Figures reveal membership take-up of the Financial Planning Association’s (FPA’s) Certified Financial Planner (CFP) designation, which was introduced to Australia in 1990, has plateaued since 2001, when the Financial Services Reform Act introduced PS 146 (now RG 146) as a minimum standard for practising financial advisers.
International Financial Planning Standards Board (FPSB) figures show that Australian CFP membership grew 600 per cent from 782 to 4,725 between 1996 and 2002. However, in the next seven years to 2009, membership increased by only 860, or a further 18 per cent. In contrast, worldwide membership over the same period grew by more than 70 per cent, after increasing 230 per cent between 1996 and 2002.
Recent FPA figures show that of the association’s 11,500 members, just under 8,000 – or about 70 per cent – are practitioner members. The number of CFP practitioner members is 5,700, or just under half of the FPA’s total membership.
The US-based FPSB is a global organisation that manages certification and education for financial planning organisations worldwide and counts the Australian FPA and US FPA among its members. The Australian FPA was the first international organisation outside the US to be licensed to award CFP certification, and remains the sole certification authority of the CFP designation in Australia.
The University of Central Queensland’s Dr Rakesh Gupta said once PS 146 was brought in, it was considered the new industry standard.
Because RG 146 is so much easier to obtain, the incentive to gain the CFP or a degree has been diluted, he said.
Associate professor Ken Bruce of the University of Central Queensland’s School of Commerce and Law said some dealer groups wanting to quickly train up their adviser force might have been seduced by the ease of the RG 146 qualification, and the incentive wasn’t there for them to strive for a higher standard of qualification.
If the FPA was able to increase public awareness and the profile of the CFP designation, it would have a positive effect on overall industry standards as well as FPA membership, Bruce said.
Bruce and Gupta suggested that the US model of having the CFP certification run by a separate standards board rather than being affiliated with an industry body raised questions about whether a similar model might work in Australia.
“Would the US model work in Australia? Should CFP certification be separated from association membership? If so, how could this be achieved? Could it be achieved by forming FPSB Australia as a separate body to the FPA, or is the current arrangement of a separate CFP certification division within the FPA acceptable?” they asked in an opinion piece submitted to Money Management.
Although it is unlikely that Australia was big enough to support a dedicated standards board, it is worth exploring alternative options, Bruce said. If the CFP was decoupled from FPA membership, this might lead to an increase in CFP uptake, he said.