The Certified Financial Planner Board of Standards has approved its new Code of Ethics and Standards of Conduct, significantly expanding the scope of fiduciary duty that will be expected of the 80,000 CFP professionals it certifies.

The new code, approved unanimously by the organization’s board of directors, will go into effect on October 1, 2019.

“CFP Board took a bold step more than a decade ago in requiring a fiduciary duty when CFP professionals provide financial planning services,” CFP Board Chairman Richard Salmen, CFP, told reporters during a press conference on Wednesday. “We are raising that bar even higher now with a fiduciary standard that will apply any time a CFP professional gives advice.”

By requiring that a CFP professional act as a fiduciary at all times -- as opposed to the old code which mandated it only when delivering a financial plan -- “we are eliminating any confusion,” Salmen said. Specifically the new code requires: “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.”

That code further requires advisors who use the marks to:

• Place the interests of the client above the interests of the CFP professional and the CFP professional’s firm;

• Avoid conflicts of interest, or fully disclose material conflicts of interest to the client; obtain the client’s informed consent, and properly manage the conflict, and;

• Act without regard to the financial or other interests of the CFP professional, the CFP professional’s firm, or any individual or entity other than the client, which means that a CFP professional acting under a conflict of interest continues to have a duty to act in the best interests of the client and place the client’s interest above the CFP professional’s.

Whether or not the CFP Board’s new standards may dovetail with the Securities and Exchange Commission’s planned “best interest” proposal remains to be seen, but what is certain is that the 16-page document is far more succinct than the 1,000-plus word DOL fiduciary rule that was vacated earlier this month. Salmen said the board saw no reason to wait for the SEC to come up with best interest standards, which SEC Chairman Jay Clayton said the agency will propose this summer.

“We’re not certain the SEC will act in a timely manner,” Salmen said. “We believe the train has left the station on fiduciary rules. It is precisely because we are a standards-setting body that we have created higher standards than what the government requires. These standards are part of the evolution of planning -- good for the public, CFP professionals and firms that employ them. We see no reason to wait.”

Salmen said that “whatever the SEC comes up with we will deal with, but we’ve been on a two-and-a-half year journey to update our standards and that doesn’t depend on an SEC timetable.”

The fiduciary standard is one of 14 different requirements in the new code, which requires CFP professionals to adhere to a “clear duty of loyalty and care and follow client directions,” said CFP Board General Counsel Leo Rydzewski. 

While the code is compensation and business neutral, it requires that those who are fee-based clearly disclosure to clients that they earn both commissions and fees or are not fee-only advisors.

The code also requires disclosure of conflicts of interest that may be inherent in any transactions an advisor is recommending. However, “disclosure is not enough,” Rydzewski said. The revised code makes it clear that CFP professionals must adopt and follow business practices reasonably designed to prevent material conflicts of interest that would compromise their ability to act in the client’s best interests. “These are important revisions to the code,” Rydzewski said.

Some 500 State Farm agents were required by the insurer to give up their CFP certifications in 2010, when the board first implemented a fiduciary standard in its code. No such company exodus or reaction to expanded fiduciary duties is being anticipated this time around, CFP officials said.

As a nod to firms’ demands, the Board scaled back disclosure requirements in the original draft of the code, removing a requirement that advisors provide a pre-engagement disclosure form to prospective clients. The change was made as a “practical consideration to firms’ operating policies,” Rydzewski added. Instead the disclosure has been mandated at the time a client engages a CFP professional.

Currently one in four advisors are CFP professionals and board research shows that the CFP designation is the most sought-after and recognized professional certification among consumers. That consumer recognition is likely to continue to grow, in part thanks to a new $25 million CFP Board TV ad campaign. The ads, devoted to raising the standing of CFP professionals, are slated to run in Fall 2018 and Spring 2019, Keller said. Since 2011, the board has spent some $75 million on its public awareness campaign.

“Now with our fiduciary requirements and other changes, we are further separating ourselves from the pack to be the leading certification,” CFP Board President Kevin Keller said. “Firms that adopt and embrace our standards have a better opportunity to retain advisors, attract the next generation of financial planners and are better positioned with the public at large.”

The Consumer Federation of America “strongly supports the CFP Board’s bold and timely decision to extend the fiduciary standard to all financial advice,” said CFA Director of Investor Protection Barbara Roper, who was a member of the commission that wrote the new code. “This reflects an understanding that it is the fiduciary duty to always act in the customer’s best interests that distinguishes advice from a sales pitch. It also represents an enormous step forward in promoting the professionalism of financial planning and financial planners. When the standards take full effect, the CFP mark will be invaluable to investors who want the assurance that the financial professional they rely on is committed to acting in their best interests at all times.”

The Board considered more than 1,500 comments over two comment periods, totaling 90 days, since proposing the new standards in December 2017.