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Financial Planning > Behavioral Finance

Ethical standards heightened

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Trust remains a sticky issue in the financial services industry. Consumers are leery of many advisors because of things completely outside advisors’ realm of control. All an advisor can do is act ethically, do the right thing every time and steer clear of trouble.

In a nod to creating a better image within the industry, the Certified Financial Planner Board of Standards has strengthened the ethical standards for planners authorized to use the CFP certification. The increased standards are effective as of July 2008, and they are in response to a CFP board survey that found 97 percent of consumers ranked trustworthiness as the most important factor they consider when looking for a financial advisor. Ninety-six percent said adherence to a professional code of ethics and practice standards is extremely important.

The Board also included a list of questions consumers should ask an advisor before working with him:

  • What experience do you have?
  • What services do you offer?
  • What is your approach to financial planning?
  • Will you be the only person working with me?
  • How will I pay for your services?
  • How much do you typically charge?
  • Could someone besides me benefit from your recommendations?
  • Have you ever been publicly disciplined for any unlawful or unethical actions?
  • Can I have it in writing?

The CFP Board’s ethical standards require CFP professionals to answer most of these questions, even if the questions are not asked. As part of the updated standards, CFPs will be required to describe the services to be provided in a written agreement.

“Integrity, competence and the desire to create trusting relationships with consumers are cornerstones of CFP certification,” said Karen P. Schaeffer, CFP, chair of CFP Board’s Board of Directors. “With an increasing number of Americans seeking professional assistance with their finances, our updated ethical standards are a strong statement to the American public that the CFP Board will hold CFP professionals accountable to provide ethical financial planning services deserving of the public’s trust.”


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