Certified Financial Planner Board of Standards Inc.- Comments on Proposed Technical Corrections to Standards of Professional Conduct

On March 30, 2009, the Board of Directors ("Board") of Certified Financial Planner Board of Standards, Inc. ("CFP Board") requested comments on proposed technical corrections to its Standards of Professional Conduct ("Standards"). The proposed technical corrections were intended to clarify ambiguities, eliminate redundancies and add terminology to achieve consistency between the Standards and other CFP Board publications.

CFP Board received 28 comments received during the 30-day comment period, which ended April 29, 2009. The comments are available for review below. These comments were reviewed by CFP Board’s Ethics Task Force, which provided its recommendations to the Board. On July 16, 2009, the Board approved the recommended technical corrections, which are included in the updated Standards of Professional Conduct publication and available for review in redlined format.

Note: The views, expressions, findings and opinions expressed in the comments on this Web page are solely those of the author(s), and CFP Board accepts no responsibility for the content of the comments. Comments received via e-mail have been provided in full below.

Comments

Updated April 30, 2009

LOUIS J. BALOGH, CFP®

Date: March 31, 2009

The additions and corrections appear to be in order. They do make the text clearer. I saw no discrepancies.

JAMES A. BARNASH, CFP®

Date: April 5, 2009

I appreciate the opportunity to review and provide feedback to the technical corrections being proposed to the Standards of Professional Conduct.

Upon review of the document, I believe these changes only help to clarify the overall document and provide for consistency between various components of the overall document. I am in favor of the proposed technical corrections.

BRIAN E. BARTKUS, CFP®

Date: March 31, 2009

New corrections seem fine to me!

SHEL BRANDENBURGER, CFP®

Date: April 1, 2009

(Note: All capitalized words below constitute my comments/additions/suggestions.)

Page 1: Shouldn't 'suitability' be one of the nouns in the third line of the Introduction ?

Page 2 (middle): Why is the word 'candidate' used in the context of Fitness Standards, instead of 'Certificant' ? Do Fitness Standards apply ONLY to candidates? That's doubtful !

Page 3 (last 3 lines): ". . . character and fitness standards for candidates for certification - -' to ensure' ? Really ?? How can any organization actually achieve THAT level of assurance? How about using the alternate phrase 'TO TRY TO ensure . . . '

And do the FITNESS STANDARDS apply only to 'Candidates' ? What about to Certificants ? This ambiguity needs to be eliminated.

Page 4 (first line, last para.): "Registrant' is actually a distinct, separate category ? That's news to me !

Page 8 (1.2b): 'costs'? Whose costs - advisor's or client's ?

Also, ". . . . APPROXIMATELY how (CLIENT) decisions MIGHT benefit the Certificant and the RELATIVE (TO WHAT ?) benefit to the Certificant." (?) And to the requirement for the practitioner to disclose 'compensation . . . . that will or could receive;' such a mandate is simply idealistic and naive; because such information cannot possibly be even remotely known in advance by the F/P; The F/P's compensation all depends on what the client ultimately decides to do; and over what time period. For this practitioner, with clients of very long standing, periodic compensation is comprised of a multitude of factors that, together, were not capable of being known at the beginning of those relationships !

Editorial Part 1): This phraseology (immediately above) as currently written is quite ambiguous; and its implementation is NOT practical in any F/P's actual practice ! (Note: I'm distinguishing between F/Ps and portfolio managers - - the two are NOT in the same profession !) In the practitioners' real world relationships with actual clients, such advance disclosure is NOT even possible; because it cannot be neatly staged or programmed to fit into any such idealistic model.

Editorial Part 2): Rather, this language reflects the naive and biased attitudes of the bureaucratic, consumer-protection crowd, that doesn't understand the difference between 'potential unknown, future benefits' (i.e. either to the Certificant OR to the client); and the (relatively) easy-to-quantify "cost(s)." Again, whose 'costs'? This whole section "b" is way off base ! It needs to be either substantially rewritten or entirely eliminated !

Page 9 (top line): Why hasn't the 'IARD' been added yet - - assuming that the writer(s) even know of its existence ? It's the 'elephant' in the room; so it can't just be included in the phrase "other disclosure documents" and therefore be included by implication !

Page 9 (2.2 a i): Again, 'costs' and 'compensation' - - see comments above as to Page 8.

Page 9 (2.2b): ". . . likely conflicts of interests" Remember, "Beauty is in the eye of the beholder." What's 'likely' to someone may not be 'likely' to someone else. The litigant will always say that one particular matter was 'likely' to be a conflict of interest - - after the fact - - whereas it wasn't at all 'likely' at the time of the event. This phraseology is a windfall for litigants and plaintiffs' attorneys ! Are 'we' (i.e. including the CFP Board) insane; or are we just self-destructive ? "Let's get real' here, as the younger ones like to say.

Page 9 (2.2c): How can certificant's be expected to read the minds of clients? That's the implication of what's specified here.

Page 9 (2.2e): In the middle of the para.,"Written disclosures . . . . . include (i.e.singular not plural) Further in that same (long) sentence, "the SEC's 'Form ADV' is NOT an 'organization' ! This last sentence fragment, therefore, needs to be rewritten !

Page 9 (3.1 to top line of P.10)): Each exception should be listed as "(1), (2), (3) and (4);" and not left in sentence form, all running together and therefore being virtually unintelligible, as this sentence is at present.

Page 10 (3.5): ". . . . property of client IF ANY (should be added) in the custody . . "

Page 11 (4.7): Add to end of sentence "or other relevant authority."

Page 11 (5.2) 'ditto' comment in p. 11 (4.7) above.

Page 11 (6.5): " . . . upon the profession." What profession? How about furthering the professionalism of our profession by calling it such, namely the FINANCIAL PLANNING PROFESSION. (?) (Maybe the typist just got tired; and didn't want to type any more words than necessary.)

Pager 12 ("History" first para.): Shouldn't 'suitability' be in there somewhere?

Page 12 (History: 2nd para): Shouldn't it read: (The B.of S.) "HAS CONTINUED TO DRAFT AND REVISE THE STANDARDS . . . "

Page 13: Why aren't the words or phrase 'the six step process' shown in the top (introductory) para. ? Especially when the several steps are described pervasively thereafter and previously, elsewhere ?

Page 14 (101-1 first sentence): With ref. to the word 'before', please see page 5 (second para.)"Financial Planning may occur even if the material elements are not provided to a client simultaneously, are delivered over a period of time," etc. These two mandates are in obvious conflict; and somehow need to be reconciled, coordinated and made consistent. If BEFORE is the operative mandate, then the referenced verbiage on page 5 needs to be revised; but SOMETHING needs to give !

Finally, Page 26 (first para.): 'ditto' my comments above as to Page 3, with ref. to 'ensure;' AND 'ditto'' my comments above as to Page 11 (6.5) with ref. to 'the profession.'

Other than that, I have no real concerns at this time. Hope this helps.

P. FRANK CASTELLÓN, CFP®

Date: April 8, 2009

Thank you for the opportunity to comment on the proposed technical corrections. I find that the overall effort should be commended and that the changes do go a long way to clarify ambiguities, eliminate redundancies and add terminology to achieve consistency between the Standards and other CFP Board publications. However, I do have a few comments:

It seems appropriate that the “Candidate Fitness Standards” should apply not only to “candidates” but also to “certificants”. Why not do so?
Throughout the document you have deleted the use of the words “financial planning process” and instead use “financial planning”. Later in the document, you define “financial planning process” as “including but not being limited to some or all of the six steps”. You also state that “Financial planning may occur even if the material elements are not provided to a client simultaneously, are delivered over a period of time, or are delivered as distinct subject areas. It is not necessary to provide a written financial plan to engage in financial planning.”

I agree with the latter statement; however you never define “financial planning” per se nor what the “material elements” are. I strongly suggest that you add a definition for “financial planning” as a process that can be delivered over time, may not be in writing, and that may include one or more of the six steps, and may be composed of “material elements” that are also defined.
In page 5, why not include ”educational planning” in the basic subject fields that may be covered in the financial planning process? This subject field is particularly important as the cost of higher education increases and needs to be included for children and perhaps for grand children or other family members.

I also believe that you should not delete “including portfolio management design; i.e., asset allocation and portfolio management” as a parenthetical phrase after “investment planning”.
In page 8, you state that “prior to entering into an agreement, the certificant shall provide written information and/or discuss with the prospective client or client the following” obligations and responsibilities, compensation and terms.

Using the phrase “and/or discuss” will circumvent the spirit of this requirement and allow most to just “discuss” and not to provide written information. Upon encountering a problem later while providing service to the client, it will be come a “he said, she said’ argument that detracts from the professionalism that we are trying to portray and live. I strongly suggest that the statement be changed to “prior to entering into an agreement, the certificant shall provide written information and discuss with the prospective client or client the following”

CHRIS CUMMINS

Date: March 30, 2009

Will the proposed technical corrections address in whole or part the concerns that led to State Farm's request for certificants to relinquish their CFP?

JOHN DONOVAN

Date: April 19, 2009

Two comments.

A single personal bankruptcy (non-business) should have no bearing on consideration for Certification, as there are far too many diverse sets of circumstances that can cause this to occur which have no relationship to the professional conduct or capability of the applicant. On the other hand, two personal bankruptcies would be a more likely indication of a pattern of financial behavior that would be a legitimate concern for the Board, but it should still be reviewable at that point.
There needs to be a section added to provide a formal and much more responsive timeframe in which the Board musts act in a prudent and professional manner to review any Petitions presented to it. It is unacceptable that there is the current ambiguousness of “up to a year” for the Board to respond to a Petition. The current process provides absolutely no information to the Petitioner because there are no set timelines for the Board for formally reviewing Petitions. There should be a more formal process, like regular quarterly review periods (as example, any Petition received by March 31 will be reviewed and responded to by June 30), with extensions having to be formally granted if the Board feels there are extenuating circumstances which requires it to gather or research additional information in order to render an appropriate decision. The lack of a timely formal Petition review process gives the appearance of a lack of importance being placed on the petition, as if the Board will “get around to it:” at some point when it has the time, versus being a committed professional organization intent on providing a thorough yet prompt process for reviewing such Petitions. The applicants and public deserve better.

JULIE A. DOUGLAS, CFP®

Date: April 9, 2009

Having read the proposed changes, most are syntax or language issues. They tweak our Code(s) nicely and leave very little wiggle room. Well done.

JOSEPH F. FESSLER, CFP®

Date: April 3, 2009

These changes simply reflect the ongoing effort by the FPA lobby to make the CFP Board it’s shill in its battle to garner an advantage in the competition for clients between itself, representing the independent planners/non-wirehouse Financial advisors and the traditional wirehouse advisor like myself, who is also a registered CFP certificant. I think the righteously indignant outcry from the FPA and those they represent, supposedly on behalf of the uninformed public for the morally higher standard of fiduciary responsibility is a bunch of dookie. These guys are just trying to market themselves as better human beings while simultaneously attempting to hamstring their competition. It’s all so transparent. Sorry to see the CFP Board has surrendered to the heavy influence of the FPA in this matter.

SARAH YOUNG FISHER, CFP®, ChFC, MSFS

Date: March 31, 2009

The changes are fine with me. I like the inclusion of Ethics in the Standards.

RANDY GERARD

Date: April 21, 2009

Pg. 2 Re Standards of Professional Conduct: This is not defined anywhere and should not be used. Are these Practice Standards.

Pg. 5 Re: Standards of Professional Conduct: Rules of Conduct and Practice Standards?

Pg. 12 Re: Promulagated: Is this a different word?

HANSPETER GIGER, CFA, CFP®

Date: April 17, 2009

Item: Consultation certainly occurs prior to arriving at an agreement for services, but would it not also require in many cases a discussion of terms, clarity, and candor in additional detail prior to completion? Very wealthy clients may have very specific requirements which may not be met by simple agreements, and initial discussions resulting in agreements may require additional consultation. Would recommend leaving "and," as it is; 1) a two way street, and 2) the best time to be perfectly clear about services provided (by advisor) and understanding (by client) of those terms and (by advisor) of that client's expectations.

Rules of Conduct
Item 1.C
If the certificant’s services include financial planning or material elements of the financial planning process, prior to entering into an agreement, the certificant shall provide written information and/or discuss with the prospective client or client the following:

CYNTHIA HARDMAN, CFP®

Date: March 31, 2009

Thank you for the opportunity to comment on the proposed changes. I do think they add clarification.

Comments:

Under "Terminology" do we really want to leave out "using the financial planning process"? Even if steps are used over the course of time. Should we say we do things "for" clients not "to" clients?

Under 1.2 and/or seems to need revised

1.3 items (?) instead of item?
state, federal, or instead of 2 "ors"?

STANLEY HARGRAVE, M.S., CFP®, CRPC®, AWMA^SM

Date: March 30, 2009

Objection is raised regarding language relative to the conduct presumed to be unacceptable, specifically, employer reviews and terminations.

These general issues should not be of concern to the DEC unless these events caused an employer to file a formal complaint with a regulatory or licensing entity. If this situation does occur then this history is now pertinent to inquiry by the DEC. The genesis of many employment decisions are personal in nature and do not directly impact the fitness of a CFP candidate. These decisions also have a significant history of being veiled attempts to malign the integrity and future employment prospects of an individual. The DEC should not be a party to these personal disputes or condon the disclosure of this information no matter how noble their intent.

To have a candidate “air” employment reviews and termination history is an undue burden on the candidate and without objective prudence in most instances.

There is no scientific or empirical evidence that would lend much credence to the validity or substance of determining one’s character by a decision from an employer review and/or termination without cause. Legal considerations currently suggest that employers carefully consider the language used to describe an employee’s work history since potential abusive accusations are found in too many terminations.

TOM HEBRANK, CFP®

Date: March 31, 2009

Reviewed changes. Looks ok.

ELIZABETH JETTON, CFP®

Date: March 31, 2009

I have no problems with the edits and changes to the Standards.

GLENN KAUTT

Date: March 30, 2009

The corrections look fine to me. Nice job!

AMY JO LAUBER, CFP®

Date: April 1, 2009

I have reviewed the proposed standards and largely think the changes are more representative of what the board is trying to communicate.

I do take issue with the term "Candidate Fitness Standards". While I understand why the board chose these words, the word "fitness" is typically used in terms of physical position, not professional. Perhaps "Candidate Qualification Standards" would be more appropriate in this setting.

I would prefer to retain the reference to the financial planning process in the existing definition of "financial planning practitioner" (although I like "provides" rather than "engages in"). In a later paragraph describing the financial planning process, it states that financial planning includes "some or all of these six steps". I was taught and have fully embraced the fact that to provide financial planning means to provide each step of the process (even if "implementation" is the act of referring certain steps to another professional). I believe the process is what defines the CFP® practioner. In the spirit of providing more transparency to consumers, this is one area that should be emphasized so that the consumer can clearly determine what s/he is getting from a CFP® certificant. I have noticed that the revision removes the word "process" throughout the entire Code. I take great exception to this.

Under 1.2 It states that the "certificant shall provide written information or (previously "and") discuss...". It was my understanding that written ackowledgement of all the items listed was required, not optional. Our firm spent a considerable amount of time and energy drafting documents to comply with this particular standard, which, we feel, is good business aside from a requirement. If, however, the Code says the certificant must provide "written information or discuss", my hunch is that most practioners will choose to discuss, and the spirit with which this code was written will be diluted.

CARL A. LINDE, CFP®

Date: March 31, 2009

I was impressed with the attention to detail in more precisely defining the language that makes up the CFP document. Good work!

ROBERT LINDNER, CFP®

Date: March 31, 2009

One personal or business bankruptcy filed within the last five years can be appealed!!! Has the Board ever had such a request?

Bankruptcy - even one should cause one for concern. 5 years should be extended to 10!

Most real estate agents can have their licenses suspended or lost for a DUI! A reputable broker would not let them affiliate.

An organization is judged by its Standards. Ours have a long way to go.

BOB MANTOVANI, CFP®

Date: March 31, 2009

Congratulations! You have improved the readability of the SPC immensely.

Keep up the good work!

I approve.

RONALD S. MARSH, CFP®

Date: April 2, 2009

Overall I am pleased with the proposed technical corrections to the Standards of Professional Conduct Principles of the Code of Ethics (I couldn’t resist), but do have a question, and a suggested correction for fine-tuning.

For the Subject Areas, almost all of the changes seem to just be an inexplicable re-ordering of the existing elements. The only notable terminology change is that “Education” appears to be replaced by “Employee Benefits,” which clarifies that aspect of investor education, but also seems to exclude the function of educating any client (or even college-education planning), so I don’t find that to be an understandable improvement.
Section 2.2 e. – “Written disclosures” cannot “includes,” but they can include.

Thank you for this clarifying proposal

JIM MAZZA, MS, CFP®

Date: March 31, 2009

Obviously, references to the FP process are deleted even though the process is described in the text. What is the impetus for the deletion? Are we hedging on the process for some reason??

BARRY K. McCALL, CFP®

Date: March 31, 2009

I have read the proposed revisions and they seem to make the document more easy to read and understand from a client perspective.

CHRISTINE MESSMER, CFP®

Date: April 3, 2009

The redlined version looks very good, and I am in agreement with the proposed corrections.

GINA MYERS, CFP®

Date: March 31, 2009

I have one suggestion on the Technical Corrections for the Financial Planning Practice Standards. In Section 200-2 Obtaining Quantitative Information and Documents, I believe the explanation for “Upon the Financial Planning Profession” sounds a bit redundant. I would phrase it as follows:

“Financial planning requires that recommendations be made based on sufficient and relevant quantitative data. Therefore, compliance with this Practice Standard encourages the public to seek CFP® certificants who engage in financial planning.”

JOE PITZL, CFP®

Date: April 15, 2009

I approve the clarifications made in this document. Very well done!

DUSTIN T. ROBINS

Date: April 3, 2009

All the changes to the Board of Standards of Professional Conduct help clarify this document. However, I would like to see the word elements stay in the "personal financial planning process" sentence on page 5. The word element has great meaning- it means that financial planning is a process and not just a check list or steps to complete. Element is a word that is used throughout this document and I think it should stay in the previous mentioned sentence.

ROBERT E. RUNNING, CFP®

Date: March 30, 2009

I think these are good and appropriate changes.

LEON ROUSSO, CFP®

Date: April 1, 2009

Technical corrections look fine to me – Keep up the excellent work on our behalf

LEA SMITH JOHNSON, CFP®

Date: March 30, 2009

The revisions to the CFP Board are good decisions, but the bankruptcy of a CFP® could require more time than five years from use of the mark. This is because it is not clear how a CFP® who declares bankruptcy can be preparing others in proper financial planning and decision making. Doctors can be banned from practice when they do not perform in the interest of their patients or do not practice properly. Unusual illness of a CFP® or their family member may be an exception.

KEITH TOUSSAINT, CFP®

Date: March 31, 2009

I reviewed the proposed correction and agree with them.

DEBORAH E. VOSO, CFP®

Date: March 30, 2009

Why is education planning being removed? Is it incorporated under another heading?

CURT WEIL, CFP®

Date: April 5, 2009

I have reviewed each of the proposed technical changes and concur with them, considering them to adding clarity and consistency.

One comment; on page two, in the second paragraph, appears the following sentence: “The Board of Practice Standards began work on the Practice Standards in 1995 and the standards were first published in 1999.” I presume that this refers to “the predecessor organization,” which previously had been identified as the “International Board of Standards and Practices for Certified Financial Planners (IBCFP)….” Shouldn’t “Board of Practice Standards” read, instead, as “Board of Standards and Practices?”

STEWART WELCH, III, CFP®, AEP

Date: March 30, 2009

Well done. Very helpful.

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