“We first issued a fiduciary standard in 2007. When we took this step we were told that no one would ever sit for the CFP exam again. The opposite has happened. Our membership has grown 44 percent,” Thompson said.
In the CFP Board's revised code of ethics that will go into effect in October, “the public will no longer have to determine what level of service a CFP is providing,” Thompson said. “The revised, new code extends planners’ fiduciary duties from just financial planning services to all financial advice.” The new CFP Board code also includes a duty of loyalty, duty of care and duty to follow customer instructions.
Thompson said the CFP Board will be making comments to the SEC under the auspices of the Coalition for Financial Planning, whose members include the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA). The group wants the SEC to use the CFP Board code of ethics fiduciary standard in its proposed broker regulation.
The “episodic” application of best-interest rules for brokers in the SEC proposal is problematic, both consumer and advisor advocates argued. “It inappropriately allows broker-dealers to escape any ongoing duty to customers,” said Micah Hauptman, the CFA's financial services counsel. “It applies only on a transaction by transaction basis,” which leaves wide holes in the regulation.
Karen Barr, president and chief executive officer of the IAA, echoed that sentiment, saying, “We have some concerns that Reg BI would apply only at the time a recommendation is made. With investment advisors the duty can’t be turned on or off or waived. A consumer may rightly assume that an advisor is acting in their best interest,” said Barr.
“We have advocated for two decades that fiduciary duty should apply to all professionals,” Barr added.
Doubts about the proposal were echoed by SEC Commissioner Kara Stein. “Regulation best-interest reports to propose a minimum standard that brokers may not put their interests before investors. But I’m not sure it does that,” she said.
Representatives of the AARP, CFA, CFP Board and IAA said at the meeting that it is imperative that the SEC extend the deadline for comments in order to make results of consumer testing public first. They are asking the SEC to extend the August 7 deadline for comments by 90 days.
“We appreciate the commission is testing the disclosure and we think that testing should be made available,” said Thompson. “There is no way to fully evaluate the effect of the rule proposal without the testing.”