Eight major brokerage firms have signed on to a letter asking the CFP Board to delay its “best-interest” standards to allow the Securities and Exchange Commission to finalize its own standards first

Firms signing on to the request for a delay include: Ameriprise Financial Services Inc., AXA Advisors, Edward Jones, LPL Financial, Morgan Stanley Wealth Management, RBC Wealth Management US, UBS Financial and Wells Fargo Advisors.

The “CFP Board should defer finalization of the standards of conduct and should align them with the SEC’s proposal,” the eight firms said in their comment letter.

Cumulatively, these broker-dealers and wirehouses work with 18,200 of the 80,000 CFPs the proposed Code of Standards would impact. The proposed standard would require CFP license holders to act in their clients’ “best interest” when delivering financial advice.

At the heart of the matter appears to be the brokerage industry’s unabashed push to exclude commissioned product sales from fiduciary and best-interest standards.

The result of the proposal is “impractical burdens placed on our business models,” the group of B-Ds said, adding that the board’s requirements are broader than regulatory standards and add supervision and liability risks for regulated firms.

Make It Narrow

If the CFP Board won’t delay the rule, the eight firms are asking the board to apply it only to narrowly defined financial planning, in order to ensure that commissioned-based sales are excluded from best-interest standards. They are also asking that the board modify its rules when the SEC finalizes its own.

In stark contrast, registered investment advisory firms and CFPs are largely supportive of the expansive best-interest proposal from the CFP Board.

“If true financial planners had waited for government to raise standards, we wouldn’t be using ‘financial planning’ and ‘profession’ in the same sentence today,” said Dan Moisand, a former president of the Financial Planning Association and principal of Florida-based advisory firm Moisand Fitzgerald Tamayo, LLC.

The eight firms argued, however, that the proposal will hurt firms and CFP license holders who use a commission-based brokerage model—as well as those investors who may be better served by commission sales rather than fee-based accounts.

Waiting On The SEC

“We expect the SEC will propose a best-interest standard of care that is business-model neutral,” the firms said.

The group also said it expects that the SEC will not apply its forthcoming best-interest standards to brokerage relationships or require “potentially costly financial planning services … which discourage the use of brokerage as a service option.”

The CFP Board rejected a similar request for a delay from the eight firms’ membership association, SIFMA, in late January. While many firms say that the DOL fiduciary rule has become the law of the land, the agency has extended full implementation until July 2019 in response to the outcry from broker-dealers and a memorandum from President Donald Trump directing the agency to review the rule.

It should be noted that both SIFMA and the Financial Services Institute are suing the U.S. Department of Labor in appeals court to force the agency to rescind its “best-interest rule.”

CFP Board General Counsel Leo Rydzewski said that the certification body formulated proposed standards that it believes are the best path forward, but will review and consider all comments. “We look forward to reviewing the comments as we move forward in the process of developing a new Code of Ethics and Standards of Conduct for CFP professionals,” Rydzewski said.

The eight B-Ds are likely to remain tough customers of best-interest rules. Inconsistent regulations are already hurting the marketplace, the group argued. If the CFP Board goes forward with its revised proposal, it will contribute to the “growing problem of overlapping inconsistent standards of conducts,” the firms said.

“Unfortunately, the revised proposal is in direct conflict with a harmonized best-interest standard of care,” the group of eight said in their letter. “The proliferation of different standards of care across accounts, state lines, products and, potentially, professional designations does not provide clarity or reliability for investors. … If CFP Board revises its Standards of Conduct now, the changes would come in the midst of multiple regulators, including the Department of Labor, adding new and different standards of care applicable to different account types when providing investment advice.”

The timing is also problematic for the firms. While the CFP Board expects to finalize its standards by January 1, 2019, the board failed “to account for the SEC’s stated intention to advance its own best-interest standard of care in the coming months.”