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CFP Board Adds Fiduciary Requirement

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The Board of the Certified Financial Planner Board of Standards adopted on May 24 a revised version of its code of ethics, adding new language that requires all 54,000 CFPs to “at all times place the interest of the client ahead of his or her own.” The Board’s new Standards of Professional Conduct, which takes effect July 1, 2008, replaces what the Board called in a statement “a lower standard of ‘reasonable and professional judgment’” that was contained in its current Code of Ethics and Professional Responsibility. The Standards also requires that CFPs who “provide financial planning services do so with the duty of care of a ‘fiduciary’” which the Board statement says is “partly defined as acting ‘in the best interest of the client.”

Karen Schaeffer, chair of the CFP Board’s board, said in the statement that the Board believes “these updated standards reflect the level of ethical service the public deserves from financial planning professionals.”

The revised code went through two drafts since the process began in 2005, with comments reviewed by and final recommendations made by a three-member Board-appointed Ethics Task Force, all of whom are CFP Board members, led by Marilyn Capelli Dimitroff.

In a press conference call announcing the new Standards, Dimitroff responded to a question about when a CFP has a fiduciary duty by noting that there even in those instances “where fiduciary isn’t meaningful, the CFP . . . is still required to put the clients’ interests ahead of his or her own.” However, Dimitroff suggested that making the determination of when a CFP has a fiduciary duty “will be defined through case study, through determinations by the disciplinary and ethics commission over time,” guided by the CFP Board itself. “As with all U.S. law,” she said, “the laws tend to be quite general, and over time, they are defined by cases that occur,” though she was quick to say that “our goal is not to have people hanging out there; we want to make it as clear as possible.”

The Board will start an educational campaign to inform certificants of the changes in the Standards, and is accepting comments on the new Standards by e-mail at [email protected].

(Download a PDF of the CFP Board of Standards’ new code of ethics.)