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CFP Wants to Extend Fiduciary Duty

June 21, 2017

The CFP Board is seeking comment on proposed changes to its standards, among which is the expansion of the fiduciary duty to cover all financial advice by professionals holding the CFP designation, WealthManagement.com writes.

Under the CFP’s current Code of Ethics and Standards of Conduct, last updated in 2009, advisors with a CFP designation are bound by the fiduciary duty only when they provide financial planning, according to the web publication. The proposed changes would effectively require CFP professionals to act as fiduciaries at all times, including when they provide financial advice, Leo Rydzewski, CFP Board general counsel, tells WealthManagement.com.

The proposed standard would also require CFP-designated advisors to try to avoid conflicts of interest and disclose them to the client. But it would not obligate advisors to get written consent of the conflict, according to the publication. Nonetheless, advisors would still be expected to act in the best interest of the client even when operating under a conflict, Rydzewski tells WealthManagement.com.

In addition, the proposed revisions would tighten how CFPs can describe their fee structure, according to the publication. CFPs that get compensation tied to sales will not be able to simply call themselves “fee only,” WealthManagement.com writes. The CFP Board prefers “fee and commission” in such cases, but advisors will still be able to say they’re fee-based as long as they make it clear to their clients that they’re not fee-only, Rydzewski tells the publication. The CFP Board is seeking comment on the proposal for the next 60 days, WealthManagement.com writes.

Some financial industry execs, such as Skip Schweiss, managing director of adviser advocacy and industry affairs at TD Ameritrade Institutional, have praised the decision to broaden the fiduciary standard, according to InvestmentNews. Shannon Pike, president of the Financial Planning Association, says that CFP’s proposal “is good for the profession,” according to the publication. But because many of the roughly 77,000 CFPs are brokers, the CFP will lose a lot of them, Rick Kahler, owner of Kahler Financial Group who’s also a CFP, tells InvestmentNews. In addition, it’s unclear whether the CFP Board is ready to enforce and discipline non-compliant CFP advisors, Michael Kitces, partner and director of research at Pinnacle Advisory Group Inc., tells the publication in an email.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.
  • To read the WealthManagement.com article cited in this story, click here.