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Financial Planning > Behavioral Finance

Accentuate the Positive

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While I am a patriotic American, I’m quite glad that Election Day is over. All those nasty TV commercials running up to the election are a sad commentary on our society. More frequently than we would care to admit, too many of us formulate opinions on issues based on little more than headlines and sound bites. Anyone out there reading about the opposition to the proposed revisions to the CFP Board Code of Ethics and Practice Standards could easily gain an erroneous impression about the state of the financial planning profession and the relationship between the Financial Planning Association (FPA) and the Certified Financial Planner Board of Standards.

One of my duties as 2006 president of the FPA is to serve as the organization’s chief spokesperson. It is my signature that appears on FPA’s September 25 formal comment letter to the Board. I also fielded most of the press calls relating to how FPA members viewed the CFP Board’s proposal. My term ends on December 31 and I appreciate Investment Advisor for giving me the opportunity to put into print some of the positive things I have seen from CFP Board.

First and foremost I must praise the Board for beginning the daunting multi-year project of conducting significant reviews of all of the “four E’s,” Examination, Ethics, Education, and Experience. The process entails a tremendous amount of work and will bring to light many important issues. There have already been several changes at CFP Board and many more will no doubt emanate from this process.

Updating Ethics

I had the privilege of serving in the group that helped to craft the CFP Board’s Practice Standards. As we were completing our work in 2001 and dissolving the standards writing board, we could see quite clearly that the Code of Ethics would need updating. Further, with the rapid rate of change in the financial services world, we contemplated that the standards themselves would be a body of work that would likely evolve over time.

There has been a great deal of speculation as to the Board’s motivations behind the recent ethics proposals. Although some of that speculation is rather entertaining, and some almost sinister, I urge caution at the temptation to quickly dismiss the Board’s stated intents. I have no doubt that the primary reasons for the proposals are exactly as the CFP Board states. That is, to “clear up repetitive and conflicting language” and “improve enforceability.” Both of these assertions are entirely consistent with my experience working with Board in an unbroken timeline that goes back as far as 1998.

In addition, as recently as this spring, FPA asked CFP Board for guidance about the applicability of the Code, Practice Standards, and fiduciary duty. In a letter to the editor of this publication, a former CFP Board chair politely chastised FPA for stating in a member survey that no fiduciary duty applied to a certificant’s normal practice. Yet when the proposal was released, the Frequently Asked Questions page of the Board’s Web site ( said: “Only if a CFP certificant takes custody of client funds for investment purposes does the current Code set the required duty of care at the fiduciary level (Rule 103e). The default standard in CFP Board’s current Code is to “exercise reasonable and prudent professional judgment in providing professional services” (Rule 201). For financial planning practitioners, the current Code sets forth an additional standard to “act in the interest of the client” (Rule 202) and a suitability standard for financial planning practitioners who implement investments (Rule 703).

Seeking clarity is a credible rationale and a worthy one at that. By putting pen to paper on how we might define fiduciary duties for CFP certificants, the debate has ensued in earnest and maybe, just maybe, we can put an end to the decades-old question of what standard of care should apply to certificants. This could be a very positive development for the profession.

With all the attention paid to the ethics proposals, little fanfare was given to the work of CFP Board’s Education Task Force. Comprising individuals both inside and outside the financial planning profession, this group was charged with the task of reviewing the Board’s current educational goals, standards, and practices, comparing them to those of other certification bodies and to models of best practice, and providing its findings and recommendations to the Board.

One of the recommendations that stood out to me as a practitioner was that “The number of hours required for continuing education should be increased and the required topics should be broadened to include the ‘soft skills’ such as application of behavioral finance principles and communication skills.”

Although the Task Force does not recommend a specific number of hours, the increased requirement should be commensurate with other professions and reflect the quality and complexity of the profession. The Task Force proposes that a course should be accepted for continuing education credit if a skill or topic would assist certificants with building effective relationships with clients. Several conference sessions I have attended in the last few years that focused on the discovery process were denied CE credit. This task force recommendation implies that some of those sessions may qualify if the CFP Board follows through on this task force recommendation.

Defining Discipline

A couple of years ago, I experienced one of the most intense and interesting three days of my professional life. I sat in judgment of peers as a panel member in the Board of Professional Review’s (BPR) disciplinary hearings. Each panel consists of two BPR members and one volunteer like me. After cases are heard, the BPR convenes to hear each panel’s decision and recommended action. On several occasions, typically due to aggravating or mitigating circumstances, a debate would ensue over the appropriate action. CFP Board has created Settlement Guidelines to bring more consistency to the settlement process, and will also be undertaking the task of creating Sanction Guidelines to bring more clarity and consistency to the outcomes of hearings before the BPR.

Hearing a real case in no way resembles reading later a brief description of the case and results of the proceedings. While on the Board of Practice Standards, we would often talk about how valuable a learning tool it would be to walk an audience through an actual case. The BPR members felt very much the same. Many of the profession’s most experienced members have longed to establish an archive of case history to define acceptable behavior in the practice of financial planning. FPA’s recent regulatory task force report also cited case history as an important way to achieve such definition. I am happy to report that CFP Board is exploring how to create just such a reference.

The Board and the FPA

Change is never easy and is rarely greeted without dissent. For each of the four E projects I cited, there are people displeased with some element of the proposals or decisions made. The CFP Board has also engaged in activities that have little to do with the establishment and enforcement of professional standards.

The cynic will read this column and find fault with me for not talking about these elements, but as stated earlier, my purpose here is to illuminate just a few of the positives coming from CFP Board with respect to standards. I believe it is important to talk about the positives because along with speculation about what is going on behind the scenes at CFP Board comes speculation about what FPA will do based on the Board’s final actions.

Anyone can be a member of FPA. It doesn’t matter what designation you have, who you work for, or how you are paid. You don’t even have to be a practitioner. If you are interested in fostering the value of financial planning and advancing the financial planning profession, we want you in FPA. This inclusive approach is not going to change. We exist to build the profession not regulate it.

When FPA was created, it was important to the founders that the association support a single, meaningful professional standard for financial planning that was easily identifiable by the public. It was believed that without that standard, there was little chance that financial planning would ever be viewed as a professional discipline in the eyes of consumers. Today’s FPA sees no change to the public’s need for such a standard.

Personally, I view the educational and examination programs of some of the other designations as being roughly on par with that of CFP. I am 100% certain that there are many competent and ethical planning professionals in practice that do not hold the CFP marks. However, when I look at the complete package and factor in public recognition of the marks globally, the CFP remains clearly the most likely candidate to fill the role of a unifying professional standard for financial planning.

So while FPA will seek ways to engage all those, regardless of designation, who support the need to advance the profession, unless the CFP mark ceases to be the best candidate to fill the role of a unifying professional standard for financial planning, I would expect that mark to continue to hold a prominent role in FPA’s world.

Dan Moisand, CFP, is a happily married father of two, president of the Financial Planning Association, and a principal of Spraker, Fitzgerald, Tamayo & Moisand, LLC of Maitland and Melbourne, Florida. He can be reached at [email protected].

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proposals, go to


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