An Extreme Makeover for CFP Board?

Oscar Wilde would be proud. As the person who observed that the only thing worse than being talked about is not being talked about, the famous author would be the first to tell CFP Board that it should enjoy being in the middle of a public debate unusual for a staid not-for-profit.

Mr. Wilde might, in particular, relish the demand coming from some quarters that CFP Board seek an extreme makeover. Those seeking this change complain that CFP Board should cease being an educational organization (called a "c3" by tax groupies) and turn itself into a professional organization (called a "c6" by the same clever groupies).

What is the difference? Not-for-profits incorporated under 501(c)6 of the tax code are permitted to promote the interests of a particular group, such as a profession or individuals sharing an interest in a public-policy issue or hobby. They are exempt from certain taxes, but not others.

The Financial Planning Association (FPA) is a c6. FPA is permitted (indeed, expected) to manage its affairs to benefit and promote the financial-planning profession. Most membership associations are c6s.

Not-for-profits incorporated under 501(c)3 of the tax code, on the other hand, are required to promote the public interest. They are exempt from more types of taxes than c6s. These c3s cannot be managed for the benefit of a profession or limited constituency-they would lose their tax-exempt status if they did. In fact, c3s are forbidden from giving their assets-right down to their coffee mugs-to a c6. In other words, if a c3 decides to become a c6 by filing different papers with the IRS, it must first give its assets to another c3, making the tax extreme makeover pointless.

At its inception, CFP Board was given c3 assets from another educational c3 entity, the College for Financial Planning. In order to keep those assets, use and grow them, CFP Board was required to maintain its c3 tax status that was originally approved by the IRS in 1985. Because all of CFP Board's assets have been derived from those original c3 assets, an extreme makeover would leave CFP Board able to promote the interests of CERTIFIED FINANCIAL PLANNER™ professionals, but bereft of assets.

But, the c3 status CFP Board now enjoys does not mean it has no interest in financial planning or CERTIFIED FINANCIAL PLANNER™ practitioners. CFP Board's purposes are tightly tied to financial planning, even though they are slightly different than the profession-promoting purposes of a c6. The fact that a c3 has a public purpose doesn't mean it exists to further all public purposes generally-c3s are typically formed to pursue particular, narrowly defined public purposes.

What are CFP Board's purposes? CFP Board encourages people to value financial planning. The world is much more financially complex than in our parents' era and individuals can no longer live financially secure lives ignorant of these new complexities.

CFP Board also encourages people to seek assistance from professionals using CFP Board's marks if they need financial-planning help. There are many personal finance designations, but many are limited in scope or quality. So CFP Board ensures the public has access to the kind of competent and ethical help it needs.

CFP Board has a substantial interest in constituencies that are essential to its purposes, just as these constituencies have a substantial interest in CFP Board's success. These constituencies include educators, certificants, regulators, employers, not-for-profit bodies, and policymakers. While CFP Board would be acting illegally if it operated for the ultimate benefit of any of these constituencies, it legally can (and sensibly must) work with all of them to further its mission.

How important is this public purpose of CFP Board? In an era in which a large percentage of the population is spending or borrowing more than it makes, and in which politicians increase the national debt and take ineffectual steps to protect fraying personal-financial safety nets, it is hard to think of a more important purpose. Indeed, it is hard to think of a purpose more essential to basic political stability.

There is one other difference between c3s and c6s worth discussing. Foundations, universities and many other charitable organizations share a governance structure that is different from that of most c6 bodies. A university's board of governors is typically not elected by its faculty, students, administrative staff or alumni (though there are some exceptions).

Most c3 boards elect their own successors. This is done to ensure that board members act in the public interest and not in the interest of any individual constituency, such as the university's faculty or students. Self-replacing boards help c3s promote a common public purpose and reduce the influence of professional or other specialized constituencies.

Of course the financial complexity of personal finance is very recent and so the need for personal financial planning is new and not widely understood. Changes like the creation of a whole new expertise take a while to show effects. The point is not that one should be discouraged. Rather, it is simply that CFP Board's public purpose is critically important and begging for action. If CFP Board does not further this purpose effectively, individuals, financial planning professionals, and society as a whole will all suffer.

Sarah Ball Teslik

The views expressed here are solely those of the author, who can be reached at steslik@CFPBoard.org.

Annual Meeting Update

Plans are still coming together for CFP Board's Annual Meeting, which will be held in Santa Monica and Los Angeles, Calif., during the first week of August 2006. The schedule is still being developed, but so far the plans are shaping up as follows:

August 1: The Board of Governors will hold a closed session board meeting. (Santa Monica)

August 2: The Board of Professional Review will host a meeting and roundtable forum with firm representatives and compliance officers. The Board of Examiners will host the new program directors meeting. (Santa Monica)

August 3: There will be a general session with the firm representatives and program directors, followed by breakout sessions. (Santa Monica)

August 4: Certificants and the public will be invited to the Los Angeles Convention Center to hear speakers in general sessions, as well as to participate in breakout sessions following a keynote luncheon speaker. (Los Angeles)

August 5: The Board of Governors will hold the public session of its Board meeting to close out the Annual Meeting. (Santa Monica)

Be on the lookout for further details in the coming months.

Board of Professional Review Update

The Board of Professional Review conducted disciplinary hearings on November 18 and 19, 2005, in Denver, Colorado. They reviewed 24 cases, 13 of which were personal or telephonic appearances by the respondents. They imposed public disciplines in 12 cases, private disciplines in seven cases, and dismissed two cases. Press releases for the public disciplines will be issued in January, after the appeal periods have expired.

The Board also held its business meeting, where it elected Joseph E. Little, CFP®, of Battleboro, VT as Chair-Elect for 2006 and announced the oncoming board members: Jack C. Harmon, CFP® of Atlanta, GA; Barry L. Kohler, CFP® of Portland, ME; and Grace Worley, CFP® of Indianapolis, IN. Alan Goldfarb, CFP® will serve as Chair. They made recommendations to the Board of Governors regarding possible admission guidelines for CFP® certification candidates who have been involved in past disciplinary or criminal matters. Staff reported the status of revisions to CFP Board's Practice Standards and Disciplinary Rules and Procedures, and Board of Governor member Robert Glovsky, CFP® and CEO Sarah Teslik reported on the Board of Governors' activities and the planned annual meeting in August.