Financial Planning Association

The Financial Planning Association (FPA) is an organization that trains and certifies financial planners. Financial planning is the process of establishing personal financial goals and allocating resources to obtain those goals. The FPA was created in 2000 through a merger of the Institute of Certified Financial Planners and the International Association for Financial Planning. The FPA and its earlier organizations grew rapidly in the 1980s and 1990s due to changes in business pensions and changes in STOCK MARKET trading. Until the 1980s, most corporations in the United States provided definedbenefit pensions for their employees (see RETIREMENT PLAN). The employer put aside funds in a TRUST account to meet future obligations to retirees based on a percentage of what salary employees were receiving when they retired. Depending on how much the trust fund earned, a company could have either an over-funded pension plan or unfunded pension liabilities. With the advent of 401(K) PLANs, employers shifted the RISK associated with pension LIABILITY to employees. The 401(k)s, along with similar 403b and 457 plans, allow employees to contribute a portion of their salary into a taxdeferred retirement fund. The money can be invested by the employee in MUTUAL FUNDS, individual stocks, and other INVESTMENT options. The employee’s pension benefits are determined by how well their investments do and are not the responsibility of the employer. The new retirement plans led to tremendous growth in the DEMAND for and SUPPLY of financial planners. Virtually every personal finance-related salesperson, from INSURANCE representative to stockbroker, began to call himself a financial planner. Since a planner’s INCOME depended on how many policies or stock trades he or she made, it often led to a CONFLICT OF INTEREST when the best objective advice did not generate sales commissions. The Financial Planning Association’s major role is to certify financial planners. Members must pass the FPA examination and acquire three to five years of financial planning–related experience to become a Certified Financial Planner (CFP). In addition, members ascribe to the FPA code of ethics and obtain a minimum of 30 hours of continuing education every two years. The second factor contributing to the rapid expansion in the financial-planning industry was the advent of discount stock-brokerage firms. Pioneered by Charles Schwab Company, discount-brokerage firms allow individuals to trade stocks without paying huge commissions to full-service brokerages. Today individuals can buy or sell stock for $10 per trade or less, but in the 1980s trades often cost $100 to $200 each and had to be conducted through a full-service broker. Brokers acted as financial planners for people with investment funds, recommending strategies and appraising risks for investors. Discount brokers offer fewer financial planning services creating a need for, and opportunity for professional financial planners. The Financial Planning Association states the following as their “core values.”
• competence
• integrity
• relationships
• stewardship
The objectives of the FPA are
• Unify the voice, focus and resources of the financial planning community.
• Grow the organization by bringing together those who champion the financial planning process.
• Cultivate the body of knowledge of financial planning.
• Advance brand awareness for professional financial planners, building the CFP credential as the hallmark brand.
• Define and effectively communicate a common understanding of the discipline of personal financial planning and the benefits of its use.
• Facilitate the success of our members.