CFP Board Releases Draft Revised Code of Ethics and Standards of Conduct

Opens 60-Day Comment Period

Certified Financial Planner Board of Standards, Inc. today issued a request for public comment on proposed revisions to its Standards of Professional Conduct, which set forth the ethical standards for CFP® professionals.

The draft revision, titled Code of Ethics and Standards of Conduct, broadens the application of the fiduciary standard – effectively requiring CFP® professionals to put a client’s interest first at all times – and enhances and updates standards related to financial planning. 

The 60-day comment period begins Tuesday, June 20, 2017 and ends Monday, August 21, 2017. The public can read the proposed Standards in both clean and annotated formats, watch a video about the changes, and share comments on CFP Board’s website at www.CFP.net/proposed-standards.  

CFP Board’s Board of Directors will consider the feedback received during the comment period.  The final revised Standards will be announced at a later date along with an effective date for implementation. 

Background

In order for individuals to receive CFP® certification from CFP Board, they must agree to the high standards for competency and ethics that are set forth in the Standards. CFP Board periodically reviews the Standards to maintain the value, integrity and relevance of the CFP® certification. The current version of the Standards has been effective since January 2009.

CFP Board announced the formation of a Commission on Standards in December 2015 for the purpose of reviewing and recommending to the Board of Directors proposed changes to the Terminology, Code of Ethics and Professional Responsibility, Rules of Conduct, and Financial Planning Practice Standards sections of the Standards. After receiving feedback during a series of public forums and holding discussions with interested organizations and individuals, the Commission developed recommendations that are incorporated in the proposed revised Standards, which the Board of Directors has approved for public comment. The revisions strengthen the Standards, for the benefit of the public.

Highlights of Proposed Changes 

• A broader fiduciary standard requires CFP® professionals to act in the best interest of the client at all times
  • Extends a CFP® professional’s obligation to act as a fiduciary, and therefore, in the best interest of the client, when providing financial advice to a client. Under the current Standards, CFP® professionals are required to act as a fiduciary when providing financial planning. 
  • Since the definition of financial advice is broader than the definition of financial planning, the draft revised Standards expands the commitment that all CFP® professionals make to acting in their client’s best interest.
• A shorter definition of financial planning and a presumption that financial planning is required
  • Presents a new definition of financial planning that is intended to be brief and comprehensive. Financial planning is defined as “a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.” 
  • The revised Standards sets forth a presumption that CFP® professionals are required to provide financial planning when providing financial advice, while also outlining the factors CFP Board will weigh in determining whether financial planning is required. 
• More specific Practice Standards for the delivery of financial planning
  • Updates the Practice Standards, presenting them efficiently, with the financial planning process beginning after the engagement has been formed and with goals selected after the CFP® professional has developed an understanding of the client’s personal and financial circumstances. 
• Revised process for addressing bankruptcies
  • Includes bankruptcies among the types of adverse conduct to be handled through the disciplinary process, thereby returning CFP Board to the process that was in place prior to 2012.
• A consolidated, easier-to-read document for the public and CFP® professionals
  • Consolidates four sections of the current Standards in a single document.  Following a brief Preamble, the Code of Ethics announces ethical principles, the Standards of Conduct sets forth specific standards governing the conduct of CFP® professionals, and a Glossary defines key terms.
  • The Standards of Conduct is organized into five discrete sections, one of which sets forth the Practice Standards for the financial planning process. 

How to Comment

CFP Board requests comments on the proposed revised Code and Standards. Comments may be submitted by email to [email protected] or through the online form accessible at www.CFP.net/proposed-standards.

CFP Board also invites the public, CFP® professionals and other interested parties to participate in public forums to review and discuss the proposed revised Standards. Public forums are scheduled between July 24 and July 27 in the eight cities listed below. Complimentary registration is available at www.CFP.net/proposed-standards.