Comments on Exposure Draft (D-F)

On July 24, 2006, CFP Board released an Exposure Draft of proposed revisions to its Code of Ethics and Professional Responsibility and Financial Planning Practice Standards for a 60-day public comment period.

The individuals listed below submitted comments, and the content of the comments is available below for writers with last names (or organization names) beginning with the letters D through F.

Return to the main index of comments


MARY LYNNE DAHL, CFP®

Subject: Notice of new draft of ethical standards revisions

Thank you for inviting me and other designees to comment on the proposed changes to the ethical standards. I have reviewed the draft and offer the following comment:

On page 2 of Exposure Draft, you define "commission". I suggest you consider the addition of "including 12-B-1 fees, front or back loads on products sold and contingent sales charges", or something descriptive of that nature, with your existing proposed definition of "commission". My experience is that prospective clients sometimes do not understand that a commission paid at some time other than up front is still a commission.

Overall, I think that the revisions are an improvement and thank you for the work that has gone into this project.

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NICHOLAS D'AMBROSIO, CFP®

Subject: Ethics Changes

I do not want the public to think that CFP licensees can opt out of their fiduciary responsibility. This is not good for our credibility nor our credentials.

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PHILIP DAME, CFP®

Subject: New standards

If I understand your proposal--elevating the standard ethical position to that of fiduciary-- I object strongly. Even though I have never been a fiduciary for any client other than my mother, the legal oportunities that would be opened by that standard for our litigious society might cause me to cease to advertise as a CFP.

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JOHN J. DARDIS, CFP®

Subject: CFP Future

In your opinion, what role is there for a CFP who is not an RIA? It appears to me that you are trying to drive out commissioned advisors under the pretext that how one is compensated gives them integrity. You can be an honest commission advisor and do the best for the client, but I do not see how you the Board recognizes that. What I see is a growth in RIAs that have less ardous regulation than NASD/NYSE regulated stockbrokers. I foresee a significant increase in regulation and costs to service clients which means the little client will get ignored more than they are now because they will be unprofitable to service or will get lower return due to higher fees.

It appears to me products like certain annuities are being sold in great numbers by licensed insurance personnel with no investment license and I see no action by this Board or did I miss what you did to protect the public from these issues?

I am concerned about what you see as the future of the industry-what business models you feel will be survivors and how the little investor will be served by a CFP. I foresee regulatory turf wars and legal discussion instead of improvement in product and service to the client.

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HERBERT K. DAROFF, J.D., CFP®

RE: Code of Ethics and Professional Responsibility and Financial Planning Practice Standards

Some of my comments are based on CURRENT wording (revisited now, while reviewing the PROPOSED changes) and some are based on PROPOSED wording.

1. The 10 Commandments do NOT say, "Thou SHOULD not commit adultery."

I am shocked that anyone would think that our PRINCIPLES are only aspirational, that they are only BEST PRACTICES and not RULES OF CONDUCT.

Principles SHALL be followed. Please do NOT change SHALL (CURRENT) to SHOULD (PROPOSED). This applies to the Principle itself and in some cases to the explanation that follows, as well.

Search and Replace every SHOULD with SHALL

2. What is a "professional service"? (both CURRENT and PROPOSED wording in the definition of CLIENT)

It is never defined. We define financial planning along with its process, segments, etc.

Can I get out from under the Code if I sell an insurance policy, or an annuity, etc. simply by arguing that that is not a "professional service"?

This is the same old problem we have faced. Can a CFP® Certifcant take the mantel off once it is put on? I am an attorney 24/7 and I am a CFP® Certifcant 24/7 regardless of what I am doing (working professionally or mowing the grass). It is what I am and people with whom I interact know I am and expect a level of behavior commensurate with that.

Change "professional services" to "financial planning".

3. I am ashamed of our leadership. You who represent 50,000+ have been manipulated by a group representing 1,000 (NAPFA).

a. When attorneys prepare an estate plan or draft the documents, they are NOT FIDUCIARIES. The TRUSTEE of a TRUST is a FIDUCIARY.

This is a ploy by the fee-only folks. Certificants with an insurance and/or investment license are prohibited from being fiduciaries. I cannot be the trustee of a client's trust.

b. This manipulation by NAPFA is demonstrated further by even having a definition of FEE-ONLY. We don't define any other form of compensation.

Should we define fee-based, commissions, retainers, project fees, assets under management fees, retainers, hourly, etc.? Should we have a practice standard that says that we should charge in 15-minute increments? Of course, not!

c. And if that's not enough, you go as far as specifying a "fee-only certificant". That's an abuse of the Mark. I am a CFP® Certifcant. I disclose how I am paid.

The previously silent majority can no longer tolerate manipulation by the vocal minority.

Eliminate "Fiduciary" and "Fee-Only".

4. Making portions of the PRACTICE STANDARDS only BEST PRACTICES. Believe it or not, I'm not opposed. Disappointed? YES!

5. In the definitions of financial planning subject areas,

a. It says that CFP® Certifcants prepare financial statements? Isn't that the role of CPAs?

b. It says that CFP® Certifcants provide portfolio management. In order to do so, we need separate licensing (NASD/SEC). This should be clarified.

c. Subject Areas should be modified in include, but not limited to:

  1. Budgeting/Forecasting
  2. Income Tax Planning
  3. Debt Consolidation/Repayment
  4. Education Funding
  5. Income Continuation, in the event of:
    1. death,
    2. disability,
    3. retirement, etc.
  6. Investment Planning
  7. Estate Planning

6. In the PRINCIPLES, we use the word (or variations) "SUBORDINATE"

a. INTEGRITY -- must not be subordinated to personal gain -- OK

Then it says is that OUR (CFP Board) principles cannot be subordinated to YOUR (personal) principles.

Simply end the sentence with the word, "deceit"

b. OBJECTIVITY -- subordination of their judgment

Simply end with, "Certificants shall maintain objectivity.

c. FAIRNESS -- subordination of one's own feelings "to achieve a proper balance of conflicting interests"

We don't balance "conflicts". We disclose them and attempt to avoid them.

7. COMPETENCE -- says client referral, but really means referral to other professionals

" . limitations of that knowledge and when consultation with other professional is appropriate or referral to other professionals is necessary ."

8. CONFIDENTIALITY -- finally a SHALL

But, end with, "proper legal process"

Otherwise, we are saying that it is acceptable to breach confidentiality simply if there is a civil dispute, regardless of whether we have legal authority.

We need to make it clear that CFP® Certifcants do NOT have client privilege. We can be compelled by legal process to disclose confidential information.

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SCOTT DAUENHAUER, CFP®, MSFP

Subject: Revised Standards

I am writing to let you know that I am fervently opposed to the new standard regarding Fiduciary Responsibility.

I believe that if financial planners want to improve the profession we need to be held to a higher standard and that standard should be a Fiduciary one. The new standards create a situation where one CFP is held to one standard and another a different standard - this effectively makes the CFP designation worthless. It won't be long before the media figures this out and all the positive press will turn negative.

All CFP's should be held to a Fiduciary Standard and the term Fiduciary should be in the standards. How can you call yourself a financial planner and not ALWAYS put your clients' best interest first? If you can't practice financial planning and do it in a fiduciary manner, you should not be allowed to practice.

Implementing this new standard will prove a massive mistake and confuse people even more. I wonder what is happening to a board that is supposed to be looking out for the public.

Your mission states "The mission of Certified Financial Planner Board of Standards, Inc. (CFP Board) is to help people benefit from competent, professional and ethical financial planning." You are not accomplishing your mission with the standards change, you can only accomplish this by REQUIRING CFP holders to act as Fiduciaries in all engagements.

There is a good possibility I will give up my CFP designation out of protest if this standard goes through, and while you may think that one guy giving up his mark will not be worthy of a mention in the press you would be very wrong. The brokerage firms and insurance companies may control a lot of things, but the one thing they don't control is the media and I guarantee you that implementing your standards will represent the beginning of the end of the CFP - the decline of the CFP will begin if you pass these standards, how could it not - you are lowering the standards.

It's amazing that congress added a Fiduciary provision in the PPA, but the CFP board can't seem to the same thing, this is very sad and I beg of you to reconsider.

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F. DENNIS DE STEFANO, CFP®, CPA

Re: Comment regarding CFP Board's Proposed Code of Ethics and Professional Responsibility and Financial Planning Practice Standards

I wish to thank the members of the CFP Board for their diligent work on the revisions to the Code of Ethics and Practice Standards applicable to CFP® certificants. And thank you for permitting CFP® certificants the opportunity to comment on the proposals.

In this comment letter I will address two key issues confronting the CFP Board:

  • Whether to permit CFP® certificant holders to choose which legal standard (fiduciary or non-fiduciary) will be applicable to their financial planning activities.
  • Whether to permit CFP® certificant holders to choose to use the term "Fee-Only" on an engagement by engagement basis as opposed to the current rules of Advisory Opinion 2003-1.

I urge the CFP Board to undertake substantial changes to the provisions of the proposal as they relate to the fiduciary status and the fiduciary duties of CFP® certificants and retain the rules of Advisory Opinion 2003-1.

Regarding the fiduciary issue, I refer you the letter dated July 27, 2006 from Ron A. Rhoades. I agree fully with his analysis and conclusions and I urge the board to give his comments careful consideration.

Regarding the Fee-only issue, I urge the board to retain Advisory Opinion 2003-1. As someone who has embraced the fee-only approach to rendering professional services (1965-1981 as a partner in a Chicago CPA firm and the last 25 years as president of the oldest Fee-Only Wealth Management firm in Hawaii) his entire professional life, and a member of NAPFA since 1985, I am particularly sensitive to this issue.

The financial service industry is now referring to their sales force as financial advisors or financial consultants and moving to a "fee-based" approach to delivering financial products and services. Nevertheless, it is important to understand that "Fee-Only Planning" is not only a fee-set; it is also a mind-set and a skill-set. Without more, merely changing a salesman's title or the way he is compensated does not alter his transaction oriented mind-set nor enhance his skill-set.

Frankly I am at a loss as to why the board would want to change the well reasoned analysis and conclusions of Advisory Opinion 2003-1, other that pressure from the securities and insurance industries. I strongly urge the board to incorporate Advisory Opinion 2003-1 into the new code.

Finally, it will be difficult for financial planning to rise to the level of a profession as long as many CFP® certificant holders also earn commissions on sale of financial products.

In closing, the mandate of the Board is to protect the public. I can think to no better way of protecting the public than first requiring all CFP® certificant holders to act as fiduciaries. And secondly, mandating a definition of Fee-Only that applies only at the firm level and thus does not permit individual CFP® certificant holders to characterize their services as fee-only or commission on a client-by-client basis or on an engagement-by-engagement basis for the same client.

Re: Comment regarding CFP Board's Proposed Code of Ethics and Professional Responsibility and Financial Planning Practice Standards

I wish to thank the members of the CFP Board for their diligent work on the revisions to the Code of Ethics and Practice Standards applicable to CFP® certificants. And thank you for permitting CFP® certificants the opportunity to comment on the proposals.

In this comment letter I will address two key issues confronting the CFP Board:

  • Whether to permit CFP® certificant holders to choose which legal standard (fiduciary or non-fiduciary) will be applicable to their financial planning activities.
  • Whether to permit CFP® certificant holders to choose to use the term "Fee-Only" on an engagement by engagement basis as opposed to the current rules of Advisory Opinion 2003-1.

I urge the CFP Board to undertake substantial changes to the provisions of the proposal as they relate to the fiduciary status and the fiduciary duties of CFP® certificants and retain the rules of Advisory Opinion 2003-1.

Regarding the fiduciary issue, I refer you the letter dated July 27, 2006 from Ron A. Rhoades. I agree fully with his analysis and conclusions and I urge the board to give his comments careful consideration.

Regarding the Fee-only issue, I urge the board to retain Advisory Opinion 2003-1. As someone who has embraced the fee-only approach to rendering professional services (1965-1981 as a partner in a Chicago CPA firm and the last 25 years as president of the oldest Fee-Only Wealth Management firm in Hawaii) his entire professional life, and a member of NAPFA since 1985, I am particularly sensitive to this issue.

The Terminology section of the draft states:

"Fee-only" A certificant may describe his or her practice as "fee-only" if, and only if, all of the certificants compensation from all of his or her client work comes exclusively from the clients in the form of fixed, flat, hourly, percentage or performance-based fees. A certificant may describe an individual agreement with an individual client as a fee-only arrangement if the certificants compensation for that client comes exclusively from fees paid by the client in flat, hourly, fixed, percentage or performance-based fees. A certificant who has both fee-only and non-fee-only client compensation agreements may not refer to him or herself as a fee-only certificant.

Advisory Opinion 2003-1 states:

In order for a CFP Board designee to describe his or her compensation as "fee-only", all compensation from all clients must be derived solely from fees. Minimal exceptions may be allowed provided the compensation is inconsequential and independent of the purchase of any product or service. Likewise, when using terms including, but not limited to, "fee-only services" and "fee-only firm," the same requirements apply.

The draft (last sentence) allows a certificant to refer to a particular service as fee-only but not call him or herself a fee-only certificant. In my experience the public does not understand the distinction and accordingly should be removed from the draft.

The financial service industry is now referring to their sales force as financial advisors or financial consultants and moving to a "fee-based" approach to delivering financial products and services. Nevertheless, it is important to understand that "Fee-Only Planning" is not only a fee-set; it is also a mind-set and a skill-set. Without more, merely changing a salesman's title or the way he is compensated does not alter his transaction oriented mind-set nor enhance his skill-set.

Frankly I am at a loss as to why the board would want to change the well reasoned analysis and conclusions of Advisory Opinion 2003-1, other that pressure from the securities and insurance industries. I strongly urge the board to incorporate Advisory Opinion 2003-1 into the new code.

Finally, it will be difficult for financial planning to rise to the level of a profession and obtain the public trust, as long as many CFP® certificant holders also earn commissions on sale of financial products. True professional status requires that financial product sales and financial planning services not co-exist, as is true with just about every other learned profession, be it law, medicine, etc.

In closing, the mandate of the Board is to protect the public. I can think to no better way of protecting the public than first requiring all CFP® certificant holders to act as fiduciaries. And secondly, mandating a definition of Fee-Only that applies only at the firm level and thus does not permit individual CFP® certificant holders to characterize their services as fee-only or commission on a client-by-client basis or on an engagement-by-engagement basis for the same client.

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PETER DEIESO, CPA, CFP®, PFS, MST

I am writing to affirm the comments made by the Financial Planning Association of Massachusetts' September 18, 2006 letter, a copy of which is attached for your reference.

Please consider their thoughtful suggestions.

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DAVID DEMMING, CFP®

Subject: ethics

I strongly support the board's position on ethics and not watering down those provisions.

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WILLIAM DESHURKO, CFP®

Subject: Proposed Code of Ethics

I read an article on the proposed changes in Financial Planning magazine that talked about the proposal to "opt out" from working in a fiduciary capacity as long as proper disclosure is given. The comment attributed to the CFP board was that in certain situations a fiduciary standard was not appropriate. I would like to ask the question, when is advising someone on their finances not acting as a fiduciary appropriate? Is it ever appropriate to not act in the best interest of the person that you are giving advice to? If you hold a professional designation, is it ever, under any circumstances appropriate to render any opinion that is not in the best interest of the questioner? If a lawyer has a conflict of interest, in addition to diclosing the conflict, they decline to accept the client. If a CFP cannot work in the best interest of the client, they too should decline the client.

I understand the Board's conflict of interest in this issue. How much revenue does the CFP Board stand to lose if Broker/Dealers begin to not allow their reps to get a CFP designation. I would assume that if the opt out rule were adopted, and a signed written disclosure were required, that you would rapidly lose the wire house and bank reps anyway. I can't imagine having a client sign a form saying that I was not acting in their best interest when it could be avoided by simply dropping my CFP designation.

At this juncture I really have no good business reason to continue with my CFP designation, (although it is in process of being restated). In 20 years of practice I have never been asked about my CFP. If, however, acting as a fiduciary became a requirement, and it was deemed to be an enforcable policy, I would not only renew annually, but I would pay substantially higher dues. I think manadatory fiduciary responsibility would also greatly expand the CFP Board's ability to offer and charge for a client referral service. I feel that, like myself, there is a substantial number of independant reps and RIA's that maintain a security license as a matter of choice, and thus do not qualify for NAPFA membership as fee only advisor's. By requiring a fiduciary responsibility you would dilute the effectiveness of NAPFA and the fee vs. commission debate. If a broker/dealer allows there reps to retain the CFP desgnation, then any work for a client fee or commission will then be held to the same standard, as long as the rep carries the CFP designation. That would be a powerful designation, and an important step in consumer protection for our industry. With proper consumer marketing, both the designation and a consumer referral program would become very valuable benefits of membership.

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JOHN DEYESO, CFP®

Subject: Comments on Rules of Conduct

6.2
A certificant must provide professional supervision or direction to any subordinate or third party to whom the certificant delegates responsibility for any client services.

I understand the change, we as certificants, cannot remove ourselves from our responsibilities by simply delegating tasks to other people.

My fear is that the wording of the section leave open the possibility of "Negligent referral".

Example, The client has a significant estate, after much discussion with estate lawyers and the client, documents are drafted by the lawyer. Later, it is discovered that the lawyer did not do something correctly from a legal standpoint. Now, since the CFP(R) certificant must provide professional supervision would he/she not now be in violation of 6.2?

I am sure there are other examples that can be derived where the CFP certificant brings in or refers a professional with their own licenses and expertise. Is the certificant now responsible for the actions of lawyers and insurance agents? If so, to what extent? If we provide direction to the third party, and it is later discovered that the party did not follow our direction, are we in violation?

I feel that clients want and request help all the way through from recommendation to implementation. The revised standard begs the question where does the certificant's job end and the outside professional begin.

I agree, that we should review the work of outside professional to ensure everything is in order, but to what extent are we linked to their work? If we are tied to the work of outside professionals would the level of client service drop to simply the recommendation and stop short of assistance with implementation?

2.2 Disclosure (in writing of compensation)
Does this include transparent disclosure of fees from investment recommendations?

Example, 12b-1 fees or advisor fees that are often associated with wirehouse mutual funds. This would seem to be the case, and I applaud the new disclosures.

Thank you for your time

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A.J. DILIBERTO, CFP®

Subject: Comment on Exposure Draft

One suggestion would be to have the section in the contract that removes the fiduciary standard to be separately initialed. This way, attention would be given to this section and the certificant would be more inclined to explain why the fiduciary standard did not apply in that instance.

It is likely that with this amendment, certificants would be inclined to keep the default fiduciary standard unless there is clear justification to do otherwise. The FPAs argument, as I see it, is that the fiduciary standard can be written out of a contract with legalese and since most clients do not even read the contract, they would be receiving a lesser standard and not even know it.

The key is that clients must know when they are receiving a lesser standard of care, and preferably, would receive an explanation about why it does not apply in whatever instance.

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TOM DILLON, CFP®

Subject: Exposure Draft Comments

I am really unhappy with what seems to me to be years of a biased attitude among the CFP Board toward fee planners and away from commission planners. (Either can operate ethically and help clients.) There is nothing wrong with our current default standard of care. And, it allows planners to work with smaller net worth clients. (Supposedly, this is something that the Board tries to encourage. At least that is what they tell the media.) More importantly perhaps is the fact that the current Code does not preclude any planner who so chooses from working as a fiduciary. I think it is time to have some different opinions be represented on the board. When is the last time you had a board split that equals the split of CFPs doing Fee only and Commission?

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BILL DIX

Subject: CFP comments >FPA

When asked what credential speaks most strongly to educational and ethical standards in financial planning, I say CFP. However, since I'm not a CFP licensee, I view the new proposal in fairly simple uncomplicated terms.

As good a concept as disclosure is, it flies in the face of the most fundamental concept of fiduciary duty that some kind disclosure could simultaneously maintain the standard while diluting it by acknowledging a lower standard of fiduciary duty may apply.

This issue is not complicated. The reason "fiduciary" means something is because it's an easily understood, easily applied standard that basic common sense can decide. Anything less than a simple absolute standard is meaningless.

Your physician does not hold out the Hippocratic Oath to you along with a disclosure that there may be some circumstances where the choice will be made to hold to a lower standard, which, by the way, will always be for the benefit of the physician, not you, the patient.

The current CFP proposal is the worst of all possible choices - it offers more confusion to the public, it dilutes the fiduciary standard that uncompromised CFP's are trying to follow, it dilutes the whole concept of what fiduciary duty stands for and it offers cover for the most egregious application of situational ethics to benefit everyone except the client.

It is a bad idea that should be abandoned.

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STEVE DOUCETTE, CFP®

Subject: Comments to Code of conduct

How can you use certificant with two meanings? Certificant should not include individuals that have not maintained there certification?

Fiduciary: "Reasonably believes" really means nothing -- Suggest you replace "reasonably believes" with "in a manner solely for" the best the interest of the client.

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MICHAEL A. DUBIS, CFP®

Subject: Ethical Standard changes are ridiculous

I write in response to reviewing your new CFP Board Ethical Standards. I will be brief: the lack of acknowledgement for Fiduciary is a ridiculous position by the Board and quite frankly will have long-term impacts that will be detrimental to the profession, but most importantly, the end users: consumers and investors. A professional should have no problem holding them selves out as a Fiduciary. You are encouraging an atmosphere of abuse by the brokerage industry and other agency-related service providers. This position by the Board is in the same ball-park as the Merrill-Lynch Rule in its potential problems and manipulation. I believe you are taking a credential that could have been a professional designation and are removing any future for its legitimacy.

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CHRISTOPHER DUFAULT

Subject: PLEASE adopt the Fiduciary Standard!

As an individual who is considering embarking on the first of his CFP curriculum coursework, I implore you to consider with the utmost seriousness the full content of the letter that Ron A. Rhodes submitted to you on July 27 of this year.

I believe that his entire message completely and eloquently best summarizes my personal feelings as to the direction that the Board should go in its decision about the Proposed Code of Ethics and Professional Responsibility and Financial Planning Practice Standards.

I have always believed that the CFP mark has been the Gold Standard in the financial planning world, and should continue to be viewed as such by industry colleagues and the public at large.

To put it simply: if the CFP Board decides to NOT adopt the fiduciary standard, I will not begin the curriculum at all. I would rather establish my own standard of fiduciary responsibility than be associated with an organization that chooses to lower theirs.

I await your final decision so as to determine if achieving the CFP credential is in my future.

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BLAINE P. DUNN, CFP®

RE: Proposed changes to the Code of Ethics and Professional Responsibility (Code) and Financial Planning Practice Standards (Practice Standards)

As a holder of the Certified Financial Planners designation, I would strongly urge you to revise and amend your proposed changes to the Code of Ethics and Practice Standards. These proposed revisions do NOT help advance a financial planning / advisory profession as currently proposed.

At a minimum, holders of the CFP® mark should be fiduciaries. Under the current and proposed rules, they are not. That needs to be changed to advance the profession. The CFP Board could require that all holders of the mark be required to comply with all aspects of the 1940 Investment Advisers Act even if the Act itself exempts them because of the broker dealer exemption. That would at least give the public the safety of knowing that if they are dealing with a CFP® holder, they are dealing with a person who is a fiduciary.

Second, the definition of "fee only" needs to be used only by a person who is "fee only" ALL of the time - not if he is fee only for some part of an engagement and then not fee only for another part of an engagement. I have concerns with the statement that "minimal exceptions may be allowed provided the compensation is inconsequential and independent of the purchase of any product." Similar wording of "incidental" is used in the 1940 Investment Advisers Act to form the basis of the Merrill Lynch rule and exemption. Unless concrete examples of "minimal exceptions" are provided, I fear that this has the potential of being misused by those that are not always "fee only" advisors.

Third, I align myself with the letters that have been sent to you by Peggy S. Cabaniss, Chair of NAPFA and the very detailed and explicit remarks from Ron A. Rhoades. Both letters echo concerns that I have on your proposed revisions. Please consider and support their suggestions.

I fully understand that approximately half of the current CFP® holders are registered reps of broker dealers. I also understand that you want to increase the number of persons holding the CFP® mark. However, I would implore you to serve the public best by requiring all CFP® holders to be fiduciaries. In the long run, that benefits the holders of this mark, registered investment advisors in this profession, and the public which you state you want to serve.

Sarah Teslik has raised some concerns on being able to adequately define the word fiduciary. However, NAPFA has researched this issue and can provide you with case law and court cases which uphold the use of the meaning of fiduciary. If we want to enhance the industry, the CFP® mark needs to be seen by the public as the mark of a fiduciary who puts the needs of the client ahead of the needs of the advisor.

I will be glad to provide you additional thoughts and suggestions on helping your revision if you decide to revises and amend the current proposed changes.

Establish the CFP® mark as the mark of a fiduciary financial advisor, not the mark of a well educated professional salesman.

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CRAIG DUVARNEY, CFP®

Subject: 7/24/2006 - EXPOSURE DRAFT REVISION OF ETHICAL STANDARDS RELEASED FOR COMMENT

As a Certified Financial Planner practitioner, I want to express my disappointment in the proposed revisions to the CFP Board's Ethical Standards. More specifically, I object to the ability for a CFP to opt-out of his or her fiduciary duty, and hope the board will reconsider this change.

Our "profession" is still very young when compared to other professions, such as the legal or medical profession. Financial planning was born essentially from the insurance sales position and/or the investment sales position, and those roots are still evident today as the financial services industry struggles to address the issues of:

  1. Who do we really work for?
  2. How do we get paid for the work that we do?
  3. Do the above two issues create a conflict of interest between the client and the financial planner?

There are a myriad of financial services designations out there today, the majority of which are virtually meaningless. Simply put, the class(es) to attain those designations are easy, the ethics standards are minimal, and most importantly, clients have no idea what they are. For many years the CFP designation has been the "gold seal" for financial planners. It was, and still is, the most difficult financial services designation to obtain. In addition, in the minds of clients, the CFP is seen to be more knowledgeable, and held to a higher ethical standard. The proposed change in the ethical standards not only threatens that public perception, but the progress of financial planning toward a true profession.

I know of no case where a lawyer has said to his client "Please sign here. This form says that you agree that I can violate our attorney-client privilege, and that I do not need to act exclusively in your best interest." I know of no case where a doctor has said to his client "Please sign here. This form says that you agree that I can violate the Hippocratic oath, as well as what is in your best interest." Yet that is what the most important financial planning group is proposing for its practitioners.

In order to advance financial planning to the level of a profession, we must look to other well-established professions for guidance. Lawyers and doctors are held to high ethical standards, which they can not opt-out of. The public (for the most part) trusts the legal and medical profession to act in their best interest on the whole, recognizing of course that any group of people is going to have both good and bad members in it. There must be an organization in place to guide and elevate the financial services industry from that of a sales position to that of a profession. If the CFP Board is unable to fulfill that role, financial planners like me will look elsewhere, possible to the ISO Standard, which is quickly emerging as competition to the CFP Board.

In conclusion, I sincerely hope the CFP Board will reconsider these proposed ethical standards changes, as they only serve to weaken the designation and the industry. Please feel free to call me with any questions or concerns you may have. Thank you for taking the time to read this e-mail.

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ANTHONY P. EASTMOND, CFP®

Re: Code of Ethics proposed changes

The code of ethics should apply to all practitioners. Anyone not engaged in Financial Planning is merely coincidentally a CFP®. Practitioners engaged in Financial Planning, however, should always act as a fiduciary. If they choose to act in a lesser capacity while engaged in Financial Planning, I believe they must relinquish their credential. You can't receive the benefit of your credential but not honor that for which it stands. Otherwise, we are sending mixed signals to clients, and ruining the value of the credential. It does little good to agree to work at a standard below that of the credential some of the time. WE EITHER STAND FOR SOMETHING, OR WE STAND FOR NOTHING.

The only acceptable alternative I can think of is to specify that you are not providing financial planning and, therefore, are acting under a suitability standard rather than a fiduciary standard. This might resolve the issue, since, under this scenario, the professional is merely coincidentally a CFP®, and is making that point clear. He/she is not providing Financial Planning, but, rather, acting in some other capacity within the financial services arena.

This is the kind of issue that renders the CFP® a valuable asset or meaningless (or even worse, contributing to the confusion instead of being a beacon of clarity).

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PEG EDDY, CFP®

Subject: Comments on proposed changes

Gentlemen- having read numerous emails, articles and commentary about the proposed changes in the "Exposure Draft" I remain literally aghast at your suggestion that we will need to discuss with a client to what level of care standard we will be held in working with them and put this in writing! The "duty of care standard" should not be any different with one engagement than with another-we, as ethical professionals, should always put the client first, and most clients expect this. That we have to have a discussion with them and then put a special agreement in writing seems to beg the question and minimize any kind of trust relationship we are building with a client-who has come to us presumably due to their expectation of being treated with care -to allow a "lower legal standard" seems preposterous.

If we were to apply this suggested change to the medical profession, it would then seem that we could exercise less care during a routine physical check up than when we perform brain surgery. If the rule for ALL professionals is "first DO NO HARM", why would you ever suggest that we can have a menu of choices when it comes to the level of ethical behavior and standard of care in dealing with a client who trusts us, literally, with their financial life?

Applying this to the legal profession-we could defend someone vigorously if they faced the death penalty, but do less if they would only be charged and found guilty of a minor crime?

From what I understand you are proposing, it appears that depending on the circumstances, we can have a lower standard of care, if the client agrees- to quote your outline "Proposed Standard: Rule 1.0 allows a certificant to establish a lower duty of care to his clients." You then go on to have the default clause-if no written agreement exists, "then the fiduciary standard applies. " Huh?

So, now consumers, who have been educated about the value of the CFP mark have to agree upon the level of behaviour with which their CFP will treat them? Doesn't this seem odd to you? Would you have this discussion with a doctor, an attorney or a CPA? I think NOT!

Your suggested changes to the Code of Ethics cheapens the mark and does nothing more than to further confuse the public and dismay those of us who have held the designation for years.

In closing I would also suggest that underlying these proposals may be the interest of what I call the "retail side" of financial planning and sounds surprisingly similar to the infamous "Merrill Lynch rule"-how many of the members of the board are members of the "retail community" ,pray tell?

That's it from one very annoyed, disappointed and dismayed "certificant". I believe you can do better!

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HAROLD EVENSKY, CFP®

RESPONSE TO THE EXPOSURE DRAFT CFP BOARDS CODE & STANDARDS

Before addressing a number of specific issues, I'll preface my remarks by noting that the current presentation is at best confusing and at worst, potentially a Machiavellian effort to obfuscate many significant changes and deletions. If the Board seriously wishes licenses to evaluate the proposed changes, it should consider providing a "track changes" presentation. Without such a guide, the effort to match the existing Code & Standards with the proposed is overwhelming.

Although I have many serious specific concerns (noted below), to the extent I understand the proposal, overall the Code's Rules will be significantly neutered and the existing body of Practice Standards will be eliminated. I find that inconceivable. To suggest that future "Best Practices" will in some way replace Practice Standards is absurd.

Certain Provisions Removed. The statement says "should not require certificant to do CFP Board's job of investigating potential rule violations by other certificants." I would certainly agree; however, there is nothing in the code either requiring certificants to "investigate potential rule violations, or to "attempt to be vigilante." The Code, page 12, rule 603, simply references "a CFP Board designee who has knowledge." Knowledge is further described as "for the purpose of this rule, knowledge means no substantial doubt." The suggestion that "having knowledge" is synonymous with "investigating potential rule violations," and 'attempting to be vigilante,' is at best disingenuous and at worst, undermines the credibility of the Board's efforts.

Regarding how certificants must behave with regard to other professional designations. The only reference I see in the Code of Ethics is on page 12, rule 602. I cannot see any issues or problems with 602 as currently stated.

One of the most substantive changes is not referenced in any of the discussion material (at least I have not seen any discussion). Namely, the change on page 2 under terminology. The definition of "Client" now includes the qualification "rendered for compensation." Furthermore, "Rules of Conduct, Scope, Nature and Content Of The Engagement," Section 1.1 provides that an engagement be in writing. There's a long history regarding these issues. I believe that the decision to limit the client relationship to one based on a written agreement for compensation may well serve to mitigate planner liability risk; however, it will significantly disadvantage the public. In any event, it certainly requires far more focus and discussion then currently provided.

In Terminology (page 2), there is a description of the "financial planning engagement". As the proposed modifications make clear, financial planning is not the issue (although I'm clueless regarding why financial planning is not an issue for the Board); hence, I'm not quite clear why there is a reference under Terminology.

Terminology page 2, "fiduciary". Having given this a great deal of thought and discussed the issue with many practitioner friends, I cannot conceive of a single instance that it would be appropriate to provide for a fiduciary "opt out." Further more, the adoption of the lower "prudent man" standard in lieu of the "prudent expert" standard incorporated in ERISA and Prudent Investor Acts is not only embarrassing, it makes a mockery of the other practice standard related provisions.

Page 4 Footnote: "The client is responsible for accepting or rejecting recommendations". I believe that this is a critical issue. Although, in some instances, a client may delegate discretionary authority to an advisor, such delegation is consistent with the client's "accepting or rejecting," i.e., the client has "accepted" the delegation of limited discretionary authority over a portion of his or her assets. Further, the client retains the right, at will, to terminate that delegation. I have some experience serving as an expert witness in cases related to this issue. I believe that removal of the qualification may substantively increase a practitioner's exposure during litigation.

Page 5, Best Practices. I have grave concern regarding the development of Best Practices. As an example, there is a reference to "engagement letters." It is not common practice to have an engagement letter. This is terminology and a concept from the accounting profession. Financial planning practitioners almost exclusively operate under contractual agreements. I do not object, in principal, to the concept of an engagement letter, rather I am concerned that establishing "best practices" (I simply reference the engagement letter as an example) will inappropriately exacerbate potential litigation exposure. I am particularly sensitive to this, as I have served in cases where one of the major claims against the practitioner has been that he had not executed an engagement letter. Unfortunately, "Best Practices" proposed by the Board will become defacto "Required Practices." I do not have faith in the Board (or any regulatory organization) to have the Solomon like wisdom to develop a universe of "Required Practices." Best Practices should be left to the professional organizations, NOT regulators.

SUMMARY

Licenses have significant vested financial interest in the credibility of the Board's marks. The proposed changes significantly threaten the economic value of the mark. If the reality is that the Board is desirous of discarding decades of professional and intellectual effort in the evolution of our profession and proposes to strip most of the Ethics Rules and Practice Standards of substance, I (and I believe other licensees) need a better justification than the desire to streamline the rhetoric.

Board members serve in a personal fiduciary capacity. I believe each member must seriously reconsider the motivation and justification for the proposed changes. In the interim, the Board should immediately withdraw the current proposal.

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TED FEIGHT, CFP®

Subject: proposed revisions to its CFP Code of Ethics and Professional Responsibility.

As a CFP® I do not like the new proposed changes in the code of eithics. With the public wondering who they can trust and who they can not trust, we should be putting more teeth in the code not loopholes. Please give this further thought.

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SUE HARFORD FERDIG, CFP®, CSA, CRPC

Subject: Codes and Standards

I applaud your efforts to update and clarify these codes and standards.

I am proud that the Board strives to create and maintain a high professional standard for all who carry the CFP designation. This, in my opinion, is of utmost importance to gaining the credibility we need going forward. No one will take us seriously, unless we first take ourselves seriously. I truly look forward to the CFP designation being an elite designation that inspires trust from the public. I see the CFP standard set up along the lines of the CPA standard. The designation alone says So Much. If our standards are high, we will gain the credibility we aspire to and establish the financial profession in the highest echelons of our society.

Thank you for all your efforts and the time spent to do this.

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V. RAYMOND FERRARA, CFP®

First, let me thank CFP Board for its efforts to help the public and to promote the financial planning profession. The time and effort extended by both the staff and volunteers, especially those who were involved with the proposed change to the CFP Code of Ethics and Professional Responsibility (Code) and the Financial Planning Standards (Standards), is to be commended. As a former member of the ICFP and FPA Board of Directors, I clearly understand the hard work and good intentions of everyone involved. Further, as a CFP® certificant, I appreciate the lengthy period of time in which the stakeholders have the opportunity to respond to the suggested changes. Having said that, it is disappointing that CFP Board has chosen to keep the comments from public view and from CFP® certificants - two of your largest and most important stakeholders. We commend the FPA for giving those of us who prefer to see all of this discussed in an open forum for providing the opportunity to post our comments on their web site.

In order to understand the context in which these remarks are made, it might be helpful to share some of my background. In 1971, I began a career in the life insurance and mutual fund industries. Having been involved in the retail side of the financial planning industry (such as it was in those days), I moved to the corporate side in 1979, remaining in a corporate environment until 1987, when I established ProVise Management Group, LLC as a financial planning firm. One of the first things I determined upon reentering the retail side was the statutory need to establish a Registered Investment Advisory (RIA) and to obtain my CFP® designation. The RIA was established in 1988 and the CFP® designation was obtained in July of 1990. Thus, I bring over 35 years of historical perspective to the current debate.

In addition to serving on the ICFP and FPA Boards of Directors, my recent volunteerism included working on Rule 402 on behalf of CFP Board, working on the IS0 standards of behalf of FPA, participation in the Pass-Score Panel for the comprehensive exam, volunteering to serve on CFP Board this past year, and finally, serving on the FPA Regulatory Task Force, just to name a few. Throughout my professional and community volunteerism, I have always tried to find compromises and to imagine all the possibilities, rather than limiting myself to some narrow point of view.

There are likely friends and professional associates within the financial planning community who will disagree with parts of this letter. This is the nature of compromise. It is a good thing not to limit possibilities in seeking a solution which will help to define and advance the financial planning profession. There are those who want things to remain the same. There are those who want to relax the standards. Then, there are those who would prefer to see the standards become more restrictive. CFP Board has a difficult and arduous task to find a solution that will satisfy all of these well-intentioned but competing interests. Regardless of the final outcome, it is my fervent desire that CFP Board listen carefully to its stakeholders and to those who have an interest, rather than taking the "parental" view of "knowing what is best". This advancement of the profession must be a collaborative process as we move along the continuum. This new version of the Code will eventually find itself replaced as we continue the journey.

Following Steven Covey's principle of "beginning with the end in mind", we must first look at CFP Board's mission statement.

"The mission of the Certified Financial Planner Board of Standards, Inc. (CFP® Board) is to help (emphasis added), people benefit from competent, professional, and ethical financial planning.

To further this mission, the CFP® Board works to:

*create and enforce uniform standards of competence, practice and ethics of financial planners, through rigorous, validated and professionally administered education, examination, experience and ethics requirements.

*create awareness of the importance of financial planning and the value of the financial planning process.

*help under-served populations have access to competent and ethical financial planning."

It is important to point out that for many years we were told that CFP Board was there to "protect" the public. This word does not appear in the current mission statement. Rather the word used is "help". Personally, I prefer the word "help" because "help" is more easlly defined than the word "protect". Further, CFP Board has stated a desire to have "uniform standards of competence, practice and ethics", and this, perhaps more than anything else, should be at the heart of the proposed changes.

At best, the current Standards provide an assumption of a fiduciary relationship and at a very low level definition of fiduciary, but at least it provides a definition, i.e., a single standard of care. The proposed ability of a CFP® certificant to "opt out" of a fiduciary relationship by simply providing something in writing is likely to cause confusion rather than "help" for the public. How is this consistent with CFP Board's mission statement? No suggestions are given by CFP Board as to how this disclosure should be provided to the client. Is it to be buried in the Form ADV Part II? Is there a lengthy document written by some attorney who wants to cover all the bases, and the client is then told by the financial planner, "Sign here"? How does this lack of a guideline and direction, let alone if the disclosure is buried, "help" the public? Perhaps it helps the financial planner perform some functlon at a lower standard of care. Perhaps there are some functions performed on behalf of a client which do not always require a fiduciary standard. But, again, the question is, does the proposed language "help people benefit from competent, professional and ethical financial planning"?

Many people incorrectly assume that one cannot act as a fiduciary if commissions are involved. Perhaps by some definitions of "fiduciary" (ERISA), this might be the case. In fact, when the financial planner says, "Trust me. I will help you.", and the client accepts, under some definition, a fiduciary relationship has likely been established. By other definitions of "fiduciary" (CFP Board current Standards), such may not be the case.

I served on the CFP Board Task Force that addressed Rule 402 which came up with the current "if asked you must tell" language. While Rule 402 is not perfect, it does provide for a single standard to be applied to all CFP® certificants in all financial planning engagements. Some of us took it upon ourselves to provide this disclosure without being asked, but at least the Rule provided a uniform standard of when asked, a CFP® certificant had to provide that information to the client. This is consistent with the desire of CFP Board to "create and enforce uniform standards".

Unfortunately, the "opt out" provision, as currently written, does not provide a uniform standard. There are no guidelines as to when the CFP® certificant can or cannot "opt out". Can I "opt out" if I am acting as a registered investment advisor? Probably not. Can I "opt out" if I write a comprehensive financial plan? Many would say, "I think notn. But, we would first have to understand the definition of a financial plan. Already, some firms are trying to utilize the so-called "Merrill Lynch Rulen toward financial planning by saying that if they do modular work, it is not considered financial planning, and therefore there is no fiduciary relationship. This is what happens when there is no one standard of care. Loopholes get created and creative people can sometimes create confusion. When the public is confused, they are not being "helped". If CFP Board decides to keep this "opt out" provision, then guidelines and examples should be provided as to when a CFP® certificant can and cannot "opt out". We believe that in the real world, one might be able to "opt out" in certain circumstances, but the CFP® certificant should not be able to apply different standards at different times for performing the same function. It seems that the biggest question comes in the fifth step of the financial planning process, i.e., implementation. We believe it may be okay to "opt out" during this stage, but only after clear, unadulterated disclosure is given about the change of relationship, i.e., "I no longer represent your interests first."

Our firm provides "fee only services", we are "fee based", and we accept "fees and commissions". We are not a "fee only" firm. Unfortunately, many people confuse the fiduciary standard with how an advisor is paid. As mentioned above, being a fiduciary is not about how you are paid, but more about a willingness to do no harm, deliver what is promised, and to disclose conflicts. Even the "fee only" planner recognizes the inherent conflicts the planner faces from time to time that must be disclosed. This disclosure should not be buried in some long, boring legal document, but rather should be up-front, bolded, and clearly define what will (or will not) happen in the engagement. The client should initial this bolded section, indicating that not only have he/she read it, but that it was fully explained by the CFP® certificant. At the risk of repeating this too many times, CFP Board needs to provide this guidance.

Unfortunately, CFP Board inadvertently brought compensation into the discussion by defining this fiduciary relationship when compensation is received from a client. Should I not act as a fiduciary when doing pro-bono work? Let us not forget that pro-bono work is one of the distinguishing features of a profession.

We have no issue with the advancement of the profession and "helping" people benefit from financial planning, as long as that financial planning comes from competent and ethical financial planners, regardless of how they are compensated. The CFP® designation has become the hallmark, the gold seal, the accepted standard. Having achieved this recognition in the minds of the media and public because of the higher standards, the CFP® mark has surpassed other marks. The concept of financial planning being a profession was only born a mere three decades ago and while those of us who have been a part of it for all that time think this is a long time, in the grand scheme of things, it's is a relatively short period of time. A lot of ground has been gained in a short period of time, and it does not make sense to give back any of this high ground.

Several years ago, CFP Board developed the concept of "Associate CFP®". Your CFP® stakeholders stated their concerns loudly and clearly about diluting the CFP® mark by allowing this designation. Thankfully, the members of CFP Board at that time admitted that they made a mistake and backed away from this ill-conceived plan. Today CFP Board faces a similar dilemma. Will it listen to its stakeholders and make meaningful changes to the proposed Code, or will it simply give the proposed Code just a quick "cosmetic change"? In our opinion, there may be some significant points which are inconsistent with the mission statement and others, that without proper guidance, could harm the public.

We understand that CFP Board is a business. It exists because of the revenues generated from numerous sources, including the fees that we all pay to use the designation. There is value in the designation, and as long as there continues to be value in the designation, the majority of the CFP® certificants will continue to pay these fees. If CFP Board decides to move significantly away from its stakeholders, many will leave, perhaps even create a new designation clearly distinguishing themselves by their adherence to higher standards. CFP Board has much to potentially lose by not getting these changes "right".

In the position paper which accomparied the new rules, much was made of the fact that some CFP® designees don't provide financial planning. Therefore, it would be difficult for them to be held to a fiduciary standard. It goes to the point made earlier for the need to define those activities which require the CFP® certificant to act as a fiduciary and those activities where it is not necessarily expected. If you are a CFP® certificant and are teaching, then there is no client relationship as it relates to financial planning. If you are a reporter with a CFP® designation, there is no relationship to financial planning. If you are a corporate employee and your duties do not include financial planning, you don't need to be held to this high standard. If CFP Board would simply define the actions when a CFP® certificant must act as a fiduciary, it would go a long way toward creating and enforcing "uniform standards".

While we could, and perhaps some would argue we should, nitpick at some of the other items within the proposed Code, we simply ask CFP Board to listen carefully to all that everyone has to say; to evaluate this input and determine if the collective wisdom of the CFP® community can somehow produce an enhanced result than was created by CFP Board and its volunteers. Finally, we ask that you make all comments publicly available.

We implore you to take these steps and imagine the possibilities. Thank you for allowing us to share our thoughts. We wish you well in your quest and look forward to the changes which will make the new Code even better than originally anticipated by CFP Board's proposed changes.

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MARK FERRIS, CFP®

Subject: Proposed CFP Board Code of Ethics Changes

I have read the FPA summary of the proposed changes. I have also read Malcolm Gladwell's book, blink.

Without parsing every word and nuance, my blink intuition tells me that the bar is being lowered because more people just can't handle doing the right thing or take personal responsibility. The smoke screen of having to have written documentation is just that. If these changes go through, I want to see action taken to sanction any certificant or organization that uses comparisons to the medical profession.

Please take about an hour or so drive down Interstate 25 and visit with the ethics folks at my alma mater, the United States Air Force Academy. The ethics code is simple. I will not lie, cheat or steal or tolerate among me those who do. (My italics). It's a tough absolute standard in what is increasingly becoming a relativistic society. Lash yourselves to the mast and don't succumb to the song of the Sirens.

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NANCY ATKINS FERRISS, CFP®

I agree with Dan Moisand's views. I do not want to water down our professionalism.

The Board appears to want to concentrate on whether we call ourselves "CFP's" or "CFP Practitioners" because of legal concerns, but when it comes to protecting our professionalism, their new views detract from our profession.

We need to continue our lawsuit. And we need to continue to raise public awareness of what Certified Financial Planners do in terms of providing comprehensive financial plans. Modular planning runs the risk of overlooking important areas of concern because the client didn't ask for a complete plan. What would happen to a doctor who prescribed for a patient without taking a complete medical history?

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JOSEPH F. FESSLER, CFP®

Subject: Code of Ethics revisions and the FPA PAC

I'd like to congratulate the CFP Board on not folding under the political pressure the independent broker dealers are placing on the board through their political action committee, the Financial Planning Association. It's obviously a self centered strategy on their part to hamstring their competition, disguised as a campaign on behalf of the poor misinformed public.

I agree with the board, and do not believe it fits with your purpose to protect one group of certificants at the expense of others-I appreciate your compensation neutral and practice setting neutral stance. Please keep working to allow the public access to the people you certify in all practice settings.

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CHARLES F. FEW, CFP®

Subject: Comments on Code of Ethics and Exposure Draft

I have some serious concerns over the use of, and definition of, the term "fiduciary." I have been a CFP® since 1994 and a bank trust officer since 1987. Trust departments are corporate fiduciaries in the complete sense of that term and, as such, are held to higher legal and ethical standards than individual financial professionals or other types of financial corporations.

Your definition of a fiduciary seems to be a rewording of the definition and legal understanding of the laws pertaining to that of a "Prudent Man/Person. I would disagree with the definition used in the Exposure Draft. Fiduciary, as a term applied frequently in my day to day environment as a trust officer, is more than your definition would imply.

While I certainly understand the CFP Board's desire and need to have measurable standards and high qualities, I also feel that you unknowingly could be subjecting individual CFP® practitioners to a highly increased litigious exposure by using the term "fiduciary" as a default relationship standard. A fiduciary is a much higher and much different level of responsibility than that of an advisor, agent, planner or "prudent man.". If a practitioner and a client agree that the practitioner's role is that of a fiduciary, then they can, or should, define that relationship as such in writing. To automatically apply that term by default I feel would not only wrong, but could also be legally dangerous.

References to "fiduciary" in Black's as well as Webster's dictionaries align the term primarily with that of a trustee. Would most individual practitioner CFP®s want to automatically be considered a trustee? Probably not.

I would urge you to consider NOT designating a CFP®/client relationship as "fiduciary" in absence of anything to the contrary. It should NOT be an automatic default.

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MICHAEL J. FISCHER, CFP®, AIF

Subject: Revision of the Code of Ethics and Standards of Practice

I have been a proud CFP(R) Certificant since 1984. I have always been committed to improving the profession by constantly improving the services we offer and by placing my client's best interests above all others. Years ago I was pleased to see the CFP Board implement a set of Practice Standards that led the way in improving the quality of the services offered by all Certified Financial Planners. I have always believed we should behave according to ...and adopt... a Fiduciary Standard for all CFPs. In my view, if we do what is best for the customer / public, we have raised ourselves above the rest of the profession and have created our own competative advantage. In addition, by adopting a Fiduciary Standard, we raise the bar for the rest of the financial service professions. In the end, everyone wins. There may be some difficulties along the way, but everyone wins.

I was disappointed to see your recent proposal to alter the CFP Code of Ethics and Standards of Practice. In the interest of time I will not go into detail on my reasons - I'm sure the responses by others more eloquent than me will provide those details for you to consider. I understand and agree with the clarification of some areas of the Standards, but do not agree with the effort to weaken those standards and allowing a CFP Certificant to choose whether he/she will place their client's best interest first. The Client's best interests should always be FIRST and all real or potential confilcts of interest should always be avoided and or disclosed.

I believe that the weakened "Code of Conduct" will legitimize the kinds of people and practices that have always been an embarassment to the profession. Too many CFPs make a false offer to provide financial planning as a way to sell products. Allowing a CFP to "opt out" of a fiduciary standard simply legitimizes this practice and opens it to many others who are more than happy to use their CFP marks to confuse the public and sell more products. You are not making it easier and clearer for the public to determine the good guys from the bad guys - in my mind you need to be moving in just the opposite direction.

I implore you to reconsider this proposal - please withdraw it in total and begin again with input from a broader base of your stakeholders. This proposal does not express the kind of thinking and future direction of most of the CFPs that I know and respect in the industry.

I appreciate your consideration of my thoughts.

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SARAH YOUNG FISHER, CFP®, ChFC, MSFS, EA, CASL

Subject: Proposed Changes

Dear Sir: Please be advised that currently, I am proud of my CFP designation. I started my own fee-only firm in 1995 and starved for a few years because zero income is zero income. I built my practice from there, and am proud to be a CFP.

When I was a Trust Officer, I had earned my ChFC designation, but I decided after the 9/1/95 entry to a new firm, to become a CFP because I felt it was a stronger designation. My firm was "acquired" by a CPA firm as of 1/1/2005. Please note I feel that only the CPA and CFA designations have more respect, in my opinion.

I have been reading about the proposed changes to the CFP Code. I do not feel this is appropriate. The CFP designation is respected, please do not dilute it. I feel since the split between the brokerage industry and the non-brokerage CFPs, that you are more concerned about membership numbers than quality of your membership.

We should never use a lower standard, even if agreed to by the client. Most clients haven't a clue about the difference of the standard levels. CFPs should be better than others, the alphabets show this point to the public. CFAs Code of Ethics is amazing, why aren't we as concerned about our Ethics and Standards.

Why wouldn't we be required to report an infraction of another CFP. That's absurd. Again, it lowers our standards.

We shouldn't eliminate the written notification of an annual disclosure offer nor the right to ask about compensation. I'm proud to be fee-only. Clients know what I charge, and I'm infuriated that others in the industry (who make a great deal more than I do) do not want to tell clients what they are paid. Shame on you all!

Now that my firm is SEC registered, everything is written, all engagements are confirmed in writing. At first it seems cumbersome, but we got used to it. So can anyone else.

If the CFP Board dilutes the meaning of the CFP credentials, and we'll end up like the ChFC, CLU - they mean nothing to clines in the field.

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MARK O. FLAHERTY, CFP®

Subject: CPFCodes Revised

I have read and have been following the discourse on the proposed changes. I am a new certificant this year so do not have the benefit/burden of history. When I decided to pursue the CFP route over the other credentials, it was because I found the Code of Ethics and Standards of Practice to be compatible with how I wanted to practice and be viewed. It was the highest standard and the one to which I wished to be measured. The respect held for the CFP is measurable and if you are to be a professional in this realm, a necessity because it represents simple, clear standards.

Change is necessary in all endeavors and some will resist change for a reason none other than it is change. I defer to you as the experts with the certificants best interests at heart in your delibrations and actions in many matters. However, any dilution, waiver or process that allows a CFP certificant to enter into a relationship with a prospective client or client that is not of the highest ethical standard is inconsistent with the CFP identity and further dilutes our credibility with our prospective clients and clients. Some of the discussion has centered on avoiding the word fidicuary because to do so would be difficult. We did not become CFP certificants because it was easy. If the standard is a high bar, meet it or seek other affiliation.

There is one essential standard for the CFP certificant: the highest ethical standard. Anything less is a betrayal to the years of hard work that the CFP professionals have laid down. Further confusing the public with a hodge-podge of "what-ifs" is inconsistent. If we are to further raise the public's acceptance of the value we can bring, it will be the result of clear, unambigious standards by which all CFPs subscribe -- all the time, without exceptions, modiciations and contract amendments. When a person sits down with a CFP they should have the confidence and assurance they are meeting with a person of the highest quality and ethics. Not as amended/modified by legal parsing.

The goal of any proposed changes should be to improve the quality and credibilty of the CFP, not confuse or dilute it. As I read the proposed changes, it would appear you are doing just that. I strong recommend reconsideration.

Thank you for an opportunity to express my views.

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BARBARA FLEMING, CFP®

Subject: Comments on changes in New Code of Ethics

As I read the new "rules of conduct" that I must abide by as a CFP® Professional, I felt that they were fair. I am happy to see the results of your hard work. Samples of agreement letters that can be used by a new certificant would be helpful to them.

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KAREN F. FOLK, PH.D., CFP®

Subject: Proposed ethics standards

I want to register my strong opposition to the proposed standards.

I would like to see them revised to require that all CFPs act as fiduciarys in all relationships with their clients.

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CHARLES E. FOSTER, II, CFP®, CFA

Subject: CFP Fiduciary Responsibilities

Please do not approve the escape clause that you are currently proposing for the "opt out" from a CFP practitioner's fiduciary duty.

To see how silly this "opt out" should -- and will -- look to the consumer if your proposed "opt out" option is not eliminated, please read the article from Bloomberg reproduced below [Susan Antilla, "'F' Word -- Fiduciary -- Unwanted on Wall Street," Bloomberg, September 11, 2006]. How many more articles like this, printed in the Wall Street Journal, Forbes, Business Week, Time, Readers' Digest, etc. will it take before you understand the larger picture, that of all of the consumers who do not expect weasel words from their CFP practitioner?

It would be wonderful to know that the CFP Board can and will make the tough decisions necessary for the CFP designation to continue being the "bluest of the blue chip" designations and not subject to deserved ridicule.

If you do not know how to get outside of your (our?) current box, at least require that any "opt out" option in client contracts be written in bold, large type, early in the contract, and in clear and understandable words, similar to the warning that is printed on cigarette packages.

Thank you for your consideration of my concerns.

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MARY RAE FOUTS, EA, CFP®

RE: Comments to Proposed Revisions to the CFP Board's Code of Ethics and Professional Responsibility and Financial Planning Practice Standards

Thank you for providing the opportunity to comment on the referenced revisions. As a CERTIFIEFD FINANCIAL PLANNERT practitioner, I appreciate that the revisions condense the documents into a more concise format. However, as outlined below, I am concerned that some of the revisions are detrimental for CFP® certificants and the public.

Item: Revisions to Certificant Informing CFP Board of Unprofessional Behavior

Revision: The CFP Board Exposure Draft Overview states on page 3 " . . . the draft Rules of Conduct does not include language requiring certificants to notify CFP Board when they observe potential rule violations by other certificants. . . . Instead, the Exposure Draft creates a moral obligation for certificants to inform CFP Board of unprofessional behavior, a more appropriate balancing."

Concern: Where is this moral obligation created in the draft? I can find no evidence that any such moral obligation is created in the draft. Furthermore, what authority does CFP Board have to dictate morality? The Exposure Draft Overview implies that CFP Board still expects certificants to be investigators and tattle tales, activity which most certainly can create legal problems for certificants.

Both the draft and overview are silent as to certificants who perform litigation consulting and expert witness testimony; this is addressed in current Rule 604. As a CFP® certifcant who provides litigation consulting and expert witness testimony in litigation matters involving CFP® certificants, does CFP Board now expect that I have a moral obligation to report potentially unprofessional behavior that I observe in my litigation work?

Suggested Revision Correction: The CFP Board should not expect certificants to do policing on the CFP Board's behalf, moral or otherwise. Any such policing expectations should be removed from Rules of Conduct. If CFP Board wants this activity done, the CFP Board should create an investigative department within the CFP Board of Standards, with CFP Board of Standards employees, to provide this service.

Item: Revision Requiring Written Contract Between Client and Certificant

Revision: Draft Rules of Conduct does not require that the CFP® certificant sign the written contractual engagement between the client and the certificant.

Concern: While I applaud the requirement of a written contract, I am greatly disturbed that the CFP Board would not require the certificant's signature on the contract. The written contact would serve to outline the expectations and obligations of both the client and CFP® certificant, and would be binding on all parties. Therefore, all parties involved in the contract should be required to sign the contract.

Signing a contract established that a party agrees to uphold the terms of the contract. How can a client possibly have faith that the certificant will abide by his/her contractual expectations and obligations if the certificant does not sign the contract? Furthermore, would the contract even be binding on the CFP® certificant without the certificant's signature?

Suggested Revision Correction: Required that all parties involved in the written contract - all clients and the CFP® certificant - sign the contract.

Item: Proposed Definition of "financial planning engagement"

Revision: The proposed definition specifies that the binding written agreement exists with only the client's signature.

Concern: Please refer to my previous concerns related to the written contract between the client and certificant.

Suggested Revision Correction: Change the definition of "financial planning engagement" to require the certificant's signature, as follows: A "financial planning engagement" exists when a CFP® certificant and a client sign a binding written agreement under which a certificant performs some type of financial planning service.

Item: Client Information and Property Section, Item 3.6 - Commingling of Client Property with Certificant Property

Revision: The proposed rule will now allow a CFP® certificant to commingle client property with the property of the certificant or the certificant's employer.

Concern: Commingling of client property and CFP® certificant property goes in the face of established professional standards whereby property of a professional and a client are not commingled. Such commingling opens up opportunity for an unacceptable conflict of interest at best, and at worse, rampant abuse by certificants.

Suggested Revision Correction: Prohibit commingling of client property with certificant property. Remove the words "unless the commingling is explicitly authorized and defined in a written binding agreement between parties" from Item 3.6.

Item: Client Information and Property Section, Item 3.8 - Client Property and Fiduciary Care

Revision: The proposed rule will allow a CFP® certificant to specify the legal standard of care for a client's property.

Concern: The proposed rule allows a certificant to affect a standard of care that is less then a fiduciary standard of care, and do so in areas where CFP Board now requires fiduciary care (current Rule 103e). In my professional opinion, allowing a lesser standard of care when a fiduciary level of care is the industry standard can never be in the best interest of the client. The proposed rule provides opportunity for abuse and unacceptable care standards by certificants.

In addition, the proposed changes could place the CFP® certificant into a position whereby the client expects the certificant to act as a fiduciary, even when a fiduciary standard of care is not generally expected by industry standards.

Suggested Revision Correction: Maintain current fiduciary care standards.

Item: Borrowing and Lending, Items 4.1 and 4.2

Revision: The proposed rule permits lending and borrowing of money between a CFP® certificant and client.

Concern: With few exceptions, current Advisory Opinion 2001-1 clearly states that maintaining a borrowing and/or lending of funds relationship between a client and certificant is not in the best interest of the client. Furthermore, maintaining a borrowing and/or lending relationship can also violate laws related to issues including but perhaps not limited to rebating and inducing a client to purchase a financial or insurance product. Lastly, allowing such a relationship provides opportunity for abuse by certificants.

Suggested Revision Correction: Make the guidelines of current Advisory Opinion 2001-1 part of the revisions. This could generally be accomplished by omitting revision 4.1.c and 4.2.c.

Thank you for considering my comments.

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DANIEL B. MOISAND, CFP® ON BEHALF OF FINANCIAL PLANNING ASSOCIATION (FPA)

Re: Exposure Draft Revisions to CFP Board's Code of Ethics and Professional Responsibility and Financial Planning Practice Standards

On behalf of the Financial Planning Association ("FPA®") [note: The Financial Planning Association is the largest organization in the United States representing financial planners and affiliated firms, with approximately 28,500 individual members. FPA is incorporated in Washington, D.C., where it maintains an advocacy office, with headquarters in Denver, Colo.] I would like to thank the Board of Governors for the considerable effort that has gone into the review of the CFP® Board of Standard's ("CFP Board") ethical standards. I appreciate the opportunity to offer formal comments on these significant revisions to the Code of Ethics and Professional Responsibility ("Code of Ethics") and Practice Standards. FPA is interested in any changes to the CFP Board's standards inasmuch as approximately 19,000 FPA members are CFP® certificants, and FPA's bylaws require all individual FPA members to adhere to essentially the same standards.

The principal questions that we asked in evaluating the proposed changes were:

  • Do the revisions enhance protections for consumers?
  • Do the revisions advance the profession of financial planning?

In this context, these proposed revisions fail to enhance consumer protections or advance the profession of financial planning.

Overview

FPA notes the favorable market position of the CFP Board as the most widely recognized accrediting organization in the United States and the world for financial planners. As a result, any changes to its standards will have long-term effects on the future of the financial planning profession, for both CFP certificants and others who hold out as financial planners. Further, FPA appreciates the fact that the Code of Ethics must evolve over time as the profession matures and the practice of financial planning adapts to market and regulatory changes. However, the characterization that these proposed revisions are a periodic update of the standards belies the fact that the core tenets of the Code and Practice Standards have been essentially eliminated or made optional in this proposal. [note: See subheading "Most Content Remains Unchanged" in the Exposure Draft Overview.]

These changes constitute a complete reorganization of the Code with material changes that weaken, not strengthen, consumer protections. The changes have the potential to adversely affect an estimated five million clients of CFP certificants in the U.S. and potentially tens of millions of future clients. The changes will instantly dilute the value of the registered marks for each CFP certificant in terms of credibility to the public and regulators. Questions over an equivocal standard of care are already being raised in the consumer financial press, raising concerns over erosion of the marks over time.[note: See, e.g.,"`F' Word -- Fiduciary -- Unwanted on Wall Street," by Susan Antilla, Bloomberg, Sept. 11, 2006. According to Antilla, a personal finance columnist, "Most controversial among the [proposed ethics] changes: to allow planners to slither out of their fiduciary duties as long as the client signs an agreement that says he or she has agreed to settle for less. You might wonder how on earth a classy outfit like the CFP Board could wind up proposing a loophole out of high standards." See also "New Financial-Advice Rules Give Investors the Double Shuffle," by Thomas Kostigen, Marketwatch, Aug. 11, 2006; "When Duty Calls, or Doesn't, Financial Planners Duck Behind Fine Print on Fiduciary Role," by Chuck Jaffe, July 26, 2006.] In addition, the revisions conflict with most certificants' views of what constitutes uniform standards for a profession that rise above statutory law, and that are not revised merely to comport with existing regulation.

FPA is indeed troubled that the proposed revisions to the Code were prepared behind closed doors over an extended period of time without the benefit of broad stakeholder or public input that could have identified alternative solutions to some of the problems noted in the CFP Board's explanation of the changes.

The exposure draft contains some positive, incremental changes that would help simplify the current structure of the Code of Ethics; however, these are overshadowed by the negative effects of sweeping changes that will have a broad impact on consumers and the profession. FPA recommends that the CFP Board withdraw the proposal, reconsider the impact of the proposed changes on the public, and establish an improved stakeholder review process akin to those of state and federal regulators with advanced explanation of significant changes, greater transparency, and maximized stakeholder input.

Because we believe that the overall proposal is severely flawed and should be withdrawn for further review, we will refrain from commenting on every issue of concern to FPA. [note: For example, FPA has significant concerns about the elimination of a requirement that certificants report ethical violations to the Board, the revised definition of "fee-only," the elimination of a requirement to refer clients to outside professionals in certain instances, and the removal of a stated fiduciary duty of care for certificants with custody over client assets.] Instead, our comments will focus on the changes that FPA finds to have the most potentially damaging consequences to consumers and the profession.

Proposed Duty of Care

In our review of the proposed revisions to the Code, the primary concern was the weakened standard of care required of certificants. The relevant proposed Rules of Conduct are as follows:

1. Scope, Nature and Content of the Engagement
1.1. The certificant and the client shall mutually agree upon the client's personal financial goal(s) that are relevant to the services to be provided by the certificant under the agreement between the client and the certificant. The certificant or the certificant's employer shall then enter into a binding written agreement with the client governing those services. This agreement may consist of multiple written components and must specify: ...
e. Whether the certificant will be held to the duty of care of a fiduciary under the agreement. It will be presumed that the duty of care of a fiduciary is to be applied to the professional judgments made by the certificant pursuant to the agreement unless the parties specify in their agreement a different legal standard governing these actions ...
1.2. Prior to entering into a written agreement, the certificant and the client must discuss as appropriate: ...
e. Whether the certificant will be held to the duty of care of a fiduciary under the agreement.

Proposed Rule 1.1 requires a CFP certificant to indicate, in writing, what legal standard will govern the agreement between the certificant and the client. If no legal standard is designated, the default standard will be that of a fiduciary. Accordingly, the practical result will be greatly varying standards of conduct for CFP certificants - not a universal strengthening of standards as the CFP Board suggests.[note: See "Q: Are the standards in the Exposure Draft weaker or stronger?" in Frequently Asked Questions, http://www.cfp.net/aboutus/Exposure_Draft.asp.] It appears that the proposed changes are designed to minimize any significant change to industry requirements of CFP certificants, as evidenced by the elimination of their obligations under Rule 202. [note: Rule 202 in the current Code of Ethics states that "A financial planning practitioner shall act in the interest of the client." Under this rule, it could be inferred that a fiduciary standard applied to the relationship between a certificant and a client even though it was not required to be stated in a written agreement.] For example, certificants who are registered investment advisers and certificants who choose to accept fiduciary status will automatically be accorded such status under the proposed change. Many other certificants that the CFP Board did not cite in its rationale for the change, such as insurance agents or registered representatives of broker-dealers, likewise may not have to designate a lower standard of care that will apply to the client relationship, since a fiduciary disclaimer has already been incorporated in many customer account forms. [note: It is puzzling as to why the CFP Board would strongly oppose the proposed exception for broker-dealers from the fiduciary requirements of the Investment Advisers Act of 1940 and then readily embrace a lower standard for certificants who are brokers under the proposed changes.]

If the certificant will not act as a fiduciary, the requirements of Rule 1.1 also shift the burden of disclosure to the client by requiring him or her to read the fine print in determining whether the certificant is obligated to place the client's interest first. [note: Rule 1.1 also requires the certificant to "discuss as appropriate" whether the certificant will be held to a duty of a fiduciary under the written agreement, but the exposure draft offers no explanation or guidance as to when such a discussion is appropriate. Would determinative factors depend on the financial sophistication of the prospective client, whether the disclaimer is prominent, or some other unknown factor that the CFP Board would promulgate in its contemplated "Best Practices?" And would the "Best Practices" be mandatory? The lack of transparency in the previous drafting process is cause for concern on whether such issues would be addressed in the next phase of CFP Board rulemaking.] There should be no equivocation in ethical parlance on this key point: a certificant should always act in the best interest of the client.

Rule 202 should be restored to its original place as a common baseline of conduct for any certificant, no matter their employment.

We are pleased to report that many CFP certificants who are members of FPA and are registered representatives of broker-dealers support the