CFP Board appeals for feedback on revised conduct standards

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With time running out, the CFP Board is appealing to advisors for input on its newly updated standards of professional conduct.

The board will accept public comments on the revised standards through Aug. 21, before evaluating the feedback. The actual timetable for finalizing the document will depend on the comments received, according to its General Counsel Leo Rydzewski.

Among the more significant revisions, are new guidelines for providing digital advice and recommending that clients work with other professionals, such as an accountant or an attorney.

Concerning digital advice, the new standard "reflects the important role that technology plays in the delivery of professional services," Rydzewski says. "It begins with the obligation that a CFP professional must exercise reasonable care and judgment when selecting, using or recommending any software, digital advice tool or other technology while providing professional services. The CFP professional,” he adds, “must also have a reasonable understanding of the assumptions and the outcomes that the technology employs and a reasonable basis for believing that the technology produces reliable, objective and appropriate outcomes."

The CFP Board is also looking to increase the accountability of advisors who bring in outside professionals to augment their work with clients. The proposed standard that governs "recommending, engaging and working with additional persons" would require advisors to conduct due diligence when bringing in outside professionals and to disclose any compensation arrangements that could create conflicts of interest.

"When engaging or recommending the selection or intention of other persons to provide services, a CFP professional is required to have a reasonable basis for the recommendation based on the person's reputation, experience and qualifications," Rydzewski says. "The standard also talks about, when engaging a person to provide services for a client, the obligation to exercise reasonable care to protect the clients' interests."

Expanded fiduciary duties
Another important change in the proposed standards expands the scope of an advisor’s fiduciary duties to a client. Under the new standards, planners would be bound by fiduciary duty in all of their work with clients, even those that fall outside planning services.

"Under the proposed revised code of ethics and standards of conduct, the fiduciary duty applies to all financial advice, which is, from CFP Board's perspective, the technically precise way of saying it applies at all times," says Rydzewski.

The CFP Board is also proposing to reinstate its former policy that defines bankruptcy as a form of "adverse conduct" that must be handled through the board's disciplinary process.

The board began revising its professional standards of conduct in December 2015 and issued its draft proposal in June of this year. Its professional conduct commission is comprised of CFP professionals representing various business and compensation models, individuals with regulatory experience and the consumer advocate Barbara Roper.

The CFP Board routinely investigates suspected violations of its standards. Remedies for advisor misconduct include letters of censure, suspension or loss of the CFP designation.

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