Over 2 years ago, the CFP Board began its process to updated the Standards of Professional Conduct for all CFP certificants, for the first time since the last set of changes took effect in the middle of 2008. And after an initially proposed last June, followed by a public comment period, the CFP Board issued a second revised proposal in December, for which a second (and likely final) public comment period is now open.
In today’s article, I am publishing in full my own second public comment letter to the CFP Board. As you will see, I remain supportive of the CFP Board’s direction with the new standards, which is to expand the fiduciary standard to all CFP professionals at all times (and not “just” when doing financial planning or material elements of financial planning, as in the past).
However, the recent revisions to the proposed Standards of Conduct did introduce a number of new concerns for CFP professionals, while also failing to resolve some of the problems of the original proposal. Of greatest note is the fact that the revised proposal effectively creates two forms of advice from CFP professionals – financial planning advice, and non-financial-planning financial advice – which are both subject to a fiduciary standard, but have different disclosure requirements, and will be evaluated by different Practice Standards. Which means CFP professionals will be able to routinely avoid being held accountable to following the CFP Practice Standards by not giving financial planning advice, even as the CFP Board’s own Public Awareness campaign continues to advocate “for financial planning, work with a CERTIFIED FINANCIAL PLANNER professional”.
Also notable in the revised proposal for the new Standards of Conduct is what still hasn’t been resolved, including the fact that “reasonableness” is used as a key term to determine whether a CFP professional is guilty of wrongdoing a whopping 28 times (even though the CFP Board has no formal mechanism to issue Guidance, and raising the legitimate concern that such terms will only be defined after the fact through enforcement), serious gaps or outright conflicts for CFP professionals who are switching from fee-only to commission-and-fee compensation or back the other way, and a serious gap in the definition of what constitutes a “financial planning engagement” that could legitimately subject an advisor’s cocktail party conversations to a fiduciary standard.
Ultimately, I remain hopeful that the CFP Board will move forward with its proposed changes to the Standards of Professional Conduct, which represent a positive step forward for the financial planning profession. But only after the remaining issues are given serious consideration, particularly with respect to the unintended consequences of murky definitions of what triggers a fiduciary engagement, fulfilling the CFP Board’s Public Awareness campaign promise that “for financial planning, [consumers should] work with a CERTIFIED FINANCIAL PLANNER professional” (which already presumes that CFP professionals will be doing financial planning!), and developing a framework to provide ongoing guidance to interpret and clarify a large number of key definitions so CFP professionals don’t have to learn through the process of rulemaking by enforcement. Especially given the CFP Board’s strategic priority of Accountability!
In any event, I hope that you find this (second) public comment letter to be helpful food for thought, and that if you haven’t yet, you submit your own Public Comment letter to the CFP Board by emailing Comments@CFPBoard.org – the deadline is this Friday (February 2nd)!
source https://www.kitces.com/blog/second-public-comment-letter-cfp-board-revised-proposal-fiduciary-standards-of-professional-conduct/?utm_source=rss&utm_medium=rss&utm_campaign=second-public-comment-letter-cfp-board-revised-proposal-fiduciary-standards-of-professional-conduct
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