Fiduciary standard for CFPs could be raised, leaders say

Updates to the professional standards that certified financial planners must follow could strengthen the fiduciary level of care requirement, but CFP Board leaders didn’t promise changes to its stance that advisers can act in the best interest of clients no matter how they are compensated.
Keeping the best interests of clients at the forefront of financial advice is critical to the industry’s success, said Michael Greene, chair of the board of directors of the Certified Financial Planner Board of Standards Inc. He was speaking to fee-only advisers at the National Association of Personal Financial Advisors conference in Phoenix on Thursday.
The board announced in December it has a commission in place to evaluate and make recommendations to modify the professional standards of conduct in place for those holding the CFP certification. The last review led to the board adopting a fiduciary standard of care.
“We will in no way be looking to water down that standard,” he said. “I can see us only continuing to strengthen that.”
Some NAPFA members believe the CFP Board should give up its “compensation neutral” stance that allows brokers who accept commissions to become CFP holders. They believe clients should pay advisers based on the services provided, rather than from products sold through the planning process.
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All of the 2,622 members of NAPFA must have attained the CFP designation and be fee-only advisers.
“The CFP Board should have the courage to say what they think a true fiduciary is,” said Chris Long, owner of Long & Associates. “They are inching forward on that, but they’re conflicted because so many broker-dealers are CFPs.”
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Less than 7% of the 74,619 CFP holders identify themselves as fee-only advisers, according to the board’s records. Mr. Greene addressed Mr. Long’s comment with a statement he admitted some might not like to hear.
“Let’s acknowledge that all business models are conflicts,” Mr. Greene said. “As long as we are in the business of somehow being paid for advice, there’s conflict.”
What is important is figuring out how to mitigate the conflicts and disclose them, he said.
Mr. Greene said the recent Labor Department fiduciary rule requiring all retirement advice to be in the best interest of clients is another step toward moving the whole industry in the fiduciary direction.