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March 16, 2007 |
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CFP Ethics Revision Wins FPA Support |
The second draft of the revised CFP ethics code has won
the support of the Financial Planning Association, which was one of the
chief foes of the original revision.
FPA President Nicholas Nicolette said the organization supports the
new revision because it applies a uniform fiduciary standard on CFP
certificants.
The first draft, which drew fierce opposition when it was
introduced in July 2006, had provided certificants with an “opt out” to
the fiduciary standard.
“Under these latest proposed standards, a CFP certificant shall at
all times place the interest of the client ahead of his or her own,”
Nicolette said. “In proposing such a standard, we commend CFP Board
for listening to FPA members and others who have expressed serious
concern with the board’s original exposure draft of ethics changes.”
The second draft was released by the CFP Board last week in hopes
of wrapping up a review of the board’s ethics code and practice
standards that began in 2005. The new rules effect about 54,000
advisors who hold the CFP certificate.
Under the second rewrite, all CFP certificants who provide
financial planning services would be required to provide clients with
the “care of a fiduciary.”
The CFP Board also raised the professional standard for all CFP
certificants—including those who do not provide financial planning
services. The new rules would require that all CFP professionals “shall
at all times place the interest of the client ahead of his or her own.”
This is stricter than the current baseline standard for CFP
certificants, which requires they provide “reasonable and prudent
professional judgment.”
The CFP Board of Standards is taking public comments on the new
proposal until April 25. The board will also take comments at a March
30 public hearing in Denver.
Nicolette said the FPA will submit comments on the proposal. He
noted there are still some issues the organization is scrutinizing,
including the conditions under which CFPs will have to meet the
fiduciary standard.
Under the new rules proposal, a certificant will be held to the
fiduciary standard if they provide “material elements of the financial
planning process.”
The CFP Board’s proposal comes at a time when a FPA Fiduciary Task
Force is wrapping up its examination of the fiduciary responsibilities
tied to financial planning, according to the FPA.
“We believe CFP Board’s proposal is generally in alignment with the
work of our task force and its endorsement by the FPA Board,” said
Nicolette.
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