The number of advisors who qualify to hold the Certified Financial Planner (CFP) mark may drop after new ethics standards are enforced beginning June 30, CFP Board Chair Susan John said today.
John, a CFP and founder of the planning firm Financial Focus Inc., and Kevin R. Keller, the CFP Board’s CEO, spoke at a session at the Financial Planning Association’s annual meeting in Minneapolis.
John assured the audience that the board hopes the number of CFP licensees doesn’t fall when the ethics and conduct standards are enforced, but acknowledged it will be tougher for some advisors to qualify.
A big change required by the new standards, which became effective October 1, is that all CFPs must act as fiduciaries, putting the best interest of the client first. The board delayed enforcement of the new standards until June 30 to give firms a chance to make adjustments and comply.
“We've decided that the standards are what the standards are; we're not bending them for anybody,” Keller told the audience. “As I said before, we hope that the firms will create an atmosphere where it's possible for you to act as a fiduciary for your clients.”
The board will have to “see where this goes,” Keller said, but reminded listeners that the standards were developed with input from people at all kinds of advisory firms.
In response to questions, Keller assured the audience that advisors who work at insurance firms will not be excluded from becoming CFP licensees. Advisors working in all business models are welcome to hold the mark, as long as they follow the standards, he said. For example, brokers, who in the past have not had to meet a fiduciary standard, are considering how to comply.
Both John and Keller encouraged any advisor with questions about how to stay compliant while responding to specific client situations to contact the board at [email protected].
They showed a video at the session, introduced by the board today, that provided a perfect example of the kind of question that could come up. In the video, “Betty,” who is retiring soon, engages “Sarah,” a CFP professional, for financial advice. Betty’s retirement funds are in a 401(k) plan. Because there are more investment options available in an IRA, Sarah recommends rolling the 401(k) into an IRA, which she could manage. Although Sarah was well-intentioned, she didn’t first analyze whether the features and options of the 401(k) plan would be a better fit for Betty, given her goals, risk tolerance, objectives and financial and personal circumstances. In this case, Sarah would have been violating the new ethics and conduct code.
Advisors can get more information on the new code by visiting cfp.net/code.