After two year’s of debate, the Certified Financial Planner Board of Standards released on Wednesday what may be its final version of the new code of conduct for CFP professionals.

The proposed standards of conduct require advisors to act as fiduciaries whenever they are providing financial advice. The existing standard requiries CFP mark holders to act as fiduciaries when providing financial planning. The proposed standard broadens the definition of when CFP professionals have to act as fiduciaries, which always has been a central tennent of the CFP Board. 

One change involves when an advisor has to disclose a host of information about services provided and fees charged. The original proposal said such information had to be provided at the beginning of any discussion with a potential client. The new version says this detailed information has to be disclosed at the time the person is engaged as a client.

The rules clarify compensation definitions, including what is considered fee-only or fee-based, a conflict that has erupted into heated battles between the board and some advisors in the past.

An advisor who is receiving commissions from some activities or sales has to make clear to clients that he receives commissions as well as fees and not try to use the ‘fee-based’ designation to delude clients into thinking he or she works only on fees. Fee-only is seen by many in the profession as a more ethical standard of compensation.

The revisions clarify that CFP designees using the fee-only description cannot receive any commission compensation from sales of products. It also says no 'related party' can receive commissions and defines who qualifies as a related party. The board considered banning the term "fee-based," completely but decided against it in favor of a clearer definition, the board said.

The CFP Board said it does not make any judgment on what compensation model is most desirable, but wants clients to have clarity about what they are paying, said Leo G. Rydzewski, CFP Board general counsel. Advisors using the fee-based description have to make it clear to clients that they receive both fees and commissions.

The board took into consideration written comments, survey answers and town hall commentary presented over the last several months during an extended commentary period before revealing the new rules.

CFP Board has required its certificate holders to act as fiduciaries, putting the best interests of the client first, since 2007. The first draft of revisions to the decade-old rules was released in June. An extended comment period was then added when financial industry representatives and consumer organizations asked for additional time to comment.

A final month-long comment period will be held Jan. 2 to Feb. 2 and the final rules are expected to be released during the first quarter of 2018. The rules will go into effect in January 2019, said Blaine Aikin, CFP Board chairman, during a press briefing Tuesday.

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