Certified Financial Planner Board of Standards Inc. - Comments on Exposure Draft (M-P)

Comments on Exposure Draft (M-P)

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 M through P.

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JIM MACGILLIVRAY, CFP®

Subject:

I agree with the view that proposed changes will weaken the professionalism to which we currently adhere.

LARRY MADDOX, CFP®

Subject: Revisions to code of Ethics and Professional Responsibility

I am a practicing CPA, in addition to being a CFP. I have been practicing as a CPA since 1978 and have held my CFP designation for many years.

I agree with the objections set forth by the FPA in Jim Barnash's statement to the CFP Board.

I would like for the CFP designation to be as much a mark of a professional as the CPA designation and I think that the CFP board seems to be the organization best positioned to make this case and move the holders of the designation into the ranks of other professionals.

There is no question about what a doctor's or a CPA's duty is to his or her clients and I think that, if we CFPs want to be considered professionals in the real true sense of the work, we must be unequivocal in what our obligation is. The idea that some of us can "opt out" of the fiduciary standard of care, by including some written language in our contracts or elsewhere is disingenuous at best.

In my opinion, we CFPs and you, the board, should be doing all that we can to make things clearer and more precise, so that consumers of our advice ALWAYS know what to expect from ALL CFPs. Otherwise, I don't think that we can rise to the level of a true profession.

ALICE H. MAGOS, CFP®

Subject: very brief comment on exposure draft

I trust the board will seriously consider the suggestions offered by Jim Barnash !!!!!

DEBORAH LEVY MAHER, CFP®

Subject: Comments on CFP Board Exposure Draft of Proposed Revisions to Ethical Standards

These are my comments on the proposed Code of Ethics and Rules of Conduct:

Code of Ethics -- fine

New Rules -- it is important to clearly state that the rules are binding on ALL certificants.

Engagement -- the change specifying that a financial planning engagement exists only if there's compensation involved is a good one.

Fiduciary Duty of Care -- all certificants should follow a fiduciary standard at all times. There should be no lower standard allowed.

Terminology -- "Certificant" shouldn't include any not currently certified.

Thank you.

JOE MARCY, CFP®

Subject: Comments Regarding Exposure Draft

This is a personal comment and does not necessarily represent the views of the organization I work for.

Those advocating that financial planners accept fiduciary responsibility only when they take custody of client assets for investment purposes are leaving a hole a mile wide. This definition would not be consistent with ERISA or the standard under which trust national charter bankers operate, 12 CFR 9. Admittedly, when custody of assets is taken fiduciary standards are more stringent. However, to say that fiduciary responsibility does not exist where investment advice or management is given but custody is held elsewhere is unacceptable to most regulators and should be unacceptable to the CFP Board. The ERISA standard is whether the party has any discretion or control over the assets. The trust banking standard in 12 CFR 9 is whether the party provides investment advice for a fee (or is a named fiduciary). Financial planning clients deserve the expectation of a fiduciary standard that is at least as inclusive as that of fiduciary regulators.

MARY MARGOLIS, CFP®

Subject: Response to Draft

I object to the water-down ethics. Every CFP should be held to a fiduciary standard even if they have legions of attorneys to craft language that the consumer never reads to avoid the fiduciary standard.

Let's face it, most clients never read the agreements; does that mean they should not be protected? If adopted, what consumer education will follow? Will clients know to ask about a fiduciary standard? Will there be two CFP designations...one for those who adhere to a fiduciary standard and those who offer a "lower" standard. (A house divided will fall.)

Eliminating the honor code to report violations that we become aware of is further diminishing the meaning of the CFP designation. For the designation to be credible, we must police our own, including reporting violations.

The SEC is controlled by the wire houses. It appears from this draft that the wire houses also control the CFP designation. I strongly object to the draft in its entirety.

THOMAS P. MARKS, CFP®

Subject: Proposed rules changes

Please add my voice to that of other FPA members in opposition to the proposed rules changes to our Code of Ethics. Thank you for your attention in this matter.

MARIO MARTINS, CFP®

Subject: code of ethics revisions

I have looked over the documents and I'm impressed - I think the deletions as well as the additions will do a good job of firming up the goals of the code of ethics and also making financial planning a more respected and highly-regarded profession. When I first saw that revisions were being proposed, I thought to myself, "oh no, this is going to be nightmarishly convoluted" but once I read what's being proposed, I found everything to be clear, helpful and protective not only of the client, but also the CFP certificant (having a written agreement is beneficial for BOTH parties, no question about it). Also, the fiduciary responsibilites section is well-handled to balance the different responsibilities of those who hold the CFP designation with the need to provide the public with our commitment to providing reliable, good, solid advice without them having to wonder if we're just out to make a buck at their expense. Finally, I look forward to the Best Practices: sample engagement letters, checklists and advisory opinions will only help us all to do a better job and maintain the highest levels of occupational integrity.

I think the new code is a nice improvement with less redundancy, clearer standards and lots to offer CFP certificants as well as the public we serve. Well done.

STEVEN F. MATTAINI

Subject: Proposed Rule 1.1.e

This letter is in response to the CFP Board's proposed Rule of Conduct 1.1.e. regarding the standard of care required of a CFP certificant in dealing with clients. The issue of whether all CFP certificants accept a fiduciary duty is very important to me.

I come to financial planning as a second career, after practicing as an attorney for 25 years. My perspective, therefore, may be somewhat different from others in the field on the question of the standard of care clients should expect from their planners.

When I was considering switching careers, I spent a substantial amount of time researching financial planning. As I did so, two themes kept recurring. The first is that most practitioners want to elevate financial planning from an occupation to a profession; the second is that there are a number of different marks and certifications held by practitioners.

My research ultimately led me to the conclusion that the CFP mark was the current gold standard among financial planners. Other certifications and designations have their strengths and applications, but the emerging consensus was that the CFP mark was now, and would continue to be in the future, the best indication of competence and integrity. Thus, I prepared for, took and passed the March, 2004 CFP test, and will complete the experience requirement in a few months.

Given this background, what the CFP mark stands for is very important to me, as is the question of whether financial planning becomes recognized as a profession, not just an occupation. Of course, those in the field cannot by fiat simply decree that financial planning has now become a profession. Financial planning will become a profession only by earning recognition of such status by the public.

In the process of becoming a financial planner, of course I became aware of the distinction between the fiduciary duty of care some planners embrace, and the lower suitability standard others are willing only to assume. I was frankly puzzled by the clear contradiction between the refusal to accept a fiduciary duty and the desire to convince the public that financial planners were worthy of being considered professionals.

All professionals accept the concept that he or she will act in the client's best interests, not one's own. When a doctor prescribes medicine, we assume it is the best medicine for our condition, not that it is only one of many that are sufficient and the doctor has chosen it because it is to his benefit to do so. When an accountant suggests a tax strategy, we should be able to assume the strategy is in our best interest, not that it was selected among various suitable alternatives only because it results in an undisclosed advantage to her. There may be instances in which some professionals fall short of the requisite standard of care, but no one contests that a fiduciary duty is owed by a professional to a client. We put our trust in professionals. If we do not, we do not truly consider the person we are dealing with a professional.

Unquestionably, before financial planning becomes considered a profession, planners will have to earn the trust accorded to professionals. A necessary step toward establishing this trust is to agree to assume a fiduciary duty to our clients. Otherwise, we will never have clients, only customers. If not voluntarily embraced by the action of practitioners, I am convinced that ultimately this duty will be imposed on the field, either by public demand, legislation or the litigation process. I believe we would all agree that it would be far preferable if the field led the way, rather than being reluctantly dragged toward professionalism.

I was therefore dismayed to read, even before the new rule was proposed, various comments in the financial press which implied the Board was reluctant to require certificants to accept a fiduciary standard of care. Frequently, the statements I saw were to the effect that the adoption of a fiduciary duty was not possible, because the term meant different things to different people, or was differently interpreted in different jurisdictions. These difficulties were easily solved by defining the term for purposes of our rules, as the Board has now proposed, which is a good first step.

Unfortunately, the Board has also proposed that certificants be allowed to depart from the fiduciary standard of care by contract. This proposal defies one unassailable truth: in a true profession, the professional may not reduce her standard of care to her client, by contract or otherwise. With the status of a professional comes the responsibility to act like one. The professional is, by definition, the only one involved in the transaction with the necessary knowledge, competence and ethics to understand the duty she owes to the client. No professional worth the term would expect or require the client to have the understanding or capacity to define the appropriate standard of care for the services the client needs.

As such, the creation of a "CFP Lite" certificant who creates a lower duty by contract would be a disservice to both the profession and the CFP mark. Financial planners have already lost the nomenclature battle, with non-planners adopting similar titles, such as "financial advisor." Few in the public understand the difference. Creating a two tiered CFP mark, in fact if not in name, will not only add to the rampant public misunderstanding of what people in the financial advice arena do, but what the mark means. Different planners will have different obligations but hold the same certification. This will only increase public confusion, and can only hinder the goal of public acceptance of financial planners as professionals.

The question of when a fiduciary duty attaches to the CFP certificant should not be a deterrent to accepting the professional prerequisite of fiduciary duty. For example, clearly when a CFP certificant is involved in teaching, he does not have a client relationship with members of his audience. This is no different from a lawyer or doctor who teaches. It is entering into the planner-client relationship which creates the duty, and since a long, clear and unquestioned precedent for that position exists among other professions, CFP certificants should be held to no higher, and no lower, standard.

It is only the CFP Board that can determine if the CFP mark will remain the gold standard for the profession, or will become merely a marketing tool for the occupation. I have become convinced over the last few years that financial planners are so committed to professionalism we will ultimately be considered professionals. This can only occur after we all accept the fiduciary standard.

The issue now facing the Board is whether it will be the CFP certification that establishes the necessary standard to achieve professionalism. I have great respect for all the CFP Board has done already for the field of financial planning. I hope it will now take the historic, and necessary, step of requiring all certificants to accept a fiduciary duty to their clients if they want to hold the CFP mark.

Thank your for your attention to my remarks.

RICK MAYO, CFP®

Subject: Your new "standards"

I wanted to comment on your recent effort to water down the "Code of Ethics".

2 points:

- To remove the Fiducary standard from the code of ethics or "make it optional" is to water down the value of the mark. The public should expect the highest form of responsibilty from a CFP Certificant, whether its a comprensive plan OR specific issue planning.

- To let CFP Practitioners the option to have clients expect a lesser responsibility, by sating so "in writing" is to cause more confusion for the public.

You should reconsider this decision for the good of the public AND the mark.

MARK MCAULEY, CFP®

Subject: Proposed Rule Changes for code of ethics

I appreciate the efforts and dedication of the CFP Board in addressing hard ethical issues.

I have reviewed the code of ethics rule changes and feel that the over-all purpose seems to reduce the professional responsibility of those who hold the CFP certificate. I believe that this is a mistake and will increase the public's confusion and vulnerability to unscrupulous sales people. The CFP designation should clearly require a client - best interest stand.

Section IV: Rule 202 changes as stated in proposed Rule 1.0 allows a major loop hole to that critical standard.

Section V: Rule proposed elimination removes any requirement for self policing which again will cheapen this value of the CFP organization and open it up to major public criticism when blatant abusers are prosecuted and it is published that there is little self regulation. I see a need to expand and clarify this section.

Section VI: Rule 603 proposal 2.2 is a good addition requiring agreements in writing. Rule 1.2 weakens accountability and is not a good idea.

It is very important for the credibility of we, the CFP designees, that these proposed changes be re-evaluated, rewritten to a higher standard and re-opened for review by both the membership and the public.

JOHN F. MCAVOY, CFP®, AIF

Subject: Revisions to code of Ethics and Professional Responsibility

My first reaction in reading the draft of the new ethic standards is that they seem straightforward. I agree with the default of making a certificant a fiduciary.

There has been much debate within the profession about fees vs. commissions for compensation. There are some who feel that a commission disqualifies one from being a fiduciary. I disagree. It is all about disclosure. If you disclose to your client how you get paid and how much there is no conflict.

Full disclosure for me.my market is qualified plans for small and mid-sized companies. I give my clients the option to be fee based or commission. In both cases I explain how I get paid and how much.

Thanks to all of you who have worked so hard on these important issues.

MARK J. MCCANDLESS, CFP®, CPA, CIMA

Subject: Opinion on Proposed CFP Board Code of Ethics Changes

In reponse to the proposed changes to the CFP Board Code of Ethics, I am against the concept of reducing the fiduciary responsibility if both the planner and the client agree in writing. Our willingness to accept our fiduciary role is what separates a CFP(R) from other individuals holding themselves out to the public as "planners". I strongly urge the CFP Board to reconsider its position on this area.

NANCY D. MCGEE, CFP®

Subject: I support the FPA Board

I support the FPA Board in their critique of the changes proposed by the CFP Board.

RITA MCGOWAN, CFP®

Subject: proposed CFP code of ethics changes

I agree with the FPA that there should be no dilution of requirements for the use of the CFP marks. Clearly, the standards set forth by the SEC should remain, and not be subject to weakening.

DAVID MENDELS, CFP®

Subject: Proposed "Rules of Conduct"

As a CFP certificant since 1997, an instructor for the CFP program at two major universities here in New York, a director of the Financial Planning Association of New York, and as a financial planner, I read the proposed rules of conduct with mixed feelings. On the one hand, there is much that is simplified and clarified. I also appreciate the importance of recognizing the range of activities that CFP certificants engage in.

By the same token, there are two things that raise alarms.

1) Why change from "Practice Standards" to "Rules of Conduct". Terminology is important and we only debase the profession and trivialize the process by this change. Can't we aspire to something higher than to mere "Rules of Conduct"?

2) As I mentioned earlier, I fully recognize that many CFP certificants do not engage in the financial planning process on a day to day basis and to hold them to a full fiduciary standard may be unreasonable. By the same token, the mark should stand for something if it is to have any value and meaning and if it is to stand for anything it must stand for ALWAYS putting the client's interests first. To permit a certificant to weasel out of that obligation by burying it in fine print (even if he goes over that with the client) only invites cynicism and debases the mark.

There can be circumstances where a fiduciary standard may not be appropriate, but there can never be a circumstance where it is not an obligation to put the client's interest first. Anyone who does not recognize that obligation is debasing the mark and the profession. Instead of embracing people like that, we should be helping to protect the public from them.

Thank you for your time and attention,

CRAIG L. MILLER, CFP®, AEP, CFIS

T received my CFP designation February 1989. Since that time I witnessed many changes made by the CFP Board of Standards. These changes have been good. The CFP designation has continued to get more and more creditability as the years have gone buy. After all of the progress that has been made you are now going to shoot us in the back with this revised Code of Ethics. By allowing the CFP practitioners "to sidestep their obligation to put clients' interests ahead of their own by allowing them to opt out of being fiduciaries in their client relationships, you will be destroying years of progress that had been made.

I do not understand why the CFP Board would even consider such a change. The only possible answer is MONEY. More CFP enrollments, more power, more money. If you water down the standards you might as well as flush the CFP designation down the toilet.

How could you, how dare you,

RICK MILLER, CFP®

Subject: re: CFP Board Releases Exposure Draft of Proposed Revisions to Ethical Standards

The use of "percentage" in the definition of fee-only may cause confusion - "percentage" is also used in the definition of commission. It seems that the important distinction is between transaction based and non-transaction based compensation.

The requirements for contracts and pre-contract communication risk increasing the cost of hourly financial planning services - it could take a half hour of a one hour discussion to comply fully.

Perhaps a statement about the completeness of communication being proportionate to the services provided?

Excellent work by the Board!

Subject: Code and Practice Standards Comment

Dear CFP Board:

Thank you for this opportunity to comment on your proposed changes to the Code of Ethics and Professional Responsibility (Code) and Financial Planning Practice Standards (Practice Standards). I will limit my comments to the issue of the fiduciary standard of care, leaving the other questions to the other professional associations I belong to (FPA and NAPFA).

My comments begin with the very basics: why do we have the CFP™ in the first place? Because all CFPs agree with it, I quote from the CFP Board Mission (I've added the emphasis):

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

To further this mission, 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.

Fundamentally, as CFPs, we are trying to help people, individuals. With the CFP mark, we are attempting to help individual consumers by providing them with a uniform (consistent) experience when they deal with a planner who holds the CFP designation.

What should that consistent experience be in the fiduciary dimension? The draft answers that the agreement should specify whether the CFP will be held to the fiduciary duty of care. That is, the CFP will be held to a fiduciary standard of care unless she specifies otherwise. This is meaningless! The message to the consumer is: you are still responsible for figuring out whether the fiduciary duty of care is important to you. A CFP acts as a fiduciary unless he says he doesn't. What is uniform or consistent about that? What does the CFP™ stand for in the dimension of fiduciary care? Under the proposed Rules of Conduct, it doesn't stand for anything.

The FAQs suggest that the fiduciary standard may not apply or be appropriate for all parts of all contracts the CFP may enter. Perhaps. The Board's draft is rather legalistic in approaching this issue, but the CFP mark is a brand. The standard of care chosen is at least as much a marketing issue as a legal one. What do consumers want? They want clarity, simplicity. They want to know what the letters CFP mean, unambiguously. And, it is hard to imagine a situation where the client would want advice not in his or her best interest.

Why not say that the fiduciary standard is the minimum standard that may apply whenever it is appropriate? That is, in all cases where personal financial planning and personal investment advice are involved, the fiduciary standard of care will apply unless both parties agree to a higher standard. That is meaningful, and that is something consumers can easily understand. Under this approach, a CFP is always at least a fiduciary in dealing with individuals - someone who puts the client's interest first.

I can think of only one answer to the question that leads the previous paragraph, and I do not like it. The Board's website homepage has a link highlighting the Board's work with financial services firms, and that work's value to the Board and to the firms. Employees of many of these firms cannot adopt a fiduciary standard of care in their contracts with individual clients. For example, retail securities brokers would not be able to identify themselves as CFPs - their standard contracts use the suitability standard. Could the Board be succumbing to pressure from these firms to leave their employees an out - a way to take advantage of the value of having a CFP certification without having to subscribe to the fiduciary duty of care?

I return to the mission statement. It speaks of helping people benefit from financial planning. It says nothing about the profitability or success of financial services firms. If we believe that a financial planner's undertaking to hold herself to a fiduciary duty of care is valuable for her client, then we should require all planners to do so whenever they work with a client who relies on their advice (speaking about the irrelevance of the fiduciary standard of care for college professors comes across as a smokescreen, frankly).

If the Board can make a compelling case for its draft, if it can provide clear and important examples where clients would be harmed if CFPs all subscribed to the fiduciary duty of care, then I am ready to reconsider my view. If not, I fear that:

The CFP mark will not come to be as recognized, as respected, as valuable as it could be, either to the public or to certificants, and its recognition, respect and value will certainly grow less rapidly.
The media, the public, and many certificants including myself will regard the Board as having caved in to financial services firm pressure, diminishing its standing.
The Board will have missed a significant public relations opportunity. The release of the new standards, with the fiduciary duty of care as minimum standard, would provide a significant media opportunity for the Board and for every CFP. Otherwise, the release will be pretty boring stuff - mostly housekeeping, and a missed opportunity.

I implore the Board to seize this opportunity to make a significant impact. Our mark has momentum; but today, it stands only for competence, despite its claim to stand for ethics as well. Imagine the power of the CFP mark if we take a clear position on this very important subject - not only will CFPs be good at the work we do for clients, but all the work that all CFPs do will be clearly in our clients' interests - we will stake our reputation upon it. And not just if our client agreements say so - the CFP mark will guarantee it.

ROBERT C. MILLER, CFP®

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

Following an email I received from FPA President Dan Moisand, I support the FPA's concern that "the adoption of these revisions would weaken - not strengthen - the standards under which CFP certificants provide financial planning services."

TROY E. MILLER, CFP®, ChFC

Subject: ethics revision

Please reconsider the damage you will create by altering the ethics commitment that all of us, Certified Financial Planners, (CFP) have vowed. You cannot expect less than fiduciary responsibility from any person that falls under your new proposed regulations. It is dangerous for the public. I am concerned that my clients will be inundated by peddlers calling themselves financial planners. Please, please, please reconsider your proposed regulations. The Financial Planning Associations (FPA) can help you with your compromised regulations. They adhere to the Securities Exchange Commissions (SEC) definition of ethics and practice. The SEC definition is good for the public. It should remain as the minimal standard.

Thank you in advance for your cooperation.

BILL MOECKEL, CFA, CFP®

Subject: Proposed changes to the Code of Ethics and Professional Responsibility

I would like to comment on your proposed changes to the Code of Ethics and Professional Responsibility. My primary concern is with the Board's proposal to allow CFP certificants the ability to choose whether or not they will have a fiduciary responsibility to their client. I feel strongly that this should not be an option. It dilutes the value of the CFP designation, muddies the waters for clients who are already confused over the roles and responsibility of financial planners, and weakens the professionalism of the industry.

Why shouldn't every CFP (and quite frankly, everyone who calls themselves a financial planner) act "in good faith, with the care an ordinary prudent person in a like position would exercise under similar circumstances, and in manner he or she reasonably believes to be in the best interests of the client." Isn't that what we are supposed to do? Isn't that what every client expects? Isn't that what every client should expect?

Our industry is in it formative years and we continue to struggle to gain the respect of similar professional service industries such as accounting, law, and medicine. Weakening the responsibility that every financial planner has to his/her client, and the realistic expectation that every client should have of a planner who is looking out for the client's best interest, is clearly a step in the wrong direction.

If we want to grow into a mature professional industry (and not just a club) we should moving in the opposite direction. Make requirements stricter, make responsibility greater, make education standards more stringent, make this a profession that we can be proud of and one that the public can have faith and confidence in.

Thank you for your consideration.

BOB MOELLER, CFP®

Subject: Fiduciary standards

I congratulate you on raising the default standards. I am now asking for assistance in helping the people I represent make sure their "advisors" meet those standards.

I work for the Wisconsin Education Association Council, which represents about 80,000 educational employees in Wisconsin. I am a Member Benefits professional. My sole job is to inform our members about investments, retirement, etc. While I am a CFP, RIA, and CPA, I have given up all my sales licenses and work strictly for salary paid to me by our Association.

I would like to put together a simple statement that my members could insist their "advisors" sign before they do business with them. Something along the lines of "I agree that in advising you or selling you products I am acting in good faith, etc. etc. " to convey acceptance of a fiduciary responsibility.

I suppose I can make something up myself, but I would like to be able to say the CFP board recommends this standard.

I realize of course that most of their advisors may not be CFPs, but think my members would benefit from insisting their advisor take fiduciary responsibility. I meet individually with hundreds of them each year and have seen some very sad situations where they were sold garbage.

Any guidance you can provide would be much appreciated by myself and my members. Thanks. I will no doubt write one of my articles to members regarding the need for them to be careful about who they are dealing with and I am just delighted to see you raise the required standards for CFPs.

TIMOTHY M. MONTAGUE, FPA, CFP®, MT

Subject: Comments on its Exposure Draft of proposed revisions to CFP Board's Code of Ethics and Professional Responsibility and Financial Planning Practice Standards

As a Certified Financial Planner practitioner, I want to express my objection to the proposed revisions to the CFP Board's Ethical Standards that would allow a CFP to opt-out of his fiduciary duty. I do not believe this is a change the board should be considering.

There are many financial services designations out there today, the majority of which are meaningless. Some of these designations are relatively easy to obtain and have minimal ethical standards. CFP's can and should be the gold standard.

The proposed change in the ethical standards threatens that public perception and the progress of our profession. CPAs and physicians are held to high ethical standards, which they can not opt-out of and for these reasons are trusted by their clients and patients. There must be an organization to guide and elevate the financial services industry from that of a sales position to that of a profession. How can we ever become a profession if we can simply opt out of our duty to keep the client's best interest in all matters?

I believe the CFP board is on the wrong track with these changes. The public is confused enough. It is not in consumers' best interest to add more confusion or gray area to the process of finding a qualified, trustworthy financial planner. All CFP practitioners should be held to the same fiduciary standard at all times! It is in our best interest and the best interest of all those we serve for the CFP mark to be the preeminent mark of a true profession, with clearly defined professional standards. I see the proposed changes as lowering those standards and losing clarity, and for that reason I oppose the recommended changes.

MARY L. MORINA, CLTC, CSA, CFP®

Subject: Comments on Ethics

This is a brief comment on the changes you are making to the Code as it involves Ethics. I don't believe we should adopt a "fiduciary duty" stance in working with our clients. We always work toward meeting the clients' goals and have their best interests as our focus. We don't have to have Fiduciary responsibility for them or their actions. It is "overkill" in my opinion.

RE: Comments on Ethics

Thank you for your response. I absolutely agree that adherence to a code of ethics is extremely important. I object to the use of the word "fiduciary"in this context. I do not feel that we, after providing our best efforts to a client adhering to the CFP Code as it stands should, in addition be responsible for the subsequent actions of our clients.

GARY A. MORRIS, CFP®

Subject: RE: Exposure Draft Revisions to CFP Board's Code of Ethics and Professional Responsibility and Financial Planning Practice Standard

I am responding as an individual certificant/licensee.

While I am not portraying myself as an expert in the field of ethics, I thought it would be helpful in reviewing my comments to provide a description of my involvement and passion for ethics. I am a member of the Ethics and Compliance Officers Association participating in their Financial Services Industry Group. I am a member of the Institute for Global Ethics and their Center for Corporate Ethics. I chair the Character Coalition of North Texas, which is a organization that promotes character development in youth emphasizing the Six Pillars of Character developed by the Josephson Institute. I also serve on the steering committees of the North Texas Ethics and Character Association and the Greater Tarrant Business Ethics Award. I have been co-chair of the Greater Dallas Business Ethics Award for five years.

Although I do not think there is any conflict of interest, in the spirit of full disclosure, I am a registered sponsor for the CFP Board Ethics continuing education. One could even argue that changing the Code is not in my self interest.

First, the Board should be saluted for undertaking this review because it has stimulated thought and conversation about this subject which is the vital to our profession, the post-Enron financial world and therefore without exaggeration to our society.

Second, I have assumed that the Board committee has undertaken the usual review and evaluation of breeches of the current ethical standards and has completed a comparative analysis of similar organizations in preparing this draft.

In preparing my comments, I recognize the uniqueness and difficulty in developing and managing an ethics program for an independent licensing or membership type of organization. The classic business entity has a far easier job with senior management commitment to define within the seven steps of the Federal Sentencing Guidelines and to motivate ethical behavior within their culture. Further, there are complications caused by the fact that there are Certified Financial Planners who do not perform financial planning under even the Board's broad definition. While this is not unusual, there are Certified Public Accountant who are not public accountants and Chartered Financial Analyst who are not financial analysts, our profession is younger and still defining itself.

After a thorough review, I believe that the revisions are an enhancement to the current Code and Practice Standards (now Rules of Conduct). I have read comments to the contrary and believe that these revisions should be viewed in the following light:

Minimum Standards A professional looks for character standards and guidelines. The Board's approach is both rational and understandable for all Certified Financial Planner certificant to meet the minimum obligations they have to their appropriate stakeholders. All Certified Financial Planner certificants no matter what role they perform (practitioner and non-practitioners) need to develop their own written code, credo, or statement of values, etc. outlining their relationships with stakeholders at the highest level. Other organizations are clearly able to set a "higher requirement " if they choose to take that step.

Commitment to Principles and Values There has been a trend even post Enron for businesses to focus on cultural standards and ethical characteristics rather than enlarging a rule book. To the Boards credit, it has focused on reasonable, do-able requirements such as establishing the fiduciary standard as the "default". This requires a burden for the Certified Financial Planner certificant to disclose, discuss and establish an agreement with his(her) client. In a trust relationship, I believe that this will mean that the Certified Financial Planner certificant will think through the appropriateness of a non-fiduciary approach. Will it mean that de facto everyone will be a fiduciary or be honest or be ethical, clearly no, however by forcing a time to think and reflect will serve everyone's best interest.

"Whistleblowing" While the Professional Principle should stimulate a Certified Financial Planner certificant to encourage a fellow Certified Financial Planner certificant to operate ethically, this is an area that should be strengthened. I am not suggesting that the Board return to the cumbersome rules 603 through 605, nor to add the current rage of a "ethics hot line" but rather to provide some additional language to the Professional Principle.paste paragraph here

I would be happy to expand on any comments.

JOANNE D. MUNGALL, CFP®

Subject: Comments of Code of ethics changes

I find that it is difficult to make comments on these changes because I am always concerned that I am missing a piece of the puzzle but there are a few things I would like to say.

First, I would like to commend the board for attempting to 'clean up the lines' by pulling back on the Code where clearly the board has no authority or authority is already spelled out. That being said, I think these changes did not go far enough where this was concerned and hence my comments.

It is my opinion that:

1. The Code should not cover areas of which there is clear regulation by law or authorities such as the SEC or NASD or where a certificant would be governed by another SRO. The Code should clearly state that these authorities and laws already exist and that we must adhere to them and a violation of these rules is a violation of the Code of Ethics. If the code then raises the bar on the standards for the certificants that already fall under this governance I think that is fine. Then it would make sense to extend the regulations that the Board feels are pertinent to those certificants that would not be covered by these laws or authorities. For example those certificants that would be exempted by the controversial BD rule.

2. Trying to make every certificant a fiduciary especially where the law does not make them a fiduciary does not necessarily make sense. However, I think it makes sense to require certificants that are not governed legally to act as a fiduciary be required disclose this to clients when they are working with them. I feel that this would also act an incentive to those certificants to place themselves where they would be fiduciaries and therefore would not have to disclose this to clients. I believe that this speaks to proposed rule 202.

3. Proposed 3.6 is generally not allowed by legal authorities and should be left to the legal authorities to regulate. If there is a place where no regulation exists then the commingling of accounts should not be allowed.

4. The old rule of being "fully informed" on financial planning standards was overly broad but the proposed rule 8.2 of fulfilling CE requirements is to narrow. I will very often take CE in an area that I know less about but that area is not one that I should necessarily be working on clients with. Certificants should be required to be fully informed on the areas of financial planning or strategies that they hold themselves out to their clients to have expertise in. A certificant should be able to demonstrate if requested how they stay fully informed by CE they have taken, conferences attended, books read etc.

I commend the board for taking on this endeavor as it is not an easy one.

Thank you for taking the time to review my comments.

BOBBIE D. MUNROE, CFP®

Subject: Comments on rules change

From the CFP Board's web site regarding it's mission: "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."

By now you have received many eloquent responses to your request for comment on the recent proposed rules changes. I have no desire to add substantially to what must already be a lengthy reading list (judging from the conversations on the Nazrudin chat room). But I must comment.

Allowing CFPR Certificants to "opt out" of a fiduciary standard does not serve your stated desire to "create and enforce uniform standards."

Allowing such a rules change would be a great disserve to the public. There is a great body of research from various sources that indicates that the public is already confused about the multiple standards that are applied to various "advisors" (brokers, RIAs, etc). Allowing Certificants to "opt out" by burying an alternative standard of care within their agreements would only exacerbate the confusion. And let's be honest. Many Certificants would (by their own actions or by the rules enforced by their employers) "bury" the alternative standard. For this reason alone, there should be one mark, one standard. Any legal vagaries caused by the use of the word "fiduciary" could be resolved by using a definition that could be accepted by your licensees....a definition that would protect the public. If we are ever to create a true profession in service of the public, this is a must.

I must add, not as a threat but as a caution, that if you do dilute the requirements of the mark, you may end up driving away those licensees that are most committed to serving the public. Indeed, there must be value (as perceived by the licensee AND the public) in the mark or it serves no one.

I thank all of you who graciously volunteer your time to the benefit of us all. I wish you all the best as you resolve this issue.

TIMOTHY T. MURRAY, CFP®

Subject: Code of Ethics Comments

Double standards are rarely beneficial. All CFP® professionals should have a fiduciary duty to their client. Period.

This is what the public expects from a financial planner. If your main constituent is the public-at-large, make it easy for them. Hold all CFP® professionals to the higher standard.

I chose to form an RIA because I wanted to have a duty to my clients. This is my calling. Those that are using the CFP® symbol as a marketing tool (and I know several brokers who have told me thus - and it really bothers me) can either become a fiduciaries or relinquish their right to the designation. We don't need those types in our organization.

Will we lose some certificants? Sure we will, but the public and our profession will be stronger because of it.

Do what is right.

Thanks,

R. E. MYERS, CFP®

Subject: Proposed Ethics changes

Excellent: I strongly support the proposed ethics changes.

It is entirely appropriate that a CFP be allowed to function as other than in a fiduciary capacity as long as the client understands and agrees to this.

NAME WITHHELD UPON REQUEST

Subject: Proposed Revision to Code of Ethics

As a Certified Financial Planner practitioner, I want to express my disappointment and extreme concern with the proposed revisions to the CFP Board's Ethical Standards. I object to the ability for a CFP to opt-out of his or her fiduciary duty. I do not believe this is a change the board should even be considering.

There are many financial services designations out there today, the majority of which, simply put, are meaningless. Many designations are relatively easy to obtain, have minimal ethical standards, and clients do not typically know what they really mean. I have spent a significant amount of my time and expended a lot of effort and money over the past several years to obtain the CFP designation. I did not do this because I felt it would bring me more clients or because I wanted some more letters behind my name. I did so because of the high standards those who hold the designation are held to, my passion for helping clients and desire for those clients to truly trust the advice they are receiving.

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. Clients understand and EXPECT a higher standard and ethical commitment from those who hold the designation. In the minds of clients, the CFP is seen to be more knowledgeable and held to a higher ethical standard. They expect those who hold the designation to be held accountable when they breach their duties as a fiduciary, if not by existing laws, by the very rules and standards which you as the board have implemented and upheld over the years.

The proposed change in the ethical standards threatens that public perception and the progress of our profession. Lawyers & doctors are held to high ethical standards, which they can not opt-out of and for these reasons are trusted by their clients and patients. There must be an organization to guide and elevate the financial services industry from that of a sales position to that of a profession. How can we ever become a profession if we can simply opt out of our duty to keep the client's best interest in all matters?

If you compromise the integrity of CFP licensees through optional or subjective standards you would dilute the 'gold' standard in the designation you have worked hard to create. There will no longer be any significant value in being able to say that one is a CFP practitioner, other than having the knowledge to give financial advice, without being held accountable for that advice.

I believe the CFP board is on the wrong track with these changes. The public is confused enough. It is not in consumers' best interest to add more confusion or gray area to the process of finding a qualified, trustworthy financial planner. All CFP practitioners should be held to the same fiduciary standard at all times! It is in our best interest and the best interest of all those we serve for the CFP mark to be the preeminent mark of a true profession, with clearly defined professional standards. I see the proposed changes as lowering those standards and losing clarity, and for that reason I oppose the recommended changes.

Financial planners have adopted the CFP mark as the choice designation around which to build a profession. We spent a lot of our time and money obtaining the designation because of our passion for financial planning and our desire to help our clients reach their goals and dreams. We continue to support this desire through education, participation and support of The Board which until now has done an excellent job promoting the profession, improving its integrity, and holding those who hold the designation to standards which can be counted on to be enforced. To the extent that you as the CFP Board lower standards or move away from clarity, you are failing in your responsibility to those you are committed to serve and those we are committed to serve.

Please feel welcome to contact me with any questions, comments or observations. I sincerely hope that you will reconsider any changes that would lower the standards which we have worked so hard to enforce and which clients have come to expect and trust.

NATIONAL ASSOCIATION OF PERSONAL FINANCIAL ADVISORS (NAPFA)

On behalf of the NAPFA Board of Directors, we are submitting our comments to you and the CFP Board regarding the Draft Code of Ethics. We appreciated the opportunity to present comments to the CFP Board of Directors meeting at the Santa Monica conference in August. These remarks reinforce the primary concerns we expressed at that time.

There are four primary areas of concern that NAPFA has with the proposed Code of Ethics: 1) the optional fiduciary standard for a CFP certificant; 2) the changes to the definition of "Fee-Only"; 3) the aspirational nature of the Code; and 4) the terminology used in Section 6 reflecting a suitability standard rather than a fiduciary standard.

Optional Fiduciary Standard. We urge the CFP Board of Standards to adopt a fiduciary standard whenever a CFP is engaged in a written agreement with a client. We do not support the ability for a CFP to opt-out of this standard, thereby creating confusion for the client and lowering the standard of care provided by the advisor. NAPFA considers this to be a consumer protection issue of paramount importance, because fiduciary advisors are unquestionably committed to providing service that is in their client's best interests. As we deal with an aging population, we particularly need to protect seniors and ensure their financial stability. Seniors, as well as other age groups, should be able to look to the CFP mark as a guarantee that their interests will be put first.

As we stated in our May 2006 letter to you and the CFP Board, the fiduciary standard is not only beneficial for consumers, but it also carries benefits for financial advisors and the CFP Board as an organization. NAPFA's experience shows that consumers will embrace financial advisors who are fiduciaries. Consumers respect the clarity and the integrity of the fiduciary relationship, and it gives them confidence about where to turn for financial advice

Confident consumers. Our concerns for the profession are that we have an easily identifiable mark, similar to the M.D. for the medical profession or the J.D. for the legal profession. If we are to be considered a profession, we need to set standards, have a system for certifying advisors, commit to using our knowledge for the public good, and have a code of ethics that protects the rights of the consumer.

Changed Definition of Fee-Only. The new definition of "Fee-Only" contained in your Draft Code is a step back from the definition in earlier versions of the CFP Code of Ethics. The earlier definition stated that "Fee-Only denotes a method of compensation in which compensation is received solely from the client with neither the personal financial planning practitioner nor any related party receiving compensation which is contingent upon the purchase or sale of any financial product." The important part of this definition is the fact that the compensation is "solely from the client," with the unwritten implication that this means "solely from the client at all times"

NAPFA does not see how the CFP Board can allow an advisor or an advisory firm to use the term "Fee-Only" and yet work with some clients on a Fee-Only basis, but not others. Nor do we see how a firm can work with clients on a Fee-Only basis on some aspects of a financial plan, but not on other aspects-while the firm calls itself Fee-Only. NAPFA believes that allowing a mix of Fee-Only and commission-supported compensation on a firm-by-firm or client-by-client basis will only worsen the confusion now suffered by the public. NAPFA believes that using the Draft Code's Fee-Only provisions will actually make the situation worse-especially for CFP certificants and the CFP Board. For example, who will decide what has to be disclosed, and to whom and with what language? And how will the Board police the situations that will inevitably arise? From NAPFA's perspective, the Draft Code's concept will lead to an impossible enforcement scenario for the CFP Board.

Aspirational Principles. The Draft Code specifies that Principles of the Code are aspirational and are intended to help guide all certificants. The CFP Board of Standards has ambitions to be our profession's self-regulatory organization, and it should therefore undertake steps commensurate with this worthy goal.

The CFP Board has the right to approve or reject the ability for its members to use the CFP mark, giving the Board significant influence over the conduct of CFP certificants. NAPFA believes the CFP Board should use its influence and authority to require its members to abide by the principles of the Code.

Suitability Standard. Section 6 of the Draft Rules of Conduct discusses the Obligations to the Client. Section 6.4 states that "A certificant must make and/or implement only recommendations which are suitable for the client." This language reflects the weaker standards to which broker-dealers are held, rather than the fiduciary standard placed on Registered Investment Advisors. Recommendations made by a CFP should be made in the best interest of the clients, including full disclosure of any possible conflicts of interest-the fiduciary standard. A weaker standard will simply weaken the credibility of the CFP mark with consumers.

We would like to conclude by thanking you and the CFP Board of Standards for the time devoted to reviewing and revising the CFP Code of Ethics. You have reached out to many groups within our industry, including NAPFA, to gather input. We encourage you to adopt a Code of Ethics requiring a fiduciary standard on the part of all CFPs when working with clients.

Richard Bellmer, Chair, NAPFA
Ellen Turf, CEO, NAPFA
Peggy S. Cabaniss, Past Chair, NAPFA

PHILIP D. NATION, CFP®, MS, CLU

Subject: code of ethics revisions.

I would like to congratulate the CFP board for the intent of the revisions proposed to the Code of Ethics. As CFPs we should hold ourselves to the highest standards. However, I am concerned about the means of accomplishing this goal. I think making revisions to the written code will result in consequences that could be objectionable.

These days, CFPs and their clients are deluged with new disclosure forms that have to be reviewed. Beyond a certain point, disclosure forms are intended only to protect the organization that writes them - not the consumer. Short documents become long documents. Print gets smaller. What I mean is that if I have to review 10 disclosure forms with a client, their eyes will glaze over and they start signing just to get done - not because they are involved in the process of negotiating a relationship. Please don't add more paperwork to the pile that is already too deep. It doesn't matter if the CFP board only requires one disclosure if every other regulatory body also requires it's own disclosure.

I would argue against any change that involves the addition of more paperwork to review with our clients. There is already too much. It is not a solution. It is just another problem. If that is all the board can come up with, then they should get out of the way.

Instead, I would push the Board to work with the various state and federal agencies that regulate us, to coordinate their efforts. Align education requirements so that we don't have to do the same work three different times - once for the state, once for the Feds, and once for the CFP Board. Create one central education tracking organization. Standardize requirements. Then, focus on education and best practices. Eliminate the tedious year end classes where an instructor reads from a manual, with no test at the end. That is a waste of time and money - it proves nothing about competence. CFPs should be able to prove they have learned the material - not just sat thru a class for a half day.

I appreciate the opportunity to give my feedback.

WILLIAM R. NEUBAUER, MBA, CFP®

Subject: Fiduciary Standards

I'm very distressed that the CFP board has decided to cave in to the broker/dealer lobby and water down the CFP mark by allowing two separate standards. Score a victory for the salespeople who are carefully disguised to appear as professionals. The public is already confused by such terms as broker/dealer versus registered investment advisor, financial advisor versus financial planner, fee-only versus fee-based. Now add to that fiduciary CFPs and non-fiduciary CFPs.

I believe this is a big step in watering down the value of the CFP mark. Most CFP certificants who are employed by broker dealers earned the designation to appear as true financial planners, when in reality their daily job is simply to sell stocks and bonds. I know this from personal experience working with Bank of America for many years before striking out on my own as an RIA. Most salespeople employed by broker/dealers see the mark as credentials that enhance their prestige with unsuspecting clients who think that they will perform true financial planning (something they are prohibited from doing under the Merrill Lynch rule). They simply attach the letters to their name and do nothing remotely approaching financial planning for their clients, only offering incidental advice as permitted by law. Worse yet, they do everything in their power to convince their clients that they are in fact receiving "financial planning services" when in fact they deliver nothing more than canned programs designed to crank out asset allocation plans. The CFP Board has decided to become complicit in this lie rather than stand up to the broker/dealer lobby and enforce the higher standard.

I find it hard to understand how the CFP Board can go against its membership on this issue, especially when it also leads to further confusion among consumers and a watering down of the value of the CFP mark.

Perhaps we need a new mark and a new organization at a higher level than the CFP designation to separate the professionals from the salespeople. Allowing salespeople to use the existing market and opt out of the fiduciary standard is an insult to the vast majority of practicing CFP professionals who work hard to advance the practice of financial planning as a profession rather than a sales tool.

CHARLES E. O'CONNOR, CFP®

Subject: Response to Draft Revisions

The CFP Board has characterized the new changes to the Code of Ethics as simply a periodic update. Based upon the number and extent of changes, this is not a simple periodic update. The board should have issued an advance notice, so that we would have know it was thinking about major changes. It is never too early to engage the CFP community in a discussion regarding major changes.

Under the Proposed Code of Conduct Section 1.1e I disagree with the part that states "unless the parties specify in their agreement a different legal standard governing these actions". This part should be removed. This would allow brokers, who are CFP certificants, to avoid the default fiduciary standard by specifying a lower standard by contract when they give investment advice. This also differs from the CFP Board response to the Merrill Lynch Rule. The fiduciary standard should apply to CFP certificants when they are offering financial planning or investment advisory services. The board should consider a proposal that "effective January 1, 2011 a fiduciary standard should be applied to all activities of a certificant." Setting a date in the future will allow the issue to be fully debated.

Under the Proposed Code of Conduct Section 1 Scope, Nature and Content of the Engagement. The terms "Scope, Nature and Content" are ambiguous. The CFP Board, in their own words, should define what these terms will mean, or provide standardized language that would meet this requirement, so that we can comment on them.

Fee-only compensation had previously been defined as "a method of compensation in which compensation is received solely from a client ...". We need to retain "received solely from a client" or insert the words "directly from the client to the certificant".

The current Rule 403 regarding compensation arrangements is much more specific than the proposed code on conduct. We should retain the language in Rule 403. The new proposal requires this disclosure to be in writing as required by "regulatory rules governing the engagement". A problem exists if a wirehouse broker's contract opts out of the RIA regulation, then there's a wide open loophole to not disclose.

I agree with the change that a financial planning engagement exists only if there is a written agreement. This is a definite improvement.

We need to remember to keep the client's interest first. All of the proposed changes should be reviewed as to "How does this improve the client's interests".

TOM O'CONNOR, CFP®, CFA

Subject: Comments on new ethics proposal

My understanding is that the proposed Code of Ethics makes it optional to act "in good faith" and "in the best interests of the client". What possible purpose could this provision serve? Does the Board of Standards really wish to allow practitioner certificants to act in bad faith, with disregard of the client's interest.at least so long as the client doesn't complain?

If true, these provisions fatally wound the Code of Ethics, in my view. Are you acting as a Board of Standards or as a Board of Appearances?

We all lose when you lower your standards. I urge you to prohibit behavior that ethical practitioners foreswore decades ago.

Please reconsider this provision.

GARY L. ORKIN, CFP®

Subject: Fiduciary Issues

I consider that I have a fiduciary relationship with all of my clients. I have always thought that and when the topic comes up that is what I tell my clients. I am changing my written agreement with my clients to include this. I have asked whether it can go in my ADV.

I believe you are watering down the meaning and value of the CFP mark by not requiring that all Certified Financial Planners (should be CAPS - whoops) have a fiduciary relationship with their clients. The minimum thing we should have is the requirement that all CFP certificants should, as a default, be fiduciaries. You may have a way out for the few who aren't - let them state that they aren't.

I cannot understand why there is such a controversy. This is a no brainer. I have to believe that it is a monetary issue and that the CFP Board will lose certificants, and annual fees, if they force the fiduciary issue.

KEIR OXLEY, CFA, CFP®

Subject: Proposed changes to Standard

You guys have a chance to keep standards strong and raise the profession in the eyes of the public.

Instead you are catering to the needs of the B/D industry and watering down key provisions of the Standards.

Shame on you.

REBECCA PACE, CPA/PFS, CFP®, CDFA™

Subject: Fiduciary Standard

I have been watching the Certified Financial Planner practitioner fiduciary standard discussion with concern.

A Certified Financial Planner practitioner should meet a fiduciary standard. Period. The argument that Certified Financial Planner practitioners practice in many settings that do not create a fiduciary relationship, such as teaching, journalism, and government is irrelevant. Attorneys and Physicians also practice in diverse settings. A physician who writes a column in the newspaper does not have a fiduciary relationship with the reader. Nor would a Certified Financial Planner practitioner.

It is true that many Certified Public Accountants choose to give up their fiduciary role when they accept commissions. I believe this is why the NASD does not permit them to use their professional designations on their business cards when they are registered as brokers.

The Certified Financial Planner designation must not be used as a marketing gimmick. Someone with only Broker or Agent licensing should not be permitted to use the marks. The consumer should be able to have confidence that any Certified Financial Planner practitioner they deal with is a fiduciary, without having to look for disclosures. Hardly anyone asks to see a physician's license when they make an appointment.

Of course, I am asking you to put the toothpaste back in the tube. I understand that some of the brokerage houses have recently permitted their Registered Representatives to begin to use the marks on their business cards, even without an RIA registration. The recent upsurge in brokers seeking the marks indicates to me that the CFP Board of Standards has lost control. The marks have already been hi-jacked for marketing and I fear the battle has already been lost.

Hybrid securities licensing and terminology that blurs the line and allows brokers to call themselves advisors and planners to be sales people should not be adapted by the Certified Financial Planner Board of Standards to avoid a fiduciary standard.

There should be one set of standards that all CFP practitioners must follow, and those standards must require those practitioners to act in their client's best interest at all times. Of course I understand that, with the passage of HR 4, this standard could be the end of the profession, but that is another battle.

In practice the marks seem to have no more relevancy than an educational standard.

What a tragic loss for the industry and the public.

Subject: Insurance connection

I know that at the moment you are concerned with the fiduciary standard, but there is another issue that I believe needs attention.

The recent discussions with the SEC regarding the incursion of stock brokers into the investment advisory area has been interesting to say the least. However, I have not heard of any discussion about Insurance agents using Financial Planning to sell products. Life insurance and annuities are the primary products involved.

I have been told that the insurance carriers believe that preparing a financial plan is an investment activity, and the insurance recommendations are incidental. Therefore, for at least one major insurance carrier has formed its own Registered Investment Advisor entity. The "agents" are Investment Advisor Representatives (not insurance agent's) when they prepare and deliver a financial plan, but are insurance agents when they place the insurance. In spite of some states prohibition of "dual capacity", i.e. serving as an insurance consultant and collecting payment for the sale of insurance for the same client, this practice is widespread. Apparently an Investment Advisor representative is not considered to be an insurance consultant.

The entire practice of "fee-based" planning is an affront to the public.

PETER T. PALION, CFP®

Subject: Comments re CFP Board proposing to change its ethical standards

Firstly, I think that your definition of "custody" is different from the SEC's definition that most financial planners are familiar with, and therefore, I would suggest using language to make it crystal-clear exactly what you mean there (or perhaps using a different word altogether to avoid the potential for confusion).

Secondly, I also think that you need to make it absolutely crystal-clear just exactly what kinds of activites can be exempted from the fiduciary standard of care. While I agree that there certainly are some valid instances where the fiduciary standard would not apply (i.e., teaching), I feel very strongly that all CFP certificants should be held to the fiduciary standard when performing financial planning or implementation. Allowing a broad exemption to be applied at the certificant's (or their firm's) discretion is nothing else than creating another "Merrill Lynch rule"!

Judging by the comments that I heard from practitioners during a recent TD Ameritrade conference, if you choose to do that, you might indeed be able to keep wirehouse reps on board but most likely at the expense of losing many independent certificants.

GEORGE PAPADOPOULOS, CPA/PFS CFP®

Subject: Comments to CFP Board's proposed changes to the Code of Ethics

I am extremely disappointed of the proposed changes. I do not think they serve the interest of the public and definitely do not contribute to "financial planning" becoming a true and recognized profession.

In my years of experience I have seen how much damage has been committed against consumers by salespersons masquerading as competent advisors. Their defense has been that they met the standards of disclosure by shoving yet another form to the client to sign. Allowing this to happen and wiggle out of a higher standard is extremely damaging to the consumers and I have no doubt the same mode of financial "advice" will continue to run rampant. I was hoping that CFP Board will take the high road and step up to the plate and lead us to a higher ground; instead, I see a total cop out.

Whenever I received a call or was asked by a consumer what are the minimum requirements they should look into hiring a financial planner I always answered with: 1) Be Fee Only and 2) Be a Certified Financial Planner. I will now drop No.2 because I can not guarantee that they will put the client first and foremost ALL the time.

It is about time to do this for the sake of this noble profession. Change the Code and require ALL of us to be held to a fiduciary standard ALL the time. It is the right thing to do ladies and gentlemen. Step up or step out of the way.

DENNIS PARK, CFP®

Subject: Reporting violations in the draft Exposure documents

I don't understand why the CFP organization (members & the board) wouldn't expect violations to be reported (paragraph 2 following Certain Provisions Removed). If I know of a violation and do not report it, I am further contributing to the dilution of the meaning of CFP. We don't want to follow the poor example set by so many organizations today. We should all contribute to the maintenance of the highest standards possible or we shouldn't even have standards.

I worked hard for my designation. I work hard to uphold the highest standards possible. I expect no less from my business partners. I will not tolerate criminal or immoral behavior by others who advertise themselves as CFP designates. I think I possess the common sense to know when an issue should be reported. If contributing to the maintenance of high standards is counter to what the CFP board wants, let me know. I can put my continuing education time and money to a better organization. If the new rules are accepted as written and I witness a violation, I will resign my CFP designation. I will not be part of an organization that encourages me to not report a witnessed violation.

By the way, I haven't ever turned in any CFP designates for a violation (fortunately I haven't ever witnessed a significant violation).

How does this change STRENGTHEN the standards (reference- Q: Are the standards in the Exposure Draft weaker or stronger? A: Stronger. No standard was weakened. Key existing standards were tightened, including (1) raising the default duty of care standard to the fiduciary level, (2) requiring that agreements to undertake work for clients be documented in writing, and (3) substantially enhancing disclosure requirements.)?

JAMES J. PASZTOR, JR., CFP®

As a practicing fee-only financial planner and educator I believe it is important that all CFP® certificants be held to the fiduciary standard. You state in your FAQs that it is not appropriate for all CFP® certificants and the example you use is a certificant providing employee financial education. This is a weak argument, since the Code could be written in such a way that the fiduciary standard applies when advising clients in an engagement. You have CPAs providing employee education, and they are fiduciaries with their clients. There is way too much confusion for the public with all the designations, various regulators, etc. We need as much clarity as possible, and should always be putting the client's best interest's first. Please refer to my opinion piece, which is enclosed, that I wrote for the Journal of Financial Planning.

Thank you for your time and consideration, and I am glad that the CFP Board is addressing this very important issue.

MARK E. PEARSON, CFP®

Subject: RE: Voice Your Opinion on Proposed CFP Board Code of Ethics Changes

I agree with the concerns expressed by the FPA about the new ethics standards. The value of the CFP marks is the difficulty in obtaining them and the challenge in living up to them. In the minds of financial services consumers, this is what sets the CFP marks apart . Anything that would lower the bar is a move in the wrong direction.

For example, I specifically object to the elimination of rules 603 and 605. If we are not going to police our ranks, who is?

Please consider the FPA's position as mine.

RONALD S. PEARSON, CFP®

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

As a CFP® certificant for twelve years and an Ethics Continuing Education instructor for the last three years, I feel I must comment on the proposed changes to the Code of Ethics.

First, I support the positions espoused by Ron Rhoades in his comment letter of July 27, 2006 regarding the necessity of all CFP® certificant engagements being held to fiduciary standards. I most strongly believe this is the ONLY path to a profession of financial planning. Allowing CFP® certificants to opt out of the fiduciary standard while still giving "advice" only confuses the public and cheapens the value of the CFP® mark.

I believe the new definition of "Fee Only" invites mischief and consumer confusion. Parsing the definition to cover individual agreements allows people to say they are "Fee Only" when that may only be one part of the practice. I see nothing to the advantage of the consumer in the new definition and much to hurt the consumer. I recommend keeping the definition in Advisory Opinion 2003-1.

I believe the new rule 2.2 could be an improvement over the old Rule 403 by eliminating the "as required by regulatory rules governing the engagement" language in 2.2a(i). Under the old rule, all CFP®'s were required to disclose compensation if requested by the consumer. Under the new rule, the CFP® certificant can avoid disclosure by citing regulatory rules. Eliminating the offending phrase will significantly improve consumer understanding of the engagement's costs.

WILLIAM D. PITNEY, MBA, CFP®

Subject: Comments about "Exposure Draft of Proposed Revisions to Ethical Standards"

I would like to share my comments with the CFP Board (Board) about the proposed revisions to the Code of Ethics and Professional Responsibility and Financial Planning Practice Standards. It is my hope that the Board will consider these comments in drafting its final Code and Standards, especially my concerns about applying a fiduciary standard of care.

Areas of Agreement

First, I understand the Board's reasons for the proposing the changes and the implementation challenges with the current Code and Standards. The Board has my full support in making the following changes:

Removing certain provisions from the Code & Standards over which the Board lacks authority. Cleaning up the language makes the Code and Standards clearer for certificants and associated third parties.
Adding a fiduciary standard of care. Since the Code is modeled after other professional codes and since Financial Planning is yet to be generally recognized as a profession, this is an excellent first step to enhancing the public image of the Financial Planning industry.
Requiring some kind of written contractual engagement between the certificant and client. An excellent step to enhancing the professionalism of the industry and documenting agreements made between client and certificant.
Requiring reasonable electronic security for keeping clients' electronic information secure. This is essential in today's risky identify theft environment.
Requiring professional supervision and direction over those client service responsibilities delegated to third parties. This ensures certificants perform their own due diligence before contracting outside services.

Areas of Disagreement

The Board stated that the proposed revisions were developed with the primary goal of ensuring that the ethical standards for CFP® certificants remain strong and benefit those who seek competent and ethical financial planning services. However, certain components of the proposed additions 1 and 2 should be enhanced further because they are not as strong as they should be professionally. While additions 1 and 2 are a good start, I cannot support them fully for the following reasons:

Contractual engagement. [...it does not require that the writing be signed by the certificant]. This one I just don't understand. A signature should be required. Generally, whenever someone enters into a legal and binding contract with another person or entity (e.g., purchasing a car, buying/selling a house, entering into a loan agreement, etc.) all parties, or their legally recognized representatives, are expected to sign the contracts. The same should be true for planning contracts.
Fiduciary standard of care. [Allowing individuals the freedom to create contracts that specify different legal standards for different services, especially as more and more professional services are purchased company to company]. While on the surface this seems reasonable, there is an underlying assumption that the company engaging the services of a CFP® certificant and his or her company understands the standard of care and/or has legal representation to ensure it understands the standards being applied under the "creative" contract. This flexibility may be sufficient and necessary for certificants contracted by larger organizations who have the staff to understand the standards, but I would argue that this standard is insufficient for many smaller firms and organizations they do not have a legal staff to review and interpret the contract and its standard of fiduciary duty.

To strengthen this component, maybe there should be a minimum standard of care that applies in all instances and cannot be altered by contract. Better still, maybe there should be two standards of fiduciary care. Once applied when the contracts are purchased by non-accredited individuals and organizations; another applied when contracts are purchased by accredited individuals and organizations.

Without a minimum standard of fiduciary care, we as a profession risk creating unnecessary confusion among consumers-similar to that created by the SEC's "Merrill Lynch" rule. If we want to be recognized as professionals, like CPAs, attorneys and doctors, we need to have a minimum standard for all CFP® certificants.

While I am encouraged to see the Board making progress toward implementing a fiduciary standard of care, I remain concerned that the "default standard" simply does not go far enough to strengthen the profession or protect the public. I am willing to accept all the other proposed deletions and additions to the Code and Standards as is, except for that of the fiduciary standard of care. The standard needs to be strengthened before it is released in its final form to CFP® certificants and, even more importantly, the general public.

DAVID PITSCH, CFP®, AIF

Subject: Ethics

I recently took a 2 hour online ethics course. Money and greed are usually at the center of most unethical decisions. It seems to me that the influence of the dollars associated with Wall Street are compromising the decision to have CFP's act as fiduciaries. Someone needs to retake a basic ethics course and reevaluate the fiduciary question.

JOE PITZL, CFP®

Subject: Comments on Revision

In response to the recent exposure draft revisions released by the CFP® Board, the effort to clarify and enhance the current Code of Ethics and Practice Standards should be commended, but I am disheartened by the proposal that would allow the CFP® Practitioner the ability to opt out of a fiduciary standard of care.

While the comment "the default duty of care is designed to impose the fiduciary standard of care where it is most needed and avoid imposing it where it is either not needed or inappropriate" makes me want to believe that this election is well-intentioned, it leaves far too much room for abuse.

We are working with ordinary people, including your parents, children and friends. As planners, some working far in excess of a full-time schedule, we know that it is increasingly difficult to keep up with everything happening and being introduced in this industry. Are we expecting our family and friends to weave through the myriad of options and products themselves because their financial professional is tied to a third party and can only tell part of the story?

Any CFP® Practitioner that is engaged in a financial planning relationship with people should be held to a fiduciary standard. This would include CFP® Professionals working in only one or a few of the areas defined as financial planning, such as insurance agents or attorneys. If you want to represent and sell for your company instead of representing your clients, that is your prerogative, but do not water down our mark.

In response to the statement that "By having the fiduciary standard as a default standard, CFP Board targets those client situations most likely for abuse or misunderstanding - those where the client does not know enough to ask about or specify a legal standard," I would posit that the average person, prudent or not, would not understand what it means to be a fiduciary, and thus, would not know the difference in contractual language. While a few wise people have told me that wisdom comes from experience, are we expecting our parents and friends to figure this out as well? We know, from our experience, that this loophole would be exploited. Why wouldn't we use our wisdom instead?

I am not the first to bring up the point that you would not allow a doctor to redefine the relationship with his patient to anything less than advising the patient with their best interests in mind. In the best interests of the clients and the general public, the Board should be firm in defining and holding any CFP® Practitioner engaged in a financial planning relationship to a fiduciary standard.

I am proud to be a CFP® Professional and proud of what the mark has stood for. As we move forward as a profession, we should always strive to enhance and strengthen the relationships we have with the people we serve. A reputation is a very delicate thing that can take years to build and seconds to lose. As a proud holder of the CFP® mark, I would like to see the reputation continue to build in a positive way by closing off opportunities for the CFP® mark's reputation to be compromised.

R. BRUCE POTTER, CFP®

Subject: Ethics

If you want ethics in our industry, start with requiring all CFP Certificants to abide by a Fiduciary standard! I've seen "suitable" investments that were 100% not in the best interest of the client and this is what hurts the overall industry's image. Yes this would force brokers to become registered but that is a good thing for clients. The B/D's can create other ways of working with their reps who are registered.

JOHN R. (DICK) POWER, CFP®

Subject: Proposed Revisions to Rules of Conduct

I am appalled by the proposed changes. What on earth is the driver behind this change? Are the practice standards too tough? Are there some CFP licensees that can't live up to the terms? I will not waste my time to comment item by item. I've found none that add any value to the profession; most seriously detract. I cannot fathom whom the CFP Board is serving by these changes. Certainly not the public, and certainly not the profession.

Rest assured that I will allow my license to expire if these changes pass. There will no longer be any significant value in being able to say that one is a CFP practitioner.

ALAN R. PUNKE, AAMS

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

I am in agreement with the letter the FPA sent you. In addition I wanted to add that I think going out of our way to publicize the bad deeds of miscreants in our organization is ludicrous. No other major organization (eg for doctors, lawyers, etc) that I know of does this, and I think doing so will put a big spotlight on the less than honorable members of our community. I don't think these people should be defended in any way, it's just that this practice, if adopted, may be the only exposure -and uppermost on their minds- millions of people's as they go to retire in the next 10-15 years. I believe it will promote an even greater distrust of financial advisors, and only encourage more lawsuits. And the gain to financial advisors and our industry would be what. . . ?

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