I’m going to start at the end.

The CFP Board has requested comments about its proposed new Standards of Professional Conduct. This is an opportunity to contribute to the evolution of the profession. Please, please take them up on their offer. The comment period ends Monday, August 21, 2017. To read the proposal and comment go here.

The CFP Board’s mission describes its role in the financial planning profession which is “…to benefit the public by granting the CFP certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning.”

Clearly, the Standards of Professional Conduct are critical to this role. Given the importance of standards and the criticism the CFP Board has received in the past for failing to gather input on important matters, it would be a significant wasted opportunity if few comments were shared.

The new proposal raises the bar for the practice of financial planning by a significant degree. Ray Ferrara and the Commission on Standards are to be commended for some great work.

Under the new standards, CFP certificants are to be held to a fiduciary standard at all times when giving “financial advice”. The proposal goes on to define financial advice in a way that is appropriate. This approach is easier to grasp than the current language surrounding “material elements.”

Those that choose to switch hats to a sales role may still do so but the CFP Board will continue to expect fiduciary duties to be met even if financial services regulations only require a lower level of care such as suitability or caveat emptor. 

This is a step that the true financial planning profession has been working toward for decades, a sound answer to former FPA President Mark Johannessen’s call to “raise the bar.”

I liked how the proposal clarifies when the Practice Standards apply. The new language is an improvement over the prior wording relating to a financial planning engagement.

The proposal also does an admirable job of clarifying the ability to use the term “fee-only”. They moved toward making sure the word “only” means only when used by CFP certificants. The standards explicitly warn about misleading use of the term “fee-based.”

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