The CFP Board of Standards said it will not table its proposed best-interest code of standards in the face of mounting pressure from eight broker-dealers and their associations. The brokers are asking the board to wait for the Securities and Exchange Commission to propose its own standards.

“The CFP Board’s work is informed by the regulatory environment, but its standards-setting process is not driven by potential regulatory action,” wrote the CFP Board’s general counsel, Leo Rydzewski, in an e-mail to Financial Advisor.

“Moreover, CFP Board cannot predict whether or when the SEC will act, or what the SEC will do. Should the SEC take action, CFP Board will evaluate what, if anything, should be done at that time,” Rydzewski said.

As a non-profit organization that exists to benefit the public, the group has an independent obligation to set high standards for CFP professionals, he added.

The board is expected to review and approve its proposed Code of Standards by the second quarter of the year and make the code effective for its 80,000 CFPs by January 1, 2019. The SEC has yet to propose fiduciary or best-interest standards, but has indicated it expects to release a proposal in the second quarter of 2018.

FPA And NAPFA Wants The New Code To Proceed

Planning associations including the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA) both told Financial Advisor they want the CFP Board to proceed with the new code of standards and not wait for the SEC to take action.

“We think that what the CFP Board is doing is right on track,” said FPA National President Frank Paré. “The reality is if you are a CFP and are carrying those marks, there are standards you must live by. It should not be that you can say I’m a CFP, but when I offer this particular product, I don’t have to live by CFP standards.”

NAPFA President Scott Beaudin said the CFP Board standards are designed to ensure that consumers know whether they’re sitting across from a fiduciary advisor or a salesperson. “There is room for both,” Beaudin said. “But we have seen in study after study that consumers don’t understand it when you take off one hat to put on another.”

Added Beaudin: “If a firm decides they can’t live with the CFP Board’s standards, they can make the decision not to hire or work with CFPs. This is a voluntary professional designation, but an important one that lets consumers know that a fiduciary advisor has their best interests at heart all the time, not just some of the time.”

The revision to the CFP Board’s code is the first in a decade and significantly broadens CFP certificate holders’ fiduciary responsibility to put investors’ best interests first when delivering financial advice.

The eight B-Ds that want the CFP Board to delay its standards are Ameriprise Financial Services, AXA Advisors, Edward Jones, LPL Financial, Morgan Stanley Wealth Management, RBC Wealth Management US, UBS Financial and Wells Fargo Advisors.

These companies account for 18,200 of the 80,000 CFPs the proposed code would impact.

The brokerage associations that represent the eight firms, the Financial Services Institute and SIFMA, also asked the CFP Board for a delay. Both organizations are plaintiffs in a lawsuit pending in the Fifth Circuit Court of Appeals in Dallas that would force the U.S. Department of Labor to rescind its fiduciary standards for qualified retirement accounts.

If the CFP Board won’t delay its best-interest standards until after the SEC acts, the eight firms said in a comment letter delivered to the CFP Board on February 2 that it should limit its fiduciary standard to instances where an advisor engages in very narrowly defined financial planning.

In particular, the eight broker-dealers object to the CFP Board’s definition of financial planning as “a collaborative process that helps maximize a client’s potential for meeting life goals through ‘financial advice’ that integrates relevant elements of the client’s personal and financial circumstances,” they said in a comment letter to the CPF Board.

“For example, the final Standards of Conduct should state that financial planning is not intended to apply where a representative of a broker-dealer merely makes a recommendation after obtaining relevant personal and investment-related information from the client, as required by Finra,” the group said. For clarification, the Finra requirement mandates that registered reps give customers a questionnaire that takes a few minutes to answer. It does not require registered reps to put investors’ best interests first.

“The revised proposal continues to require CFP certificants to deliver a level of service that may not be warranted for all investors or in all circumstances,” the letter from the eight companies continued. “Providing financial advice simply does not require a prescribed, time-intensive and potentially costly financial planning process in every instance.”

The attempt by the B-D industry to delay a fiduciary standard “isn’t surprising,” FPA’s Paré said. “But it’s not as if they’re putting together any new arguments. We have been hearing the same thing for the past 11 or 12 years. As an organization, we believe so strongly in what the CFP Board is doing and fiduciary standards that we were willing to sue the SEC in 2004. I think the CFP Board is doing the right thing, and we are applauding them.”

The FPA won its lawsuit against the SEC in 2007, forcing the agency to vacate its so-called “Merrill Lynch rule,” which gave the broker-dealer industry a carve-out from fiduciary regulations when companies decided to put on their brokerage hats instead. Despite the ruling and its headlong push into the fee-based advice business, the industry has been successful in preserving its carve-out from fiduciary standards at the SEC.

“At the end of the day, it will be our profession and increasing consumer demand that drives fiduciary advice forward, not regulators. That’s why we support the CFP Board,” NAPFA’s Beaudin said.