More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
TD Ameritrade’s annual conference closed Saturday morning with a session titled, “Financial Planner’s Ethical Dominance: Achieving All You Can Through the Understanding and Application of Ethical Excellence.”
In addition to two CE credits, attendees received guidance, case studies and a bit of humor from presenter Jeffrey Rattiner.
“Does anyone want to pay a bribe upfront?” said Rattiner, president of JP Financial Group, to laughter. “Is anyone here in place of someone else, or to fulfill part of a community service requirement?”
Rattiner began with his own history, noting he was part of the original road show in 1992 when the CFP’s code of ethics first debuted.
“There was one person in the legal department at that time,” he said. “Today, there are 11 people. Most of the case work comes from other CFPs turning someone in.”
He claimed 134,000 CFP professionals worldwide, with 62,000 in the United States. The number of new CFP certificates is currently increasing at 10% annually. The last examination cycle saw 4,000 people sit for the test, a “banner” number of candidates, he claimed. The number of CFP candidates registered for the upcoming test in March is 2,200, which Rattiner said was more in line with past averages.
He then explained that the session was to be interactive and would include an explanation of the new learning objectives put in place on Jan. 1 of this year.
“The CFP ethics course is unlike any other in that it must absolutely follow the script,” he added, before diving in to course material.
The CFP designation must be used as an adjective, Rattiner said, with a noun following it; CFP certificate, CFP planner, CFP professional, etc. The reason is that the board does not want the CFP designation to become generic like Kleenex, Xerox or refrigerator and therefore lose prestige.
According to handouts available at the start of the session, “Financial Planners Ethical Dominance is an approach to learning the Standard of Professional Conduct which now includes the Code of Ethics and Professional Responsibility in which we all must adhere to, [and] is a practical, fun-filled way we can grasp the true meaning of the CFP Board’s Learning Objectives, Code of Ethics and Professional Responsibility, Rules of Conduct, Financial Planning Practice Standards, Disciplinary Rules and Procedures and Candidate Fitness Standards, which many of you have not had formal training in [italics are theirs].”
Rattiner then listed and describes a centerpiece of the session, the six new learning objectives deployed at the beginning of 2102. They are:
- Demonstrate an understanding of, and be able to define, financial planning, the financial planning process and financial planning subject areas.
- Describe the material elements of financial planning.
- Determine if a CFP professional is providing financial planning or material elements of financial planning.
- Demonstrate an understanding of the required elements of a written agreement when financial planning services are provided.
- Articulate disclosure requirements and apply disclosure requirements to their practices.
- Define and outline elements of the fiduciary standard and know when it applies.
In reference to the last point, a fiduciary standard, Rattiner quoted Tom Bradley from earlier in the conference by saying, “If you always put your clients first and foremost, you won’t have a problem.”
A rule of thumb, he added, is that if an advisor takes custody of client assets and has discretionary authority over the funds, then the advisor is acting as a fiduciary.
A review and discussion of the seven CFP financial planning principles then took place, which Rattiner listed as:
The session then closed with a discussion of the rules of conduct and an examination of various case studies involving ethical dilemmas in which financial planners have found themselves.