CFP Board makes a raft of changes -- including plans to send out press releases about CFP members who declare bankruptcy
There's been a big upswelling of members with bankruptcy problems
The CFP Board announced today that it has shored up its rules and procedures regarding the Certified Financial Planner Board of Standards Inc. certification including more public disclosure for CFP professionals who file bankruptcy. See: In a world of Schwab and Merrill, can the CFP Board use $36 million of ads to make planning sexy?.
“As part of our mission to benefit the public, we must continue to re‐examine and improve upon the Certified Financial Planner Board of Standards certification and our processes to enforce its high standards,” says Board of Directors chairman Alan Goldfarb, CFP, in a statement. “The changes approved by the Board of Directors further support our mission and reinforce the CFP certification’s status as the standard for ethical and competent personal financial planning.”
One of the biggest changes impacts how the CFP Board of Washington D.C. addresses bankruptcy filings. In the past, the public would generally only find out about a bankruptcy filing if a public sanction had occurred. Now, the CFP Board will disclose all bankruptcy filings to the public with press releases.
The CFP Board is putting into place on July 1 a new procedure which will address bankruptcy-only cases and that means a CFP who has excellent behavior will still be called out for having filed a bankruptcy in the past five years.
The CFP board will note the bankruptcy filing on the CFP’s professional public profile. In addition, the CFP Board will now issue a release four times a year identifying CFP professionals who filed bankruptcy in the last five years.
CFP professionals say that under previous rules the only way the public would learn about whether a CFP professional had filed bankruptcy was digging up that information on their own or if the CFP Board had publicly sanctioned the member for other disciplinary reasons.
Bankruptcies on the rise
The new rule was put in place due to the dramatic increase in CFP bankruptcies in recent years. For instance, in 2008 there was just one CFP professional who filed bankruptcy and in 2009 there were eight. But in 2010 the number grew to 20 CFP professionals. Last year, there were 49 CFP professionals who filed bankruptcy and this year in the first quarter alone there have already been more than 30 bankruptcy filings.
“Consumers have the right to know about a bankruptcy filings that have occurred in the past five years and right now under our current approach the only way to find out was through a public sanction,” says Michael Shaw, managing director, Professional Standards and Legal with the CFP Board.
Shaw says the reason bankruptcies have increased is because the number of CFP professionals is growing each year — there are 65,000 professionals — in addition the poor economy.
“One thing we’ve learned about bankruptcy is no two are alike, says Shaw. “The reason for the increase is not really surprising.”
Fast track to certification
The CFP Board is also creating a fast track to becoming a CFP. Three years experience is still a required to receive the designation but under certain rigorous criteria it will be possible with two years experience. Namely:
- The individual is working under the direct supervision of a CFP professional; – The individual is providing direct financial planning services to clients; and – The individual has documented in writing performance of all six steps of the financial planning process.
Here are some other key changes:
- Eliminating the requirement that individuals applying for CFP certification must have six months of experience gained within twelve months of reporting the experience. The requirement that experience must occur within ten years before or five years after the successful exam completion still applies.– Providing an option for individuals to submit experience to CFP Board for review prior to passing the CFP exam. This will provide those contemplating CFP certification the assurance that their experience will meet CFP Board requirements prior to them pursuing the education or examination requirements. Credit will be granted only for experience completed within ten years before and five years after successful completion of the CFP exam.