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CFP Standards Revision

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It’s amazing what a few months of calm and careful deliberation and a willingness to listen to the opinions of others can accomplish. After unleashing a firestorm of controversy with its initial proposed revision to the CFP Board’s Standards of Professional Conduct last July, the Board released a second exposure draft on March 9 that is likely to appease most of the harshest critics of the initial proposal.

“We took the comment period very seriously,” explains CFP Board chair Karen P. Schaeffer. “Every single comment was reviewed and analyzed.”

After releasing the initial draft, Schaeffer says the Board expected “some raised eyebrows,” but they decided to put it out and “just listen and see what people said.” While Schaeffer understands the passion that many CFPs feel for their profession, the vehemence of some of the comments was somewhat surprising. “There were some misconceptions that just went out right away,” she recalls. “There were some things that people were upset about that just weren’t there…[It seems that] people didn’t understand the original code well enough to understand what kind of standards people were supposed to be operating under anyway.”

What was more surprising to the Board, was how few comments there were–some 300 comments out of more than 54,000 CFP certificants–although comments from the FPA or those contained in a letter signed by 21 current and former leaders of the leading professional planning organizations obviously represented the opinions of more than a single certificant.

Among the differences between the two drafts is a change to the baseline standard from one of “reasonable and prudent professional judgment” to a requirement that a professional holding a CFP designation “shall at all times place the interest of the client ahead of his or her own.” That requirement would hold regardless of whether the CFP provides financial planning services. For those who do provide financial planning, the current duty to “act in the interest of the client” has been replaced with an obligation to provide the “duty care of a fiduciary.” As an important corollary to that portion of the Standards of Professional Conduct, when drafting the new proposal the CFP Board’s task force also attempted to provide a definition of fiduciary, as “one who acts in utmost good faith, in a manner he or she reasonably believes to be in the best interest of the client.”

The new draft also attempts to define the term “fee-only” more clearly and notes that its use is appropriate only when the CFP professional’s compensation is derived solely in the form of “fixed, flat, hourly, percentage, or performance-based fees.”

In the first week after the new proposal was released, Schaeffer says the CFP Board has received a great deal of positive feedback. Comments on this second draft are being accepted until April 25, 2007. (Details on how to submit comments are available at the CFP Board’s Web site–

All comments received will be reviewed by the CFP Board of Directors at its meeting in May 2007. If the Board approves the revisions, an effective date of January 1, 2008 is anticipated.

(To read one advisor’s reaction to the new proposed standard, see the IA Soapbox.)


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