So, the fiduciary standard will still apply if one is providing financial advice even if one isn’t doing planning. That’s a big deal and it is outstanding.
A piece I wrote, “My Final Exam”, was published in the Journal of Financial Planning back in 2004. Yes, we’ve been talking about these issues that long—far longer actually. I was merely carrying the flag for a movement already in progress.
The piece describes a future regulatory environment for financial planners by telling the story of my last regulatory exam and how it differs from today’s regulatory structure. It spends quite a bit of time on the need to monitor use of titles and addresses “hat switching.” I suggested that by requiring a fiduciary duty to apply to all those holding out as planners/advisors, etc. at all times, the primary problem of hat switching was solved.
In my future world, planners could still perform multiple roles, but the standard of care would not change when they switched hats. There was no longer a need for people to know the difference between advice and brokerage accounts.
To me, consumers shouldn’t need a glossary to be protected.
Proper regulation centered on a uniform and bona fide fiduciary duty all the time, rather than 1,000+ page rule proposals outlining how to get around the standard. I envisioned a regulatory equivalent of a “CFP” tattoo on the forehead of practitioners. A standard someone could easily see and could not be easily removed. CFP Board has opened its palace of ink and I hope it stays busy.
CFP Board also inserted this:
In a disciplinary proceeding in which a CFP professional denies CFP Board’s allegation that the CFP professional was required to comply with the Practice Standards, the CFP professional must demonstrate that compliance with the Practice Standards was not required.
That last bit of language regarding the practice standards is an interesting, and I believe adequate substitute for the term “rebuttable presumption.” The issue the presumption was intended to address centered on whether the practice standards apply. This new provision puts the burden of showing whether the standards apply squarely on the shoulders of the licensee, exactly where it belongs.
One thing the CFP Board did not do was wait to act. Many of the groups that voiced opposition to the proposed revisions wanted CFP Board to wait until there was less regulatory uncertainty or at least wait until the SEC put something out on fiduciary.