The release of the RAND Corporation’s study of the investment adviser and broker-dealer industries, commissioned by the Securities and Exchange Commission, has caused much speculation about the future of regulation in the financial services industry. As a CFP® professional who has practiced financial planning for more than 25 years, I found the references to financial planning most interesting, if not especially surprising. The study’s scope did not include financial planning, and the references to financial planning are few and far between.

The study nevertheless found that 50% of investment advisors stated they provide financial planning. That’s a significant number. The study’s review of advertising practices also found that many firms and individuals within the financial services industry market themselves as providing financial planning services. Their advertising differentiates financial planning services from brokerage or investment advisory services. While the RAND study focuses on distinctions between the brokerage and investment advisory arenas, there are clearly important distinctions that go beyond that scope.

CFP Board is engaged in discussions with policy-makers to encourage recognition of the role of financial planning within the financial services industry and the value of financial planning for the public that seeks financial services. As an organization established to benefit the public, CFP Board is hopeful that any changes that may be made to the regulation of the financial services industry are focused on empowering consumers. If changes are made to the regulatory requirements of brokers and advisers, we hope they are done in ways that allow professionals to focus on the quality of their services to clients.

While there are questions about the future regulation of certain areas of the financial services industry, there is certainty about the standards to which CFP® professionals are held. CFP Board’s updated Standards of Professional Conduct, which takes effect July 1, 2008, applies to all CFP® professionals, whether they be associated with a broker/dealer, investment advisory firm, both or neither. CFP® certificants are obligated to abide by CFP Board’s Standards, irrespective of whether the CFP® marks appear on their business cards or stationery or how they describe the roles or services they provide to clients.

CFP Board appreciates the many who have been engaged during the development and implementation of the updated Standards, and we hope that all CFP® professionals take time to review the new Standards and consider thoughtfully how to best incorporate them into their daily work with clients. To help that process, CFP Board has developed a set of responses to questions we’ve received about the updated Standards. The FAQ and other materials on the updated Standards are available for review at www.CFP.net/aboutus/Standards.asp.

We also understand that questions will continue to arise as the effective date approaches. Additional questions about the revised Standards, including questions about the application of the Standards to specific situations, may be sent to standards@CFPBoard.org.

David G. Strege, CFP®
2008 Chair, Board of Directors
CFP Board

Rick Kagawa, CFP® of Capital Resources & Insurance, Inc. in Huntington Beach, CA, offers this little thought experiment to illustrate the special needs of a special type of client: “Pretend that your client has just gotten a job in a mine as a dynamite blaster. She will start making really good money for a 22-year-old, up to 10 times as much as her peers. There is a small possibility that, if she lives the first four years, she will make 10 to 20 times as much as when she started. If she becomes the best in her field, she could make as much as $12 million a year. There is only one problem — at any time, she may not make it out of the mine alive. The average life span is three-and-a-half years. How can you even start financial planning for this client?”

Kagawa’s client is not, of course, a dynamite blaster, but he does have an unusual profession. He’s a wide receiver in the National Football League. And all of the statistics in the thought experiment are accurate. “He may have no future, or he may have the future of a king,” Kagawa says of his client. “The future is nebulous; you can’t put numbers to it.” So, how do you start financial planning for this kind of client?

Kagawa’s dilemma occurs frequently in niche financial planning — planning that focuses on the unique challenges and opportunities faced by clients in extreme financial situations or highly specialized professions. Many of these clients have experienced an abrupt change of fortune, for good or for ill: a spouse has died, perhaps, an unanticipated inheritance has been received, or maybe the NFL has come calling. These acute transitions influence the way clients think and make decisions, argues Susan Bradley, CFP®, so planners need a process to handle it. Bradley founded the Sudden Money® Institute to develop that process.

Transition planning “is the same as traditional financial planning,” Bradley says, “but different. These experiences are more life events than financial events. The status quo dissolves; people can lose a sense of self. Whether the event itself is regrettable or wonderful, they need time — sometimes a long time — to get their feet on the ground. Planners need to accommodate the behavioral and communication shifts.”

Most people hire a financial advisor in response to a major life event, according to Bradley. And those major life events are becoming more and more frequent as some 76 million baby boomers (two-thirds of whom are over the age of 50) get divorced, sell their businesses, make career changes, become widowed, or enter retirement. “We’re in the middle of the largest transfer of wealth ever,” Bradley says. “Some of these events are planned for and others come out of the blue. But they are all personal emotional events that have a financial component. So planning has to start with the subjective, and then blend in the objective facts and figures. You can’t avoid going beyond the numbers.”

Of course, you can’t afford to ignore the numbers, either. So Bradley suggests asking clients in transition to agree to suspend all non-essential financial decisions for a specific period. Structure can be brought to what might otherwise seem like a chaotic time by dividing decisions into three categories: what must be done now, what must be done soon, and what must be done later. So much is changing at once — stress may be shortening attention spans; self-esteem and self-identity may be shifting; friends and family may be behaving differently — that postponing all but the most necessary decisions can give clients time to establish new boundaries, to find their new ‘normal.’

Bradley also encourages planners to let their clients dream by creating a “bliss list” of things they always wanted to do if they had the money. “You don’t want clients to just jump on a plane and send you a postcard,” Bradley says. “But they should be encouraged to think bigger and deeper about their vision — and agree not to act on it right away. You can then do some scenario planning, deal with the realities as they exist, and look at the choices.”

Striking the right balance between dreams and realities is one of the biggest challenges Kagawa faces. His client initially wanted to spend around $75,000 on a new Cadillac Escalade with all the trimmings. Kagawa explained some of the budgetary realities, and eventually convinced him to spend $22,000 on a used model.

In fact, basic budgeting is the biggest eye-opener for many NFL players, according to Dana Hammonds, director of the financial advisors program for the National Football League Players Association, the union that represents NFL athletes. “There are 52 weeks in the year,” Hammonds explains, “but players only get 17 pay checks [over the course of the football season]. Players may be spending like crazy in their minds, but they need to think about what they need to do for the entire year. Plus, health and disability insurance can be very expensive because of the nature of their profession. So they should also be setting aside money in case they leave the game sooner than they expected.”

So, how do you start financial planning for clients in transition, clients who may have no future or the future of a king? Well, just like in football, you won’t get far until you master the blocking and tackling of budgeting and other basics. But many clients, whether in niche professions or acute transitions, have more options than most in their playbooks. And that’s when the vision thing really comes into play. “If you’re not in this job to dream,” Kagawa says, “you’re not in the right job. But you’ve also got to bring the client back to reality.”

For another example of niche financial planning — working with clients in the culinary industry — see the profile of Mind’s Eye Resource Management in the February issue of CFP Board Report.

- James Geary

Andrew Zumwalt has what may seem like a surprising take on financial education. “The best time to provide financial planning information is not when people need it badly,” says Zumwalt, director of the Missouri Taxpayer (MoTax) Education Initiative. “It’s hard to talk to people about saving for retirement when they’re concerned with immediate needs, just trying to put food on the table. The best time is when they actually have money to put the lessons into practice. A tax refund creates that educational opportunity.” CFP Board has awarded a grant to the MoTax program to capitalize on this opportunity by pairing free tax preparation for low-income families with the basics of personal financial planning.

MoTax, an initiative of the Personal Financial Planning Department at the University of Missouri-Columbia, started providing free tax prep and financial literacy education to low-income individuals, particularly in rural areas, in 2003. Like the IRS’s Volunteer Income Tax Assistance (VITA) program, which deploys trained volunteers to provide free tax return preparation assistance to low– and moderate–income individuals and families, MoTax targets households with annual incomes under $40,000. This demographic is often ill-informed about the tax breaks — such as the earned income credit (EIC) and child credit — available to them. Some studies suggest that up to 20% of eligible households fail to take advantage of the EIC, which can average about $2,000 per family. A 2003 survey found that 82% of eligible rural Latino families missed out on the EIC. These clients are also easy prey for predatory lenders.

“A typical family can be eligible for a refund of anywhere up to $2,000 or even $6,000,” Zumwalt says, “and this money is key to making financial education work. After going through the tax preparation process, families have opened their financial lives to MoTax. We have earned their trust. That is a teachable moment. You can start by simply asking, ‘Have you thought about what you’re going to do with the money?’ Then you can begin to help people improve their financial decisions.”

MoTax will use its CFP Board grant to develop a “taxpayer assistance financial planning toolkit” and will distribute the toolkit to approximately 25 other organizations, extending the MoTax model to some 8,000 additional individuals. Zumwalt describes the toolkit as “financial planning in a box, an all-inclusive guide that will help shorten the learning curve” for running a MoTax-style combination of free tax prep and financial planning advice. The toolkit contains, among other things, complete set-up and management details; intake, tracking and record-keeping tools; a ready educational resource packet to share with clients; and a workshop curriculum to help low-income taxpayers make sound financial decisions about how to use their refunds.

According to a 2007 report by the Center on Budget and Policy Priorities, low-income rural EIC recipients spend most of their refunds in their local communities to meet basic needs. This, argues Zumwalt, “highlights how critical it is that families make the best decisions with their limited resources. Teaching families to make good decisions with their money — either by paying off debts or by beginning to save — helps them begin accumulating assets.” MoTax education specialists are students who have enrolled in a three-hour taxation class, one requirement of which is become a certified VITA volunteer. Education specialists encourage clients to follow up their MoTax meetings by consulting the financial planning information available at MissouriFamilies.org.

For many low-income families, their federal tax refund is the largest sum of money they have access to all year, according to Zumwalt: “Most people haven’t thought much about longer-term goals. They have spent the whole year just paying the bills in front of them and haven’t had time to step back and think, ‘What can I do with this money?’ This makes tax filing a unique opportunity to connect lower-income families with financial resources and education to help them plan for financial stability and asset accumulation.”

MoTax is eager build closer ties with CFP® professionals who might be interested in getting involved. If you would like to know more, contact Andrew Zumwalt at zumwalta@missouri.edu.

More information on VITA is available on the Web site of the National Community Tax Coalition, a project of the Chicago-based Center for Economic Progress, which works with community-based free tax preparation groups across the country. The Program Locator page has detailed information on free tax prep programs in all 50 states.

Read more about projects receiving funding through CFP Board’s 2007 Financial Planning Grants program.

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

To help educate CFP® professionals about the updated ethical standards for CFP professionals that take effect July 1, 2008, CFP Board has assembled responses to frequently asked questions on the updated Standards of Professional Conduct, including the questions listed below. CFP Board welcomes additional questions about the revised Standards, including questions about the application of the Standards to specific situations, at standards@CFPBoard.org.

Q: Do the updated Standards apply to those who hold CFP® certification but who do not display the CFP® marks or hold themselves out as financial planners?
A: Yes. The updated Standards, as do the current Standards, require a baseline duty of care for all client relationships that involve an individual who holds CFP® certification. When CFP Board applies its Standards to an individual who holds CFP® certification, CFP Board’s focus is on the conduct of the certificant, not only the titles used to describe the certificant’s roles or services. A CFP® certificant is obligated to abide by CFP Board’s Standards of Professional Conduct, irrespective of whether the CFP® marks appear on the certificant’s business cards or stationery. Removal of the CFP® marks from one’s business cards or stationery does not relieve a CFP® certificant of the obligation to follow the Standards.

CFP® certificants have, on occasion, been asked by their companies to remove the CFP® marks from their business cards and promotional materials. Some such requests have been made based on misunderstandings of CFP Board’s Standards and their application. CFP Board encourages CFP® certificants in similar situations to notify CFP Board and to request that their company representatives contact CFP Board.

Q: What distinctions do the updated Standards make between financial planning services and other services that don’t rise to the level of financial planning?
A: The updated Standards apply to all CFP® certificants, but certain sections of the Rules of Conduct set forth additional requirements for CFP® certificants who provide financial planning services to clients. When a CFP® certificant provides financial planning or material elements of the financial planning process, the updated Standards require:

1. A heightened duty of care to the client,
2. Additional disclosures to the client or prospective client, including some that must be made in writing, and
3. A written agreement governing the financial planning services.

Rule 1.4 sets the baseline duty of care CFP® certificants owe at all times to clients: “place the interest of the client ahead of his or her own.” That same rule sets forth a heightened duty of care for CFP® certificants who provide to clients financial planning or material elements of the financial planning process: “the duty of care of a fiduciary as defined by CFP Board.” CFP Board’s definition of fiduciary is: “One who acts in utmost good faith, in a manner he or she reasonably believes to be in the best interest of the client.”

Rule 1.2 describes information that must be disclosed by a CFP® certificant to clients and prospective clients if the services to be provided include financial planning or material elements of the financial planning process.

Rule 2.2 identifies information that must be disclosed by a CFP® certificant to all clients and prospective clients, regardless of whether the services to be provided rise to the level of financial planning. When the services do rise to the level of financial planning or material elements of the financial planning process, section (e) of Rule 2.2 requires that the disclosures be made in writing.

Rule 1.3 requires that if services to be provided include financial planning or material elements of the financial planning process, the certificant (or the certificant’s employer) shall enter into a written agreement with the client governing the financial planning services.

Q: Does conducting a needs analysis or suitability review reach the level of financial planning or material elements of the financial planning process?
A: There are a wide variety of activities that are labeled “needs analysis,” and some of those activities may reach the level of financial planning or material elements of the financial planning process. If a “needs analysis” is focused on gathering detailed information about multiple aspects of a client’s financial situation and analyzing that information in light of the client’s stated future goals, or if the analysis is used to make wide-ranging recommendations, that “needs analysis” is considered financial planning.

In contrast, if a “needs analysis” is focused on a limited component of the client’s financial situation, and does not involve other services related to financial planning, that analysis may not rise to the level of financial planning. For instance, if a client hires a CFP® certificant solely to purchase life insurance, the CFP® certificant will by necessity obtain information about the client sufficient to ensure that any policies recommended meet the client’s needs. If the “needs analysis” is focused solely on factors related to the client’s life insurance needs, that analysis may not rise to the level of financial planning.

A standard suitability review conducted in association with a transaction – a review that takes into consideration such basic elements as the client’s age, net worth and risk tolerance – does not typically reach the level of financial planning or material elements of the financial planning process.

The facts and circumstances of each situation are a key factor in CFP Board’s determination of whether a CFP® certificant has engaged in financial planning or material elements of the financial planning process.

About the Revised Standards of Professional Conduct:
On May 31, 2007, CFP Board’s Board of Directors announced the adoption of a revised version of CFP Board’s Standards of Professional Conduct, which sets forth the ethical standards for CERTIFIED FINANCIAL PLANNER™ professionals. The revised Standards become effective July 1, 2008 and apply to the more than 57,000 financial planners in the U.S. who are authorized by CFP Board to use the CFP® certification marks. CFP Board encourages CFP® professionals to begin applying the revised Standards to their daily practice well in advance of the July 1, 2008 effective date.

Bankrate.com to Feature Searchable CFP® Professional Listings

Beginning in April 2008, Bankrate.com will offer the public the ability to search for CERTIFIED FINANCIAL PLANNER™ professionals through their site. The searchable database on Bankrate.com has clear benefits for CFP® professionals and the public: it will help connect you with affluent individuals in your area who are interested in working with a financial planner, and it will allow the public that uses Bankrate.com to find financial planners who have met CFP Board’s standards of competence and ethics.

The search features that will appear on Bankrate.com are essentially the same as those used on CFP Board’s Web site, allowing visitors to search by zip code radius, by city, by state, or by name. Individual CFP® professional listings will include name, company affiliation, business address and business phone number. These listings will be made up exclusively of CFP® certificants who have indicated to CFP Board that they practice financial planning and who have not chosen to opt-out of the Bankrate listings. CFP® professionals who wish not to participate in the Bankrate listings should opt-out no later than March 31, 2008.

Criteria for Inclusion in Bankrate Listings
The Bankrate listings are available to CFP® professionals at no cost. To be included in the listings, you must 1) currently hold CFP® certification, 2) have a valid business address and phone number in CFP Board’s records, 3) have identified yourself to CFP Board as being a practicing financial planner, and 4) not have chosen to opt out of the Bankrate listings.

Opt-Out Procedures for Bankrate Listings
If you wish not to have your information included in the Bankrate listings, you may opt out through CFP Board’s Web site by following these steps:

1. Log in to your online account at www.CFP.net/login
2. Visit the “Contact Information” section of your account
3. Click the checkbox beside the “Opt-out of Bankrate.com planner listings?” option
4. Click the “Save Changes” button at the bottom of the screen

The Bankrate listings opt-out feature is separate from other opt-out options offered by CFP Board and will not affect your decision to opted out of lists and communications CFP Board may provide to third parties, such as continuing education sponsors and financial planning-related organizations.

Verify and Update Your Record with CFP Board
We encourage all CFP® professionals to keep their records with CFP Board updated on a regular basis.

To verify that your record with CFP Board contains a current and valid business address and phone number:

1. Log in to your online account at www.CFP.net/login
2. Visit the “Contact Information” section of your account
3. Review and make any necessary updates to your business address and phone number
4. Click the “Save Changes” option at the bottom of the screen

1. Log in to your online account at www.CFP.net/login
2. Visit the “Demographic Information” section of your account
3. Click the checkbox beside the “I am a personal financial planning practitioner” option
4. Click the “Acknowledge and Submit” option at the bottom of the screen

CFP Board expects its partnership with Bankrate will provide increased visibility for CFP® certification and direct benefits for CFP® professionals who choose to have their information included in the Bankrate listings. If you have any questions about CFP Board’s partnership with Bankrate.com, please contact us at 800-487-1497 or mail@CFPBoard.org.

CFP Board Adopts Strengthened Governance Policies for Disciplinary Procedures

CFP Board’s Board of Directors recently voted, by unanimous decision, to adopt new governance policies related to the oversight of its Disciplinary and Ethics Commission (Commission), the body that administers disciplinary hearings. The new policies increase safeguards to the public through clear accountability, increased transparency and public representation on the Commission.

“These governance changes incorporate best practices of the sort CFP Board introduced in the strengthened ethical standards for CFP® professionals that take effect in July 2008,” said David G. Strege, CFP®, Chair of CFP Board’s Board of Directors. “They are based on extensive and thoughtful examination of best practices of corporate governance and of professional review processes inside and outside the financial services industry. Without compromising the integrity, autonomy or independence of CFP Board’s long-stranding disciplinary process, we have strengthened our procedures to ensure certificants and their clients have access to a fair, objective and consistent professional review process.”

While the governance policy changes have no effect on CFP Board’s Disciplinary Rules and Procedures, operational changes have also been implemented to better support the Commission’s administration of the hearing process. CFP Board staff counsel will be available to offer the Commission guidance on CFP Board’s disciplinary procedures and on possible interpretation of the ethical standards for CFP® professionals. CFP Board has also retained independent legal counsel to act in an advisory role to its Appeals Committee, the body that reviews challenges to Commission decisions. Hearing Panels will continue to deliberate autonomously.

“CFP Board strengthened the ethical standards for CFP® professionals with changes that take effect in July 2008,” said Dan Candura, CFP®, who served as Chair of CFP Board's Professional Review body and is a current member of the Board of Directors. “During the process that led up to the revised standards, we recognized a need to provide more consistent support to the dedicated volunteers who serve on the Commission through added staff involvement in the process. By adding public representation on the Commission, CFP Board looks to create greater accountability at a time when more and more Americans rely on financial planners to help plan for their financial security.”

Commission members Harv Ames, CFP®, Diana Simpson, CFP®, Barry Kohler, CFP®, James Williams, CFP® and Grace Worley, CFP® resigned from the Commission. CFP Board extends its appreciation to them for their service on the Commission and the time they have volunteered to support the activities of CFP Board.

CFP® Marks in the News

CFP® certification was mentioned prominently in several widely-read consumer publications during the first months of 2008.

Sharon Epperson’s article “Money Smart - Find the Right Financial Adviser” was featured in the February 2, 2008 edition of USA Weekend, distributed nationally with the weekend editions of many newspapers, and advised readers to look for financial advisers who hold CFP certification, highlighting the education – and continuing education – required of those who hold the CFP® marks.

The February 17, 2008 issue of Parade, distributed nationally with the weekend editions of many newspapers, featured a story on long-term care insurance that advised readers not to choose a policy based on a seller’s recommendation, but to seek second opinions from CERTIFIED FINANCIAL PLANNER™ professionals.

Jane Bryant Quinn, in the March 3, 2008 edition of Newsweek, directed readers to look for the CFP® mark as a sign of credible financial planning, calling CFP® certification the “best-known credential” and noting the “serious courses” and “difficult exams” required to obtain CFP® certification.

Highlights of media coverage of CFP® certification are available on the CFP® Marks in the News section of CFP Board’s Web site.

CFP Board continues its efforts to promote awareness of CFP® certification among media outlets and the audiences they serve. Those 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.

Book Authored by CFP® Professional

CFP Board congratulates Jenna Mitchell Everett, CFP® on the recent publication of her book, 50 & Forward: A Woman’s Journey of Financial Awareness and Self-Discovery.

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.

Financial Planner Volunteers Sought for Washington, DC Financial Literacy Fair

Capital Area Asset Builders and DC Saves seek financial professionals to provide free general financial planning information to the public at a Financial Literacy Fair in Washington, DC on Saturday, April 5, 2008. The Fair is a free event designed to help people increase their financial knowledge, learn more about money management and take positive steps to increase their financial security. In addition to free tax preparation services and workshops presented by leaders in the financial services industry, the Fair also offers attendees opportunities to receive a free credit report and meet one-on-one with credit counselors. Financial professionals will be asked to meet with individuals, couples, and families for approximately 15-20 minutes to offer free, no-strings-attached information to help them create a financial plan.

The Financial Literacy Fair will be held at the Boys and Girls Club at THEARC, on Saturday, April 5, from 10:00 a.m. to 2:00 p.m. Volunteers will be required to volunteer for 2 hours, from noon to 2:00 p.m.

Those interested in participating should contact Linda Stroman at DC Saves directly at dcsaves@caab.org or 202-419-1440 by March 21.

Grant Funding Opportunities from CFP Board

CFP Board seeks to provide grant funding to innovative and sustainable projects that promote an understanding of the benefits of financial planning and provide underserved populations with access to competent and ethical financial planning. The application deadline is April 30, 2008. [The application deadline has been extended to May 15, 2008] Read more about CFP Board’s 2008 Financial Planning Grants Program.

CFP Board Seeks CFP® Professionals to Participate in Financial Planning Clinic in Washington, DC on Saturday, September 13, 2008

CFP Board seeks CFP® certificants to participate in a Financial Planning Clinic on Saturday, September 13, 2008 at the Grand Hyatt Washington in Washington, DC.

The event is an exciting way to reach the public with first-hand experience of the benefits of financial planning, and the format is simple – volunteer CFP® professionals meeting one-on-one with consumers to answer their financial questions.

The Financial Planning Clinic in Washington, DC builds on the successes of similar events CFP Board hosted in Los Angeles and Boston where hundreds of CFP® certificants made a positive difference in the lives of thousands of people by sharing their time and expertise to help individuals, couples and families sort out their personal finance questions and concerns.

For many, the events were an introduction to the benefits of financial planning. More than 95% of attendees found their experience so rewarding that they would recommend it to others, while the same percentage of volunteers stated that they would participate again. Volunteers expressed how much they enjoyed interacting at such a personal level with so many consumers of diverse financial backgrounds.

The Financial Planning Clinic will be held at the Grand Hyatt Washington in Washington, DC from 11:00 a.m. to 4:00 p.m. on Saturday, September 13, 2008. Volunteers will be required to participate for the entire time. A 30-minute lunch break and complimentary lunch and refreshments will be available. Only CFP® certificants in good standing with CFP Board may participate.

If you are interested in participating at the Financial Planning Clinic, apply online or contact CFP Board by e-mail at clinic@CFPBoard.org or by phone at 800-487-1497 with the following information:

• Name
• Phone Number
• E-mail Address
• Mailing Address
• If you are multi-lingual, the languages you would like to use at the Financial Planning Clinic
• The general financial planning topics you are most interested in discussing with attendees