Compensation is also the topic of the provision that jumped out at me most in the proposal. The CFP Board only controls an individual’s right to use the mark. It has no control over firms. Some firms market “fee-only” when they are not or otherwise obfuscate compensation. 14f of the proposal puts the responsibility for being accurate back on the shoulders of the practitioner by requiring the CFP professional to correct their firm’s misrepresentations and accurately represent the compensation method.

Having heard many cases against CFP licensees when I served on the Discipline and Ethics Commission, it was all too common for a licensee’s defense to center around “my company made me do it.”  While that can be a legitimate defense for some actions, I was pleasantly surprised to see the proposal included this accurate compensation description requirement. I see no condition in which a CFP professional should allow a client to be misled about compensation method. Compensation issues cut right to the heart of professionalism, trust and ethics.

As good as this proposal is, there is room for improvement. I will share just a few here and make more thorough comments via my comments to the CFP Board.

In places, like Item 4 of the Code of Ethics, CFP licensees are expected to “Avoid or disclose and manage conflicts of interest. The “or” can be interpreted as a choice. I would reword that so it is clear that licensees do not get to choose between avoiding or disclosing/managing. It is stronger to allow “disclose and manage” only when a material conflict is unavoidable. If the standards included “...and manage in the clients’ favor”, they would be even stronger.

I liked the incorporation of “financial advice,” but I would have added a statement about holding out. I think it is reasonable that anyone using the title “Financial Adviser(or)” should be presumed to be giving financial advice.

Actually, I would have incorporated a holding out presumption akin to a proposal made by Canadian securities authorities called Multilateral Instrument 33-107. It really cuts through the bull. I liked it so much I included it in my 2004 Journal of Financial Planning paper “My Final Exam.”

It describes holding out as:

“using a title that includes any of the words “financial,” “retirement,” “wealth,” “security,” “asset,” or “money” in combination with any of the words “adviser,” “advisor,” “consultant,” “specialist,” “expert,” “manager,” or “counselor,” or a title similar to “financial planner,” or… as providing a service described using an expression that includes the word “planning,” or…any of the words “financial,” “retirement,” “wealth,” “security,” “asset,” or “money” in combination with any of the words “advising,” “consulting,” “specialty,” “expertise,” “management,” or “counseling,” or an expression similar to “financial planning”…

These days, there doesn’t seem to be any sales people in the financial world. Everyone is an advisor.  That’s fine if the people who use the title actually give advice and are held accountable for acting as an advisor.

But we all see a pervasive problem for the public. Many who hold out as advisors aren’t giving advice. They are just selling.