Forget the SEC advice rule — broker-dealers more concerned with CFP Board expanded fiduciary standard ​

CFP Board's updated code of ethics and standards goes live in October

Jun 7, 2019 @ 2:00 pm

By Bruce Kelly

Lawyers across the brokerage industry are busily reading and digesting the Securities and Exchange Commission's investment advice reforms approved this week. But some firms are also gearing up for more changes promulgated by the organization that administers one of the most sought-after designations in the industry: the Certified Financial Planner, or CFP.

The Certified Financial Planner Board of Standards Inc. in 2018 approved a new code of ethics and standards of conduct, expanding a fiduciary standard as part of its revamp to the designation's conduct requirements. Under the new standards, all CFPs — including brokers — must act in the best interests of their clients when providing financial advice.

Under the new SEC reforms, brokers do not have to operate under a fiduciary standard.

Many in the retail securities industry dislike the CFP Board's updated code of ethics and standards of conduct, which is to take effect in October.

"Similar to state fiduciary efforts, the CFP Board's code adds yet another standard demanding compliance by firms and advisers," wrote Chris Paulitz, a spokesman for the Financial Services Institute, in an email. "And with more standards come greater complexity, higher costs and increased likelihood of error."

The FSI is a trade organization that represents independent contractor broker-dealers.

Last February, eight major brokerage firms called on the CFP Board in a comment letter to halt its effort to raise the investment-advice requirement attached to the designation until the SEC proposed its own standard. The firms also criticized the new standards of conduct as impractical and duplicating existing regulations as well as for being overly broad.

One of those firms, Edward Jones, has recently sent a letter to advisers expressing concerns about the new standards and how they affect financial advisers, according to an industry source who asked not to be named.

A spokesman for Edward Jones, John Boul, said that the firm is reviewing the SEC's Regulation Best Interest to see how it would work alongside CFP's fiduciary standard and will have more to say, possibly as early as next month.

Similarly, other large broker-dealers are in the process of reaching out to financial advisers in their network who hold the CFP designation to ensure they have the information they need to prepare for the Oct. 1 compliance date.

Meanwhile, Kevin Keller, chief executive of the CFP Board, said he would have liked to have seen more fiduciary teeth in the SEC's rule, but is now relishing the idea that the CFP designation "will become a lot more valuable to consumers."

"Now that the SEC has issued its Regulation Best Interest rule and related guidance for investment advisers, consumers should know that nearly 85,000 CFP professionals will be obligated to provide financial advice under a fiduciary standard," he said.


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