Tattoos? Odd, I know, but bear with me.
On March 29th, CFP Board announced that its board of directors had unanimously approved revisions to its Code of Ethics and Standards of Conduct. The new standards significantly raise the bar for CFP professionals.
They clearly put the onus on the certificant to avoid behaviors that have often caused confusion to the public. No more use of “fee-based” or similar terms to suggest fee-only. No more allowing misleading marketing by one’s employer to slide by a client without clarification. Most importantly, there is no more use of the excuse “I wasn’t doing financial planning” to attempt escape a fiduciary duty or the practice standards.
The new rules and standards aren’t perfect by any means. There are some disclosures that can be given orally, there is not enough emphasis on avoiding conflicts, they pulled the “rebuttable presumption” that a CFP licensee was providing financial planning, and they added a step 7 to the classic financial planning process.
Nonetheless, for the most part, CFP Board got things right. They kicked things off with this:
STANDARDS OF CONDUCT
A. DUTIES OWED TO CLIENTS
1. FIDUCIARY DUTY At all times when providing Financial Advice to a Client, a CFP professional must act as a fiduciary, and therefore, act in the best interests of the Client.
They then define “Financial Advice” as:
A. A communication that, based on its content, context and presentation, would reasonably be viewed as a recommendation that the Client take or refrain from taking a particular course of action with respect to: 1. The development or implementation of a financial plan; 2. The value of or the advisability of investing in, purchasing, holding, or selling Financial Assets; 3. Investment policies or strategies, portfolio composition, the management of Financial Assets, or other financial matters; 4. The selection and retention of other persons to provide financial or Professional Services to the Client; or B. The exercise of discretionary authority over the Financial Assets of a Client.