CFP Board Proposes Tightening Fiduciary Requirements: ‘Huge Step’ or ‘Double Standard’?

CFP Board Proposes Tightening Fiduciary Requirements: ‘Huge Step’ or ‘Double Standard’?

At the end of 2015, the CFP Board announced that it was forming a new Commission on Standards… a 12-person committee, with a diverse representation across the industry, that was tasked with updating the CFP Board’s current Standards on Professional Conduct, which hadn’t been changed since the last update went effective in 2008. This week, the Commission on Standards released the first draft of its new Proposed Code of Ethics and Standards of Conduct, which expands the scope of when a CFP professional must act as a fiduciary on behalf of clients to include not just when delivering financial planning or material elements of financial planning, but anytime the advisor provides “financial advice”, which is broadly defined to include any time the CFP professional suggests that the client “take or refrain from taking a particular course of action” (which could include even a single product recommendation).

Notably, though, the CFP Board will still allow CFP professionals to earn commissions – akin to the Department of Labor’s fiduciary rule – as long as the advisor otherwise meets his/her fiduciary obligations with respect to the advice itself. And as a result, some critics are still raising the concern of whether the CFP Board’s new standards will still leave open too many loopholes for broker-dealers offering particularly high-commission products. On the other hand, with the Department of Labor’s fiduciary rule forcing substantial reform amongst broker-dealers anyway, including the rise of less conflicts T shares and clean shares, in practice efforts to comply with the DoL’s fiduciary rule could reduce the conflicts that CFP professionals are exposed to, anyway. In the meantime, the CFP Board will be conducting a series of 8 open Town Halls for feedback on the proposed standards, and the release of the standards on June 20th marks the start of a 60-day public comment period, which will end on Monday August 21st, during which anyone can submit a comment on the proposed standards via the CFP Board’s website here.


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