Earlier this month, Kevin Keller and I had the privilege of visiting with CFP® professionals at a series of town hall-style meetings held over two days in Houston, San Antonio and Dallas, Texas. I’m thankful for all of you who participated. It was an honor to meet with people who have contributed to making CFP® certification and the financial planning profession what it is today. We enjoyed the hospitality of the CFP® certificant communities in these cities and benefitted from the chance to listen to the insights your colleagues shared during our conversations.

I hope many more CFP® certificants will be able to join us at future CFP® Certificant Connection events. In July, we’ll visit several cities in California. In October, we’ll visit the Midwest, with stops in Minneapolis, St. Louis and Chicago. We hope to add additional dates and locations to this series of meetings.

Even if you’re not located in an area that allows you to join us for in-person meetings, there are upcoming opportunities to stay connected with CFP Board. Our first Business Update Webinar of the year takes place next week and will include updates on CFP Board’s current activities, including our work with the Financial Planning Coalition to provide the financial planning profession with a unified voice that can effectively shape the discussion of future reforms to the regulation of the financial services industry. The Webinar will take place immediately following the Board of Directors’ meeting, so participants will be first to hear the latest updates on the issues addressed by the Board. Please join us on Friday, March 6, 2009 from 1:30 – 2:45 p.m. (Eastern Time). Register online at https://www2.gotomeeting.com/register/949005761.

As we prepare for the Board of Directors meeting next week, I’d like to thank those of you who took time earlier this year to provide comments on changes that have been proposed for our Disciplinary Rules and Procedures. Those comments will be reviewed and discussed by the Board at the upcoming meeting. We hope that broader segments of the CFP® certificant community will respond with comments about upcoming issues on which the Board seeks input. Your thoughts are invaluable to our work.

Marilyn Capelli Dimitroff, CFP®
2009 Chair, Board of Directors
CFP Board

Contact CFP Board’s Board of Directors at BOD@CFPBoard.org.

I’d like to echo Marilyn’s thanks to all who participated in our CFP® Certificant Connection events in Texas. We had quick but productive visits to several cities, and the meetings affirmed for us that earning the CFP® certification is a great personal and professional achievement and that the CFP® certificant community places high value the goal of having financial planning recognized as a distinct and legitimate profession. As we continue our public policy work and collaboration with the Financial Planning Coalition, it’s especially important for us to hear what’s on the minds of the CFP® certificant community.

Regulatory reform is coming. Earlier this week, President Obama charged his economic team with making recommendations for an overhaul of our financial regulatory system. He outlined seven core principles for the reform process, one of which was “mak[ing] sure our system of regulations covers appropriate institutions and markets, and is comprehensive and free of gaps, and prevents those being regulated from cherry-picking among competing regulators.” (Read the President’s complete remarks here.)

All of us involved in the financial planning profession know that financial planning, which covers such a broad range of personal finance issues, can be viewed as falling in one of those gaps. There are thousands of people who hold themselves out as financial planners without having the education and experience that it takes and, most importantly, without adhering to standards that put their clients’ interests ahead of their own. As our Financial Planning Coalition continues its work to develop a strategy to shape regulatory reforms as they affect financial planning, our goals – as outlined in the Coalition’s Statement of Understanding – include those of having financial planning services specifically regulated and having the public view financial planning as a legitimate and accepted profession.

CFP Board and the other organizations involved in the Financial Planning Coalition recognize that we have a unique window of opportunity to advance shared positions on policy issues and to work together to create a loud and clear voice on behalf of the financial planning profession and the public we serve. We’ve made contact with policymakers to share our goals and have identified key individuals we expect to support our goals. We will also be seeking input and assistance from the CFP® certificant community as the regulatory reform process gains momentum, and we hope you will remain engaged with us on these important issues.

If you have any strong relationships with Congressional representatives or other leaders on Capitol Hill, we’d like to know so we can seek to enlist your assistance in supporting the Coalition’s proposals when they’re released. Comments or opportunities related to our public policy work may be sent to publicpolicy@CFPBoard.org. There has never been a more important time for us to work together to take advantage of opportunities to shape regulatory reforms as they affect financial planning.

Kevin R. Keller, CAE
CEO, CFP Board

Not long ago, I bought my wife a digital camera for around $200. I was pretty pleased with this gift since my wife needed a good digital camera to photograph her textiles for posting on her Web site, plus we could all use the camera for family snapshots. My mood changed abruptly though when I brought the camera to the checkout and the salesperson asked, “Do you want an extended warranty with that?”

To be honest, the idea of purchasing an extended warranty had never occurred to me. I wasn’t quite sure why I might need one. But after the salesperson suggested the idea, I was suddenly uncertain. Digital cameras can be tricky, and if something went wrong it would be nice to have it covered. After all, I’m spending $200 on the thing so it might not be a bad idea to insure that investment. Could it be that I really needed an extended warranty and just didn’t know it? So I asked, “What does the warranty cover and how much does it cost?”

The salesperson explained that the warranty lasted an additional year (the camera came with a one-year warranty included) and guaranteed repair or replacement should the device break down or become damaged. The cost was $20. My mood shifted again, this time from uncertainty to suspicion.

Twenty bucks — 10% of the purchase price — seemed like a lot of money to insure myself against the risk of break down or damage. I thought about friends who already owned digital cameras; none of them had ever complained of technical faults. In fact, the cameras seemed amazingly sturdy and easy to use. I couldn’t think of a single example of anyone I knew ever having problems with a digital camera. And even in the unlikely event that the camera did break down, was it really worth $20 to make sure I got a new one? The chances of that happening seemed so slim that I decided to forego the reassurance of an extended warranty. “No thanks,” I told the salesperson.

This simple transaction reveals some complicated facts about risk. And with the whole idea of riskiness so prominent in everyone’s financial lives at the moment, it’s worth re-examining some assumptions about the other “R” word — risk.

The first assumption that needs rethinking is that risk is a stable thing. When we identify our “risk tolerance” — conservative, moderate, aggressive — in filling out a financial planning questionnaire, for example, it can seem like we are simply reciting some fact about ourselves, like eye color. But risk tolerance is fluid, easily influenced by recent information and even by our moods. When I took that digital camera to the checkout, my risk tolerance was high. But when the salesperson introduced the thought that the camera might break down, my risk tolerance suddenly plummeted. Fortunately, it quickly rebounded and I saved myself $20. (The camera works like a charm, by the way.) But the experience shows just how volatile our perceptions of our own appetite for risk can be.

One of the forces at work in risk assessment is availability bias, the extent to which examples of the potential risk are easily available. People “assess the likelihood of risks by asking how readily examples come to mind,” write Richard H. Thaler and Cass R. Sunstein in Nudge: Improving Decisions about Health, Wealth, and Happiness. “If people can easily think of relevant examples, they are far more likely to be frightened or concerned than if they cannot.” I could not think of anyone who had personally experienced a digital camera malfunction, so I concluded that the risk was low — therefore, no extended warranty. (Consumer Reports is anti-extended warranty, too; it once took out a full-page ad in USA Today with the tagline, “Despite what the salesperson says, you don’t need an extended warranty.” Yet, according to a survey by America's Research Group, about two-thirds of Americans frequently buy warranties.)

Unfortunately, it’s pretty easy to manipulate a person’s sense of risk. All you really have to do is put them in a negative frame of mind. In one experiment, described in Your Money and Your Brain by Jason Zweig, men were asked to list either three or eight factors that increase the risk of heart disease. The men who came up with only three factors rated the overall risk as higher than the men came up with eight factors. Why? It’s pretty easy to think of three things that increase your risk of heart disease (Try it now; it takes about five seconds), so this group concluded their risk must be pretty high since three examples came readily to mind. It is much harder to think of eight things that increase your risk, so this group concluded their risk must be pretty low since eight examples did not come readily to mind.

Of course, your actual risk of heart disease has nothing to do with your ability to think up risk factors. Yet our sense of risk is extremely susceptible to the power of suggestion. “Probability judgments are attached not to events but to descriptions of events,” wrote Amos Tversky, one of the founders of behavioral economics. “The judged probability of an event depends upon the explicitness of its description.” When I walked into that electronics shop, I was blissfully unaware of the risks to my new digital camera. But to heighten my sense of risk, all the salesperson had to do was suggest that something could go wrong.

Our own instinctive optimism often leads us to underestimate risk. Everyone knows, for example, that about half of all marriages end in divorce, but most newlyweds would rate their own risk of splitting up at about zero. Similarly, 50% of all new businesses fail, but entrepreneurs routinely estimate their own chances of success at around 90%. It’s easy to rate yourself as an aggressive risk-taker when you think home values and stock prices can only go up. When they come crashing down again, though, people tend to become very conservative very fast. And therein lies another pitfall of risk — by avoiding a real and present danger, we may expose ourselves to an even greater danger in the future.

The level of risk in any financial plan depends not just on the market, but on other potential risks as well. For example, if I take all of my money out of equities and put it into a savings account, I might feel that I’ve protected myself against the current risks of the stock market. But in doing so, I may also expose myself to the risk that, because my savings barely pay any interest, I will fall far short of my financial goals in retirement. Which risk is riskier? It all depends on your financial goals.

One way to keep risk in perspective is to be aware of your own susceptibility to suggestion. Thaler and Sunstein cite one study that found that phrasing risks in a negative way is more effective if you want to discourage certain behavior. For example, the designers of one energy conservation campaign discovered that telling people they could lose $350 a year by wasting energy was more effective than telling them they could save $350 a year by conserving energy. The risk of loss, it turns out, is a bigger motivator than the chance of a gain. (For more on loss aversion, see Learning to Love Loss Aversion in the January 2007 issue of CFP Board Report.)

“When availability bias is at work, both private and public decisions may be improved if judgments can be nudged back in the direction of true probabilities,” Thaler and Sunstein write. “A good way to increase people’s fear of a bad outcome is to remind them of a related incident in which things went wrong; a good way to increase people’s confidence is to remind them of a similar situation in which everything worked out for the best.”

The ancient Roman author Publilius Syrus once wrote, “Danger cannot be avoided without danger.” The trick to risk is to first have an accurate assessment of the danger — No extended warranty for me, thanks! — then to decide which risks you want to run.

- James Geary

Download the FAQ on CFP Board's Revised Standards (PDF format)

CFP Board has released a short consumer-oriented video overview of CFP Board’s ethical standards and disciplinary process. The video highlights how the ethical standards for CFP® certificants, combined with CFP Board’s enforcement of those standards, assist the public in finding reputable financial planning professionals they can trust to provide competent and ethical services.

CFP Board encourages CFP® certificants to share with clients and potential clients how they benefit from the ethical standards contained in CFP Board’s revised Standards of Professional Conduct, which is now in effect and enforceable for CFP® certificant conduct that takes place January 1, 2009 and later. The Standards establish clear and strong ethical obligations for CFP® certificants that put the client’s interests first and are designed to provide clients with the information they need to make sound financial decisions. These ethical standards, and CFP Board’s enforcement of those standards, are key factors that set the CFP® certification apart from the many other credentials associated with the financial services industry.

CFP Board’s Business Update Webinar: March 6, 2009

Join CFP Board at its first Business Update Webinar of 2009 on Friday, March 6. During this event, Marilyn Capelli Dimitroff, CFP®, 2009 Chair of the Board of Directors, Robert J. Glovsky, CFP®, 2009 Chair-Elect, and Kevin R. Keller, CAE, CFP Board's CEO, will provide updates on CFP Board’s recent and upcoming activities, including the latest on CFP Board’s involvement in the Financial Planning Coalition that is working to provide the financial planning profession with a unified voice that can effectively shape the discussion of future reforms to the regulation of the financial services industry. The Webinar will be presented in an interactive format and will be hosted by Mark Johannessen, CFP®.

The Webinar will include time for questions and answers, and certificants are invited to submit questions prior to and during the program. Questions may be submitted in advance of the program through the registration process or via e-mail to webinars@CFPBoard.org.

CFP Board Business Update
Friday, March 6, 2009
1:30 p.m. – 2:45 p.m. (Eastern Time)

Register at https://www2.gotomeeting.com/register/949005761

Recordings of last year’s Business Update Webinars and related materials are available through CFP Board’s Web site at www.CFP.net/aboutus/webinars.asp.

Save the Dates: Upcoming CFP® Certificant Connections

Marilyn Capelli Dimitroff, CFP®, 2009 Chair of the Board of Directors, and Kevin R. Keller, CAE, CFP Board's CEO, are hosting a series of town hall-style meetings to provide CFP® professionals and other CFP Board stakeholders with the opportunity to engage in dialogue on the topic of regulatory reform and any other issues of importance to the CFP® certificant community. The events will be held in an open format to allow participants to address the topics of most concern to them, and to provide CFP Board’s leadership the chance to connect with CFP® certificant communities across the country.

Save the dates and plan to attend upcoming CFP® Certificant Connection meetings to San Diego, Los Angeles, San Francisco, Minneapolis, St. Louis and Chicago later in 2009. For information on the current schedule, visit www.CFP.net/certificants/connection.asp or contact CFP Board at events@CFPBoard.org.

SAN DIEGO, CALIFORNIA
Monday, July 13, 2009
5:30 - 7:00 p.m. (Pacific)
Details coming soon

LOS ANGELES, CALIFORNIA
Tuesday, July 14, 2009
8:00 - 9:30 a.m. (Pacific)
Details coming soon

SAN FRANCISCO, CALIFORNIA
Tuesday, July 14, 2009
5:30 - 7:00 p.m. (Pacific)
Details coming soon

MINNEAPOLIS, MINNESOTA
Monday, October 19, 2009
5:30 - 7:00 p.m. (Central)
Details coming soon

ST. LOUIS, MISSOURI
Tuesday, October 20, 2009
8:00 - 9:30 a.m. (Central)
Details coming soon

CHICAGO, ILLINOIS
Tuesday, October 20, 2009
5:30 - 7:00 p.m. (Central)
Details coming soon

CFP® Certificants Add Value to Women’s Heart Health Fair in Washington, DC

On February 6, CFP Board participated at the 2009 Women’s Health Fair in Washington, DC, organized by the Sister to Sister Foundation, a national non-profit organization founded to prevent heart disease among women. This informative and engaging event featured presentations on healthy lifestyles, cutting-edge information on medical issues of importance to women, complimentary heart screenings and exhibitors. The fair hosted 3,622 attendees and was kicked off with a ribbon-cutting ceremony by the Washington Mayor Adrian Fenty.

Of the nearly 100 attendees who stopped by CFP Board’s exhibit booth to learn about the CFP® certification, many took the opportunity to consult with two CFP® professionals who were on hand to provide free one-on-one consultations. CFP Board would like to thank Rita Cheng, CFP® and Jane Huang, CFP® for generously sharing their time and knowledge with the participants at this event.

Because many health concerns can be attributed to the stress caused by the recent economic turmoil, CFP Board’s booth offered an important benefit to the attendees, and it was provided to CFP Board at no cost. The fair also provided CFP Board with an opportunity to network with organizations that could serve as partners for CFP Board’s consumer outreach initiatives.

CFP Board Grant Recipient Profile: AccountAbility Minnesota

Bonnie Esposito, executive director of AccountAbility Minnesota in St. Paul, calls it “the money moment”: the period when low- to moderate-income taxpayers receive their Earned Income Tax Credit (EITC) refunds. “This is the time when the conversation about financial planning is most effective for low-income taxpayers,” Esposito says. “When else will they have that much money to work with? This is the time to really get their attention.”

AccountAbility Minnesota (AAM), which provides free tax assistance clinics and related financial services to low- and moderate-income individuals in the Twin Cities area, intends to get people’s attention by using a CFP Board grant to expand its partnership with the Financial Planning Association of Minnesota to offer free credit reports and one-on-one financial education sessions to AAM customers.

In 2006, low-income taxpayers received some $40 billion in refunds thanks to the EITC. Yet only a fraction of those refunds typically end up in savings accounts. “Usually the money goes towards paying debts and other bills,” says Eva Margolis, AAM’s partnership manager, who coordinates the tax clinics with the Financial Planning Association of Minnesota. “The average annual income of our customers is $12,000. Many families receive large refunds, anywhere from $3,000 to $6,000 — all at once. That gives them more resources to save, to build assets, to start accumulating wealth, and they are more open to education. So this is a teachable moment.”

AAM makes the most of that teachable moment by making volunteer CFP® professionals available to people accessing its Volunteer Income Tax Assistance (VITA) program. From late January through mid April, AAM partners with other Twin Cities’ community-based organizations to offer free tax assistance clinics to individuals and families in need. Last year, AAM and its community partners helped more than 17,500 low-income taxpayers receive almost $26 million in refunds.

With help from the CFP Board grant, AAM aims to add financial planning consultations to its free tax preparation services. When people come to the AAM sites to have their taxes prepared, volunteer CFP® professionals offer to pull the taxpayer’s free credit report from annualcreditreport.com and to make suggestions regarding credit repair and improvement. AAM also offers to set up a savings account for customers and to arrange for the direct deposit of their EITC refund.

AAM tax sites are situated in the poorer sections of the Twin Cities, where predatory lenders are rife and access to financial planning information is scarce. “Many customers have never seen their credit report before,” Margolis says. “They don’t know their credit history, and they don’t know how their credit report affects them. It is educationally empowering for people to get their credit history, and in the process customers build a relationship with the volunteer.” And at two AAM sites this tax season, those individuals who want to learn more can sign up to meet one-on-one with a CFP® professional for a free in-depth consultation.

“The tax clinics serve 30 to 50 people per evening,” says Esposito. “There is lots of waiting as customers have their taxes prepared and checked by another volunteer for quality assurance. During this time, we ask if customers are interested in seeing their credit report. It’s a method of getting customers engaged with the idea of financial planning. The people who are really engaged can then sign up for a one-on-one appointment.”

The follow-up sessions with CFP® professionals will provide AAM customers with the basic financial planning information they need to use their refunds to improve their long-term financial security. And once the AAM program is up and running, Esposito wants to replicate the model nationwide in collaboration with other VITA programs and the National Community Tax Coalition (NTCT). “In Minnesota, we have 20 partners outside the Twin Cities to help with tax assistance,” says Esposito, who also serves on the steering committee of the NTCT. “With this grant, we can develop the process and the training to get financial planning help to people in other tax programs in other states.”

If you would like to volunteer for the AAM program, contact Yer Lee at ylee@accountabilitymn.org.

CFP® Marks in the News

How to Spot the Next Bernie Madoff
Check up on your adviser: Verify your adviser's academic credentials and professional certifications. For instance, if the adviser claims to be a CERTIFIED FINANCIAL PLANNER[™ certification], check with the Certified Financial Planner Board of Standards.

Laura Cohn
Kiplinger's Personal Finance
March 2009

Need financial advice? Consider a professional
If you have a simple portfolio, and this is your only holding, you might consider finding a fee-only financial planner who can study your finances and give you ideas on what to do in this instance. Otherwise, you might look to form a relationship with a CERTIFIED FINANCIAL PLANNER[™ certificant] who can advise you over time.
If you need help finding a financial planning professional, the Certified Financial Planner Board of Standards offers a lookup service here: http://www.CFP.net/search/.

Matt Krantz
USA Today
January 30, 2009

Read these notable media references to the CFP® certification at www.CFP.net/certificants/marksinthenews.asp.

CFP Board’s media outreach efforts are greatly enhanced by the many CFP® professionals who are engaged in their own efforts to reach national and local media with the message of the benefits of financial planning and working with a CFP® professional. We appreciate all of you who help further awareness of CFP® certification across the country through your media contacts and your involvement in your communities.

Accomplishments of CFP® Certificants

CFP Board congratulates the following CFP® professionals on their professional activities and accomplishments:

Alan Goldfarb, CFP®, of Weaver and Tidwell Financial Advisors, Ltd. in Dallas, Texas, and member of CFP Board's Board of Directors, for being named one of the "Top Financial Planners in Dallas" by DMagazine.

Bruce K. Grace, Ph.D., CFA, CFP®, Chair of the Department of Accounting, Economics, and Finance at Morehead State University in Kentucky, for his election as a Board Member to the Northeast Kentucky Regional Health Information Organization (NEKy RHIO). Mr. Grace was also elected to the Executive Committee of the NEKy RHIO and serves as treasurer.

Laura Rowley, CFP®, for being named Vice President at Kanaly Trust, a wealth management firm in Houston, Texas.

CFP Board welcomes information about the activities and accomplishments of CFP® professionals. If you have information you would like to share with CFP Board, please contact us at mail@CFPBoard.org.

• Registration for Business Update Webinar, March 6, 2009
• CFP® Certificant Connection Schedule
• Message to CFP Board’s Stakeholders from Marilyn Capelli Dimitroff, CFP®, 2009 Chair of CFP Board's Board of Directors

Journal of Financial Service Professionals Seeks Article Submissions

The Journal of Financial Service Professionals, published by the Society of Financial Service Professionals, invites CFP® certificants and other financial service professionals to consider submitting an article for possible publication. Your article can help to broaden the knowledge base in our dynamic industry.

Each submitted article is sent to several expert reviewers who evaluate the article for suitability, technical accuracy, originality, readability, and other pertinent factors. The Editor may accept or reject the article based on the reviewers’ recommendations or may ask the author to revise the article in accordance with the reviewers’ comments. Please note that a certain percentage of articles will be rejected because of the rigorous review process. To guarantee the integrity of the process, the reviews are done blindly; that is, the reviewers do not know the identity of the author and vice versa.

All articles published in the Journal are copyrighted by the Society of Financial Service Professionals. Authors should follow the Journal’s guidelines for preparing submissions, which are contained in an Author’s Guide. If you have any questions or would like to discuss an idea for an article, please contact Kenn B. Tacchino, Editor, at 610-499-4328 or kbtacchino@widener.edu.

Employment Opportunities at CFP Board

CFP Board has employment opportunities for a Compliance Manager in our Professional Review Department, a Continuing Education Manager in our Education Department, and a Senior Public Policy Analyst in our Public Policy Department. If you or someone you know is interested in helping shape the ongoing development of CFP Board’s mission, we invite you to learn more about available employment opportunities at www.CFP.net/aboutus/jobs.asp.