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The CE Charade

Financial planners and investment advisors have to meet minimum CE credit standards, and that is certainly a good thing for their clients and the profession as a whole. To maintain their CFP designation, for example, advisors have to stay on top of any new technical developments in the planning and investment fields by completing 30 hours of CE every two years. This keeps them current, and refreshes their basic knowledge of financial planning topics.

We are told that the CFP Board reviews all CE sponsors, and looks at the outlines of the presentations that will be delivered. As a producer of a conference, I can tell you that our session outlines appear to be examined with some care.

Yet advisors don't actually have to go to a classroom to get their CE obligations met. They can take the equivalent of "coursework" by completing the questionnaire in the back of our industry magazines, one CE credit per questionnaire taken. That means any one magazine can give them 24 of their required 30 hours to stay on top of new developments, refresh their knowledge and better serve their clients. If they read two magazines, that brings the total to 48 hours. Three? 72 hours, more than twice the requirements, and presumably twice the educational value. Right?

But I wonder if the CFP Board has ever bothered to look at the rigorous educational curriculum offered by these magazines. In the latest (September) issue of Investment Advisor magazine, we find these real questions, which seem not to be rigorously educational in nature:

Advisors should become members of FSI [the Financial Services Institute, the trade organization of broker-dealers] because:

A) It's a stronger organization than FINRA or the SEC.

B) They can address even the biggest issues and demand change.

C) Without it, they'd have no representation at all.

Among the trends affecting the independent broker-dealer space in the future are:

A) A difficult recruiting environment.

B) Increasing consolidation among firms in the industry.

C) All of the above.

According to Eric Schwartz, it's important for broker-dealers to allow alternatives even if they don't like them because they need to provide diversity for advisors and clients.

A) True

B) False

We are repeatedly told that practice management sessions won't qualify for CE credits, so what are we to make of this question:

Strategic plans are frequently ineffective because:

A) Advisors establish new goals before reaching the ones laid out in the plan.

B) They have no process for measuring and monitoring the success of the plan.

C) They never finish writing the plan and just do whatever they have to in order to grow assets.

Or these:

Advisors' most popular social media platform for building brand awareness is:

A) Facebook

B) LinedIn

C) YouTube

Advisors' biggest obstacles in adopting social media strategies is:

A) Broker-dealer concerns.

B) Finding quality content.

C) Compliance issues.

I'm going to go out on a limb and question whether advisors are more technically competent after they've mastered the FSI's marketing pitch to, well, advisors, and I feel actual doubt that advisors are better at serving their clients if they know which social media platform other advisors find most popular.

But maybe September was an anomalous month. Here are a couple of questions from Investment Advisor's August CE quiz.

Sustainable growth results from a high rate of growth quickly in a firm's life span.

A) True

B) False

The concept of firm owners as servant-leaders translate well to small firms because:

A) RIAs are already enthusiastic about doing what's right for their clients.

B) It's difficult for leaders of large firms because they've worked hard to get to the top and want their share of the profits.

C) All of the above.

From the July issue of Investment Advisor:

What percentage of wealthy investors are under age 50?

A) 18%

B) 29%

C) 37%

Because millennials are often friends with their parents, they tend to:

A) Treat members of all generation (sic) as equals.

B) Be unable or unwilling to make big financial decisions on their own.

C) Be more cynical than other generations.

Despite criticisms against study groups in general, one of the strengths of the study group borne of FPA's NexGen community, according to Mike Anderson, is:

A) It's made up of high-profile members with long histories of investing and financial experience.

B) Diversity within the group allows them to look at problems from different angles.

C) They are located in the same geographic area, so it's easy to meet with members.

Which of the following is not a erason broker-dealers are opting for cloud/SaaS technology solutions over other options?

A) They are a faster and more economical way to stay current.

B) They can support multiple advisors in multiple locations.

C) They are more popular among their support staff.

The top technology challenge for broker-dealers is:

A) Data management.

B) Enterprise compliance surveillance.

C) Client data protection.

I should not be singling out Investment Advisor; here's a couple of howlers from the CFP CE quiz in the August 2013 issue of Financial Advisor magazine:

Listed REITs acquired $41 billion in new properties in 2012, according to New York firm Real Capital Analytics.

A) True

B) False

Since 1990, the Alegris 40 index has had more down years than up years.

A) True

B) False

Proponents of managed futures strategies say they provide:

A) Diversification

B) Non-correlation to stocks and bonds

C) Both of the above

D) Neither of the above

or from July:

Which of the following is true about Jefferson National Financial Corp's variable annuity?

A) Policyholders are charged a monthly flat insurance fee.

B) The platform offers nearly 400 investment choices.

C) The company keeps its cost structure low.

D) All of the above.

Looking back, I'm not sure when we crossed the line to the place where one can read sales brochures and gain CE credits. But it clearly does not enhance the professional image of the advisor profession when one can get dozens of CE credits–indeed, many more than are required–by answering questions like these. I doubt that any reputable college curriculum is going to include this material in its textbooks or lecture halls.

And I think that in approving these sales-related, BD lobbying-related, practice management-related quizzes, the CFP Board has opened its doors to the kind of presentations that it has always claimed are NOT related to professional education. If the magazines can give CE credits with this kind of information, then I think the CFP Board ought, in fairness, to give the FPA and NAPFA the right to offer CE credits for their practice management-related sessions. Broker-dealer conferences already grant CE credits for attendance at flagrantly sales-oriented presentations, but this is done slyly when, perhaps, it should be done out in the open.

I've written about this before, and the CFP Board at that time declined to clean up this particular act. Since then, in my estimation, the problem has gotten worse. Eventually, I suppose, the stench from these alleged CE quizzes will grow intolerable; it will be interesting to see how far down this road the magazines have to go before that happens.