A new era is coming for the advisor with a prestigious designation.

Next fall it will be official—if you’re an advisor with a CFP mark you will have expanded fiduciary responsibilities in almost every aspect of your practice. And it doesn’t matter what kind of firm you work for or if it will mean you or your employer will have to dig deeper to comply.

That’s what Certified Financial Planner Board of Standards officials were reminding CFP practitioners on Wednesday night at an expository meeting in Manhattan. It is part of a series of meetings around the country to discuss how recent professional code changes, which include the redefinition of financial planning, affect the standards of CFP practitioners.

The new expanded fiduciary standard covering CFPs next year “includes discretionary authority as well as communications that would be viewed as a recommendation that the client take or refrain from taking a particular course of action with respect to a wide range of financial matters,” according to the new code.

The code expansion, adopted by the CFP Board on March 29 and due to go into effect in October 2019, broadens the fiduciary standard “to all financial advice.” What is financial advice?

The CFP professional will be covered not just when he or she is providing financial planning, but also financial advice.

“That is a significant expansion of the fiduciary duty,” said Leo Rydzewski, general counsel of the CFP Board.

Exceptions to this new expanded fiduciary rule include responses to directed orders as well as the furnishing of marketing materials, general financial advice that “a reasonable CFP would not view as financial advice,” according to a commentary on the new code provided by the CFP Board.

“This is a big win for consumers and we support these changes very much,” said Stephen Craffen, chairman of NAPFA, a fee-only financial planning group that has been pushing for a broader fiduciary standard for over a decade.

How To Apply New Rules?

Still, CFP Board officials conceded there was some controversy about adopting the expanded fiduciary standard and how it will be applied. For instance, board officials on Wednesday night emphasized that the CFP practitioner, if he or she expects to retain the CFP marks, must maintain the new fiduciary standard even if it conflicts with the standard of a broker/dealer or some other employer.

CFP Board officials said moving the CFP profession to a tougher fiduciary standard triggered debate in the industry as professionals commented on the changes. It is a debate that, in some cases, continues, which is why they are asking for feedback in how the new code is applied.

The essence of the change is how the CFP avoids conflicts of interests and where and how the broader fiduciary standard is applied.

The professional, according to the revised code, must disclose all potential conflicts in providing advice. “This obligation,” according to the code, “is to provide the client with sufficiently specific facts so that the client is able to understand the [CFP] professional’s conflicts of interest and the business practices that give rise to the conflicts, and give informed consent to such conflicts and reject them.”

The CFP must also “place the interests of the client above the interests of the CFP professional,” said Blaine Aikin, chairman of the Fiduciary (Fi) 360 committee and a longtime member of the CFP Board. Conflicts need to be “more fully disclosed,” Aikin added.

He cited an example of a situation that could potentially pose a conflict of interest and how the professional should act. Say a CFP wanted to sell a client a car. Both parties agree on a price.

Can this transaction be completed under the new code? No, CFP Board officials said.

Under the new code, a CFP professional and the client would agree on an independent assessor to determine what was a fair price before the deal could be completed, Aikin said.

Disclosing Conflicts 'Not Enough'

Rydzewski added that disclosing any potential conflict of interest is “no longer enough” under the new rules. “You have to manage the conflict.” This is the only way a CFP can act in the client’s best interests, he added.

In an analysis on the new standard, CFP officials said some commentators objected to the phrase “at all times” in the application of the fiduciary duty.

But in both the CFP Board commentary and in statements on Wednesday night, board officials said “the language serves the important purpose of reinforcing that there are no exceptions to a CFP professional’s duty to act as a fiduciary when providing financial advice.”

Where is the border between being covered and not covered by the new standard? “The provision of advice triggers the fiduciary responsibility,” Aikin said. “If you’re not providing advice,” he added, “that would not be covered.”

And the new fiduciary standard applies to CFPs regardless of the kind of business where the professional works.

“The fiduciary duty is business model neutral as it applies to all CFP professionals regardless of the business model in which they operate,” said the CFP Board commentary.

“Regardless of the contractual obligation, the obligation is on the CFP professional individually to ensure that they are acting as a fiduciary in providing services to the client,” Rydzewski said.

Rydzewski, in response to a question from Financial Advisor after the meeting, said some firms, in commenting on the new standard, have said the new code could pose problems. It is an issue that the CFP Board acknowledges in its commentary on the new standard.

“CFP Board recognizes that some firms may incur additional costs associated with a CFP professional’s compliance with CFP Board’s fiduciary duty.”

Aikin added that the board is attempting to find ways to avoid these potential conflicts between a firm and an advisor complying with the new CFP fiduciary standards.

CFP Board officials said they are looking for help in putting these standards into effect. They are asking for comments, questions and suggestions. And Rydzewski emphasized that the board was asking for help in how it could provide CFPs with effective guidance in understanding the new code.

One CFP in the audience, who would not identify herself or her firm but confirmed she has the CFP designation, said applying the new standard and code could raise some issues, and that many professionals could use some help in understanding how things have changed.

“This is a lot for us to take in and apply and everybody should understand it. What the CFP Board should do is to have a webinar for continuing education credits that would go over many of these issues and not charge us for it.”

Rydzewski noted the CFP Board doesn’t present these continuing education seminars, but the CFP was persistent.

“I understand that. But you are spending millions of dollars in advertising this. How much would it cost to do something for us and present it for continuing education credit.”

Rydzewski told the CFP “thank you for the feedback.”

According to the CFP’s Board revised code, financial planning now has a new definition: “Financial planning is a collaborative process that also helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.”