Fiduciary advocates press CFP Board for specifics on standards changes

Meanwhile, few brokerages and their trade associations, which blasted the DOL's fiduciary rule in comment letters, are responding to the CFP Board's proposal.

Fiduciary advocates are urging the Certified Financial Planner Board of Standards Inc. to clarify how credential holders must avoid or manage conflicts of interest under a proposed reform of the mark’s rules.

Earlier this summer, the CFP Board released a draft update of its code of ethics and standards of conduct that would require all CFPs, including brokers who use the mark, to act in the best interests of their clients at all times when they are providing investment advice. The current standard holds CFPs to a fiduciary standard only during the financial planning process.

The revised rules would require a CFP to “seek to avoid conflicts of interest, or fully disclose material conflicts of interest to the client, obtain the client’s informed consent and properly manage the conflict.”

Some fiduciary advocates said in comment letters to the CFP Board that the organization needs to specify what it is demanding from CFPs. Monday was the comment deadline for the proposal, which also includes several other changes in the credential’s rules.

“Provide further clarity about what it really means to ‘manage’ conflicts of interest, and what types of conflicts the CFP Board expects CFP professionals to avoid,” Michael Kitces, a partner and director of research at Pinnacle Advisory Group, wrote in an Aug. 21 comment letter. “Don’t force CFP professionals to find out what is deemed unacceptable after the fact with an adverse [Disciplinary and Ethics Commission] ruling.”

The Consumer Federation of America also is seeking more detail.

“We urge the CFP Board to clarify to the extent necessary that a CFP professional continues to have a duty to act in the best interest of the clients, appropriately manage all material conflicts and place the client’s interest above the CFP professional’s, in addition to fully disclosing the conflict,” Micah Hauptman, financial services counsel at the Consumer Federation of America, wrote in an Aug. 14 comment letter.

The Financial Planning Association said the CFP’s proposal brought the credential standards more in line with FPA’s standard of care. But it, too, wants more guidance.

“Develop the next layer of explanation and clarification for CFP professionals to understand how they will need to alter their practices to stay in compliance, which would include expanded definitions, concrete examples and legally substantiated criteria,” several FPA officials wrote in an Aug. 21 comment letter.

Brokerages and their trade associations submitted many comment letters about the Labor Department’s fiduciary rule, but few are responding to the CFP Board’s fiduciary proposal.

The U.S. Chamber of Commerce, the American Council of Life Insurers and the National Association of Insurance and Financial Advisors are not filing letters, although NAIFA said members who hold CFPs will be commenting. As of early Monday afternoon, the Securities Industry and Financial Markets Association had not commented. The Financial Services Institute will submit a letter later Monday.

Supporters of the DOL rule, which requires all financial advisers to act in the best interests of their clients in retirement accounts, say that regulation has the teeth to eliminate conflicts. It’s currently undergoing a review ordered by President Donald J. Trump that could lead to revisions of the measure.

Knut Rostad, president of the Institute for the Fiduciary Standard, faulted the CFP Board’s proposal for not being tough enough in its fiduciary requirements.

“The overriding issue is mitigating conflicts of interest,” said Mr. Rostad, who plans to file a comment letter Monday afternoon. “The CFP Board must provide specific guidance to do so.”

Most of the approximately 77,000 CFPs in the United States aren’t registered investment advisers, Mr. Rostad said. Advisers already must adhere to a fiduciary standard, while brokers, such as those at wirehouses, which have many CFPs, are governed by a less-stringent suitability standard.

“The vast majority of CFPs have no background or experience [with fiduciary duty], and there’s no culture of mitigating conflicts of interest,” Mr. Rostad said.