Financial Planning Standard Board, FPA’s Response to International Financial Planning Standard
DENVER…January 13, 2006…The International Organization for Standardization (ISO) published its first standard for personal financial planners, titled ISO 22 222:2005, on December 21, 2005. Initiated by CFP Board of Standards, Inc., in 2001, the Financial Planning Association (FPA) has long recognized the positive and negative effects this standard could have on the global financial planning profession and has been actively involved in monitoring the creation of the standards since the inception of this project.
“With a profession as young as financial planning, FPA believes that well-crafted standards can help define and clarify the role of financial planners, especially in countries where things are just getting started,” explained Daniel B. Moisand, CFP, president of FPA.
In June 2004, FPA’s Board of Directors unanimously approved a motion concerning the ISO standards being drafted, stating that while FPA supports the creation of global standards for financial planning, the Association opposes the ability to self-declare compliance with the standards. In this motion, FPA also reaffirmed its conviction that those who hold themselves out to be financial planners should hold the CFP mark.
“The ISO standards are strong. They thoroughly define financial planning, outline the six step process, spell out competency requirements and clearly state ethical principles that financial planners must follow,” said Moisand. “FPA does not object to the content of the standards. Our concern has always been around how people are assessed against the standards.”
Created in 1947, ISO is comprised of a network of national standards institutes from 156 countries and has published over 15,000 standards to date. These standards have, by and large, been technical standards, where specifications are given on how to have machinery or processes from one part of the world interface successfully with products or processes from another part of the world. Over the years, ISO has grown a strong culture of neutrality around how users comply with the standards, with the options being self-declaration, second party assessment, or third-party certification.
“The kind of compliance assessment needed for these financial planning standards is inherently different, because of their subjective nature,” said Laura Garrison, director of international relations for FPA and a technical expert for ISO. “If a manufacturing firm self-declares compliance with a standard, but then their widget doesn’t work, this is immediately apparent. The risk to the consumer on their faulty goods is finite.”
“Let’s face it, we have all experienced times when we thought we knew material better than we did. And it was only through an exam or external assessment that we realized our lack of understanding. Add to this the long-term, critical nature of financial planning and the newness of this activity to consumers and you have a recipe for potential disaster,” continued Moisand.
When U.S. participants who drafted the standards voted on whether the standards were ready for publishing, FPA’s vote was negative. FPA is not the only member who has concern over the issue of self-declaration, but the consensus of the group was that this is not an issue critical enough to delay the publishing of the standards. Therefore, the overall U.S. vote that was registered with ISO was positive.
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