CFP Board makes changes to proposed code of ethics, will seek more comments

The Certified Financial Planner Board of Standards Inc. has made changes to a revised code of ethics and standards for CFPs and will seek further comments before finalizing them, the group’s chairman said on Wednesday.

Earlier this summer, the CFP Board released a draft update of its code of ethics and standards 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.

After reviewing the more than 1,300 comments, the board modified the proposal. The revised version will be released by the end of the year and open to another comment period from Jan. 2 through Feb. 2. The board expects to finalize the changes by the end of the first quarter next year.

In an appearance at Schwab IMPACT in Chicago, CFP Board Chairman Blaine Aikin declined to elaborate on what will be different about the new proposal.

“It will have meaningful changes,” he told reporters on the sidelines of the conference. “I wouldn’t characterize it as being stronger or diluted.”

He said the proposal will continue to emphasize a principles-based fiduciary duty for CFPs that applies at all times.

“Principles are vitally important to us,” he said during a conference panel.

The CFP Board’s effort to strengthen the designation’s advice standards comes as the Labor Department re-assesses its fiduciary duty rule, which requires brokers to act in the best interests of their clients in retirement accounts, and as the Securities and Exchange Commission is drafting its own advice rule for retail accounts.

Ira Hammerman, executive vice president and general counsel at the Securities Industry and Financial Markets Association, expressed frustration at all of the fiduciary activity. SIFMA opposes the DOL rule, saying that it is too complex and costly and will force brokers to abandon clients with modest accounts. It indicated some of the same misgivings with the CFP rule in its comment letter.

“As if we don’t have enough to worry about, now we’ve got that added [CFP] layer of complexity,” Mr. Hammerman said on the conference panel.

Although he called the CFP Board “a wonderful organization,” he’s concerned about how its rule will apply to brokers who hold a CFP mark but don’t exclusively provide financial planning. Brokers are currently held to a suitability standard when selling products, while investment advisers must adhere to fiduciary duty.

“What’s the ripple effect?” Mr. Hammerman said. “Hopefully, it’s something that firms can operationalize.”

Mr. Aikin said part of the reason that the CFP Board has modified its proposal is to ensure that fiduciary principles can be carried out in a practical way.

“We want to be more clear in how we state things,” Mr. Aikin said.

The CFP Board, which sets and enforces the educational and ethical standards for the CFP credential, has been a champion of the DOL fiduciary rule. Supporters argue that it would mitigate broker conflicts of interest that lead to the sales of inappropriate high-fee investments that erode savings.

There are approximately 80,000 CFPs in the United States.

Related Topics: Certified Financial Planner Board Of Standards Inc. (CFP Board), Charles Schwab & Co., Securities Industry And Financial Markets Association (SIFMA)