As a public comment period about proposed standards for certified financial planners comes to a close, advisors have expressed support, opposition and more than a little confusion.
On June 20, the CFP Board revealed sweeping conduct code revisions that would broaden the application of the fiduciary standard among CFP professionals, opening a public comment period slated to close Monday.
As of August 14, many of the written comments by CFPs were in support of the proposed changes to the CFP Board’s standards of professional conduct. However, the Financial Planning Association, the largest membership organization for CFP professionals in the U.S., argued that advisors need more clarification from the board before the new rules are formalized.
“It’s clear that CFP professionals require more clarity,” said the organization in a released statement. “While we asked our members for their opinions on the proposed standards, many were unable to do so because they remain unsure of what is being proposed, what the changes will mean to them as practitioners, and how the proposed standards will be implemented and enforced.”
Previous versions of the conduct code required that all financial planning recommendations be held to the fiduciary standard. The proposed changes would apply the stricter standard to any kind of financial advice.
The FPA recommended that the CFP Board tell advisors what changes they will need to be make to their practices to remain compliant with the new rules, possibly through educational sessions, additional documentation and a longer comment period.
The Consumer Federation of America, among the most vociferous proponents of the Department of Labor’s efforts to implement more stringent fiduciary standards for advisors who handle retirement accounts, applauded the CFP Board’s efforts in its comment letter.
“The CFP Board’s own experience shows it’s possible to comply with a broad and strong fiduciary standard regardless of business model or compensation structure,” wrote Micah Hauptman, financial services counsel for the Consumer Federation of America. “We have no doubt that these revisions will continue to set a model for what advice standards should look like throughout the financial industry.”
Hauptman’s also supported the CFP Board’s proposal to require the disclosure of information about the advisors and their firms to prospective clients, including methods of compensation, services provided, potential conflicts of interest and information about the advisors’ public disciplinary history and bankruptcies.
While he supported the proposals in his comment letter, Michael Kitces of Pinnacle Advisory Group called on the CFP Board to clarify which elements of compensation must be disclosed to clients and to consider all financial planning recommendations as elements of financial advice.