CFP Fiduciary Standard Worries

Can well-regarded, top-rated funds still fail compliance tests?
June 6, 2019
SEC BI Rule in flux-ish
June 20, 2019

Is the new CFP fiduciary standard more worrisome than the SEC advice rule? Yep!

While you are busy reviewing the Securities and Exchange Commission’s (SEC) new investment advice reforms approved last week, check out the Certified Financial Planner (CFP) Board’s new code of ethics and standards. Compliance is everywhere!

According to an article in last week’s InvestmentNews by Reporter Bruce Kelly, “many in the retail securities industry dislike the CFP Board’s updated code which is expected to take effect October 1, 2019.

Higher standards for CFP professionals?

Yes indeedy. According to a CFP Board statement commenting on the SEC’s Best Interest Rule and related guidance for investment advisors, the Board noted that it was taking action to set the bar for compliance as there was no federal fiduciary standard in place.

The CFP Board wanted consumers to know that now that “the SEC has issued its Regulation Best Interest rule and related guidance for investment advisers and that consumers should know that nearly 85,000 CFP professionals will be obligated to provide financial advice under a fiduciary standard.
The fiduciary obligation in CFP Board’s new Code of Ethics and Standards of Conduct (effective October 1, 2019) is straightforward. Drawn from the common law of fiduciaries, it includes a duty of loyalty to place the clients’ interest above their own and the firm’s, a duty of care, and a duty to follow client instructions. This clear and simple standard – along with the entire Code and Standards – is consistent with the CFP Board’s mission to benefit the public…Those who comply with CFP Board’s Code and Standards will not be in violation of Regulation BI, or any other existing laws and regulations, by doing so. The new Code and Standards complement, rather than conflict, with the law…In the absence of a federal fiduciary standard, the new Code and Standards serves as a North Star for consumers seeking financial advice.”

Why did the CFP Board develop the new Code and Standards?

Because it wants the investment professionals it certifies to do the right thing and to encourage consumer confidence in the face of so many public bad actors. Officially, the CFP Board says that it periodically reviews its ethical standards and certification requirements to maintain the value, integrity, and relevance of the CFP certification. The Board notes that the deliberative and thorough process to develop the new Code and Standards spanned more than two years, starting with the December 2015 formation of the Commission on Standards, and including active outreach to gather input on proposed revisions from CFP professionals and the public.

  What does the new Code and Standards mean for CFP professionals?

More oversight. Compliance must be in place effective October 1, 2019. The new Code and Standards expands the application of the fiduciary standard to all financial advice and requires CFP professionals to act in the best interests of the client at all times when providing financial advice. The 18-month period between the announcement of the new Code and Standards and their effective date was intended to be responsive to concerns expressed by a number of investment professionals and the firms they work for to have a “reasonable window of time to adjust their current operational systems” in order to be accountable for the new Code and Standards.

Will you be ready for the CFP’s new Code and Standards?

As though compliance professionals did not have enough on their plates already! The SEC’s new advice rule and the CFPs new client-facing requirements have been a long time coming. Good news; you are not alone. Both the SEC and CFP are prepped for a deluge of inquiries. And then there’s Patrina. For more than 25 years, we have been helping compliance professionals like you keep track of “bad apples,” and stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective, designated third-party services, our comprehensive 8-module compliance solution, and compliant data capture & file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered. Let’s talk.

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