The Institute for the Fiduciary Standard has joined a growing number of organizations pushing for a delay in the implementation of CFP Board best interest code of standards.
The institute leveled harsh criticism of the new CFP Board standards during two webinars Wednesday and Thursday, calling the standards a mess that creates more confusion among the public and advisors. The institute is a research and education institution designed to promote the fiduciary standard in investment and financial advice.
The new standards are “a mess for the consumer [and will lead to] advertising by advisors that is not honest and is a step short of fraudulent,” said Rick Kahler, a member of the institute and president of Kahler Financial Group in Rapid City, S.D.
The standards clarify what has to be disclosed to clients and when. They also define when fiduciary standards have to be adhered to by advisors. The division that now exists between advisors who get paid by commissions for products and advisors who are paid through fees for services is at the center of much of the debate. Fee-only compensation is seen by many as a higher standard than commissions, which are seen as raising conflicts.
The comment period for CFP Board standards ended Feb. 2 and the final reforms are expected to be announced in the second quarter of this year and enacted Jan. 1.
Knut A. Rostad, co-founder and chair of the institute, said the institute is raising its objections now in hopes that the CFP Board will make definitions and regulations clearer for 80,000 CFP mark holders.
The CFP Board did not rule out considering comments made after the Feb. 2 deadline.
“We very much appreciate and value comments and input from all of our stakeholders,” said Daniel F. Drummond, spokesman for CFP Board. “There have been more than 1,400 comments provided to CFP Board; we have met with hundreds of individuals and have had dozens of meetings over the last two years. CFP Board will consider these comments as we revise our standards.”
The Financial Services Institute, which represents more than 100 independent financial services firm members and their affiiiated financial advisors, recently asked CFP Board to delay the implementation until the Securities and Exchange Commission introduces new regulations for financial services. The CFP Board said it is moving ahead, in part because it does not know when the SEC might act.
Only 15 percent of CFP mark holders work strictly for fees, Rostad said. The majority are paid through commissions, a combination of commissions and fees, or other methods.
The institute noted that the proposed standards are a good step forward, but that much more needs to be included.
The institute said, “The standards do not presumptively equate the CFP mark with fiduciary conduct, do not urge CFPs to avoid conflicts over disclosing them, do not provide guidance on mitigating conflicts, do not require certain written disclosures and communications and do not address enforcement.