Praise and reproach for CFP Board’s proposed standards changes

Major consumer advocates and groups say the CFP Board's proposed changes to its standards of conduct represent an important step forward in the evolution toward a more fiduciary planning industry.

"I applaud the board," wrote Phyllis Borzi, a former assistant secretary in the Department of Labor and the official credited most with shepherding the government's own fiduciary rule into existence. Borzi’s comment appeared on the board's public forum for feedback on its proposals. Nearly 200 responses appeared on the site, which closed to additional feedback on Aug. 21

Others chimed in to say the board needs to go even further to rid the industry of conflicts and clarify ambiguous points of the current rule.

Critics, however, said it will create unintended consequences, as well as overly burdensome compliance requirements.

Now that the deadline for public comments is past the CFP Board will evaluate the feedback. The timetable for finalizing the changes will depend on the comments received, according to its General Counsel Leo Rydzewski.

Scroll through to read a lightly edited survey of the comments.

These proposed revisions provide a model for what advice standards should look like throughout the financial industry, regardless of business model or compensation structure…. Since 2008, CFP professionals across all business and compensation models have been required to operate under a fiduciary standard when providing financial planning services. While that standard has benefited investors substantially, it leaves open the possibility for a CFP professional to make sales recommendations or otherwise act in a way this is not in the investor’s best interest, outside of the financial planning relationship. The proposed standards close this potential loophole, extending the fiduciary duty to all financial advice, not just when a CFP professional provides financial planning services. This means that a client will be fully protected throughout the relationship, regardless of what services they are receiving.

We are concerned that the proposal will have negative unintended consequences and further confuse investors …. While FSI appreciates that the CFP Board is well-intended in wanting to disclose material conflicts of interest to clients and to provide baseline information to prospective clients, it is important that the CFP Board consider the consequences this creates for firms who have financial advisors who hold the CFP designation and the resulting regulatory obligations the proposal will create. Simply put, firms will be faced with either applying all resulting requirements to their entire universe of financial advisors or disallowing any financial advisors to hold themselves out to customers as CFP-designated. FSI does not believe the CFP Board intends either of these scenarios and thus urges the board to reconsider the unintended consequences of the proposal.