CFP Board completes rules overhaul with revised enforcement guidelines

Eight years after the CFP Board began reforming its guidelines, the overhaul of its sanctions, standards and enforcement policy is complete, General Counsel Leo Rydzewski said.

The certifying organization that oversees more than 98,900 planners with the profession's most respected and prominent designation "will continue to review and revise them as appropriate over time" but is "unlikely" to make as many changes to its guidelines, Rydzewski said in an interview. Earlier this month, the CFP Board adopted the revised sanctions guidance, certification fitness standards and enforcement procedures, which are set to take effect in July. The adjustments follow a tougher code of ethics put in place in 2020 and a series of enforcement and disclosure-related shifts in the wake of Wall Street Journal articles about certificants' omitted "red flags" in 2019.

LetsMakeAPlan.org is the CFP Board's public-facing searchable database of CFPs. Five years ago the Journal found the site lacked information about thousands of "customer complaints, regulatory skirmishes and other problems" (such as 140 felonies). Today, the site looks much different. Among other steps, the CFP Board undertook a review by an independent task force, convened a multiyear Commission on Sanctions and Fitness that developed the revised guidelines unveiled this month, and publicly addressed the need for greater transparency and stricter enforcement. The new guidelines represent "the completion of our work" begun in 2016 with the ethics overhaul, Rydzewski said.  

For planners in the field, "the key takeaway is that they should be confident" that the CFP Board has crafted "an enforcement process that's fair to CFP professionals and credible to the public," he said. "We're hoping to advance the planning profession for the benefit of the public."

Public comments from key stakeholders and a survey of CFPs indicated general support for the revisions, with some caveats calling for tweaks to certain parts of the guidelines and criticism about the organization's outsize role as an enforcement body. 

The alterations refined 52 categories of misconduct, compiled a list of 25 aggravating and mitigating factors in enforcement proceedings overseen by the CFP Board's Disciplinary and Ethics Commission and filled out more specific descriptions of the evaluation of a candidate's fitness for certification and the type of actions that would bar a planner from certification or make them ineligible. Professional discipline based upon fraud, theft, misrepresentations "or other dishonest conduct involving clients," as well as any felony convictions, remain grounds for "an absolute bar" from certification, according to the revised fitness standards. 

In addition, applicants and certificants will now be subject to a "uniform application" of the sanction guidelines. Adoption of the revisions also led to the following "policy conclusions": certain misconduct "should always bar an applicant from becoming a CFP professional"; the Disciplinary Commission will continue issuing some private sanctions but not be given authority to order fines or other monetary sanctions; and the CFP Board won't remove public dings from its online databases.

Those revisions are "better aligned" with the 2020 code of ethics that applies the fiduciary duty to all certified financial planners' advice, said Daphne Jordan, the chair of the National Association of Personal Financial Advisors and a wealth advisor with Austin, Texas-based Pioneer Wealth Management Group. Her organization is a networking, professional development and advocacy organization representing more than 4,500 fee-only planners. In its comment letter after the CFP Board asked for feedback in September, NAPFA found a few "little suggested changes" but applauded the "consistency with what a fiduciary is and that fiduciary standard," Jordan said in an interview.

"They do an excellent job of systematically looking at all of their documents and systems," she said. "It protects consumers from the bad actors and the spoiled apples."

Other organizations such as the Financial Planning Association of Greater Phoenix, the Consumer Federation of America, the AARP, the Public Investors Advocate Bar Association and the Securities Industry and Financial Markets Association submitted comments as well. The latter organization, a trade and regulatory advocacy group representing the largest brokerages in wealth management, submitted by far the most critical letter among those half dozen commenters. The CFP Board and its revisions impose "an unnecessary overlay" on top of "the existing robust regulatory sanctions regime," SIFMA Deputy General Counsel Kevin Carroll wrote.

"As we have stated over many years, our primary concern is that although CFP Board is a private credentialing organization, it increasingly purports to function and act as a regulator," Carroll said. "In doing so, CFP Board has imposed and continues to impose significant supervisory, compliance, regulatory and legal risks on the firms that employ certificants. As you know, certificants and their firms are already subject to extensive regulation by the SEC, FINRA and state securities and insurance regulators, among others."

In contrast, the AARP praised the organization for taking action.

"Ensuring that there are clear policies and processes set forth and that CFP professionals understand the standards they are held to, as well as the potential sanctions they will face for violating these standards, is important in protecting investors," AARP Legislative Counsel and Legislative Policy Director David Certner wrote. "The proposed revisions should give the CFP Board better tools and more latitude to ensure that CFP professionals adhere to their obligations as holders of the designation."

The CFP Board "carefully listened to the professional community" in crafting the revisions, Rydzewski said. "CFP Board takes its standards seriously and undertakes great effort to evaluate what the appropriate standards should be."

Financial advisors at large and NAPFA members specifically find value in the designation because Americans "need help in navigating these waters" now that individuals have so much responsibility to prepare for their own retirements without being able to rely on pensions anymore in most cases, Jordan noted.

"We don't do a great job in our country of educating folks about their money, but we all have to deal with money," she said.