Understanding the New Code of Ethics
The “Focus on Ethics” article series takes a close look at topics important to understanding CFP Board's new Code of Ethics and Standards of Conduct.
CFP Board’s new Code of Ethics and Standards of Conduct (“Code and Standards”), which takes effect October 1, 2019, is a comprehensive update to the ethical and practice standards for CFP® professionals, including an integration of the Code of Ethics with the Standards. The Code of Ethics was rewritten to set forth the principles that guide the behavior of CFP® professionals, followed by elaboration of those principles in the Standards. The result is a concise Code that serves as a meaningful vehicle for communicating the commitment that CFP® professionals make to high standards of competency and ethics:
CODE OF ETHICS
A CFP® professional must:
- Act with honesty, integrity, competence, and diligence.
- Act in the client’s best interests.
- Exercise due care.
- Avoid or disclose and manage conflicts of interest.
- Maintain the confidentiality and protect the privacy of client information.
- Act in a manner that reflects positively on the financial planning profession and CFP® certification.
Each of the six principles in the new Code is addressed in more detail in one or more of the Standards that follow. For example, the principles of Integrity, Competence and Diligence are explained in detail through Standards A2-A4:
- A CFP® professional must perform Professional Services with integrity. Integrity demands honesty and candor, which may not be subordinated to personal gain or advantage. Allowance may be made for innocent error and legitimate differences of opinion, but integrity cannot co-exist with deceit or subordination of principle.
- A CFP® professional may not, directly or indirectly, in the conduct of Professional Services:
- Employ any device, scheme, or artifice to defraud;
- Make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
- Engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
A CFP® professional must provide Professional Services with competence, which means with relevant knowledge and skill to apply that knowledge. When the CFP® professional is not sufficiently competent in a particular area to provide the Professional Services required under the Engagement, the CFP® professional must gain competence, obtain the assistance of a competent professional, limit or terminate the Engagement, and/or refer the Client to a competent professional. The CFP® professional shall describe to the Client any requested Professional Services that the CFP®professional will not be providing.
A CFP® professional must provide Professional Services, including responding to reasonable Client inquiries, in a timely and thorough manner.
The principle of Acting in the client’s best interests is described in more detail in Standard A1, Fiduciary Duty, which outlines three underlying duties: Duty of Loyalty, Duty of Care, and Duty to Follow Client Instructions. (Read more about CFP® Professionals’ Fiduciary Duty When Providing Financial Advice under the new Code and Standards.)
Other principles of the Code don’t have a single corresponding Standard, but are referenced within numerous Standards For example, the sixth principle of the Code, Act in a manner that reflects positively on the financial planning profession and CFP® certification, is addressed throughout many elements of the Code and Standards. Standard E2 states, “Refrain from Adverse Conduct. A CFP® professional may not engage in conduct that reflects adversely on his or her integrity or fitness as a CFP® professional, upon the CFP® marks, or upon the profession.” That Standard includes a non-exclusive list of outcomes that CFP Board considers to reflect adverse conduct, ranging from felony convictions, to regulatory or civil court findings of fraud, theft, misrepresentation, or other dishonest conduct.
The Code and Standards outlines other duties to clients, firms, and CFP Board, the Practice Standards for the Financial Planning Process that reflect positively on the profession and CFP® certification, including Standard A7, Professionalism:
A CFP® professional must treat Clients, prospective Clients, fellow professionals, and others with dignity, courtesy, and respect.
The new Code and Standards reflects the commitment that all CFP® professionals make to high standards of competency and ethics. The new Code of Ethics sets forth important principles for CFP® professionals that benefit the public and advance financial planning as a distinct and valuable profession.
Access More Guidance Materials
This compliance resource is part of a full library of resources that CFP® professionals can use to comply with the Code and Standards. More guidance materials can be found in our Compliance Resources Library.