The CFP Board has released two sample client engagement letters that are designed to help certificants comply with the board's new code of ethics.
The letters were drafted with input from CFP professionals and consumers and are being released as examples of forms that investment advisors and brokers can use to comply with sections of the code that require CFP certificants to provide information to clients.
"The sample engagement letters use plain language to reduce consumer confusion, increase consumer trust, and reduce the number of questions a consumer may ask regarding the engagement," CFP Board CEO Kevin R. Keller said in a prepared statement.
The board stressed that CFP professionals should use the letters as a guide, and that they should be customized to fit the circumstances of each client engagement they are used for. Each of the letters include notes on how they can be tailored to fit a particular client's situation.
"Each sample letter assumes a specific factual situation," the board said. "For that reason, CFP professionals must tailor the sample letter to fit their practice and the client's circumstances."
The samples are specifically designed for CFP professionals to comply with the "Duty to Provide Information" section of the board's new "Code of Ethics and Standards of Conduct."
The new rules, which the board started enforcing June 30, were aimed at requiring CFP professionals to act as fiduciaries and in the best interest of clients at all times.
"A CFP professional might consider adding provisions to address legal and other issues and any regulatory requirements," the board said. "A CFP professional also should review the CFP professional’s firm’s policies and procedures regarding communications with clients and required approvals and consult with the firm’s compliance officer."
One letter is designed for fee-only investment advisors who are providing financial planning, including investment advisory services, the board said.
The other letter is meant for registered representatives of a broker-dealer who are providing financial advice that does not include financial planning. This letter would be used by reps who are not dually registered, who offer insurance products and annuities in addition to mutual funds and ETFs, who are agents of insurance companies and who have revenue-sharing arrangements with mutual companies and other arrangements that may result in referral compensation.