CFP Board adopts revised ethical conduct standards

FWR Staff

3 June 2007

Most financial planners required render fiduciary "duty of care" to clients. The Certified Financial Planner Board of Standards has adopted new ethical standards for the 54,500 financial planners in the U.S. who are authorized to use CFP certification marks.

"CFP" stands for "certified financial planner."

The revised standards require a CFP professional to "place the interest of the client ahead of his or her own" at all times. This replaces the lower standard of "reasonable and prudent professional judgment" contained in CFP Board's previous Code of Ethics and Professional Responsibility.

The revised standards go into effect on 1 July 2008.

Emphasis on "best"

"Ethics has always been a vital part of the requirements for CFP certification," says the CFP Board's board chairman Karen Schaeffer. " CFP Board believes these updated standards reflect the level of ethical service the public deserves from financial planning professionals."

The revised standards also require that CFP professionals who provide financial planning services do so "with the duty of care of a 'fiduciary'" -- a term the CFP Board defines as acting "in the best interest of the client." This heightened "duty of care" significantly strengthens the previous CFP Board requirement that financial planning services be performed "in the interest of the client."

Last year the CFP Board came under fire when it proposed to make the fiduciary aspect of its ethical standards less than absolute. Last summer the CFP Board said it didn't want to make fiduciary duty mandatory because some of those it certifies are teachers, government workers and others who don't provide financial planning services.

And it has adhered to that stance.

The CFP Board's review of its CFP standards of conduct started in 2005 with the Board of Directors' decision to review all of CFP Board's ethics-related functions. Two drafts of proposed revisions were released for public comment, and the CFP Board's board of directors appointed a task force to review the comments and make recommendations a course of action.

CFP professionals found to have violated the CFP Board's ethical standards may lose the right to CFP designations. Meanwhile, the CFP Board says it's hard at work educating its members on the impact of the revised standards. -FWR