Just as the election campaign is ending, a campaign that has been reported to even make children cry, the CFP Board is in the midst of a public discussion about what the CFP designation means. This discussion is extraordinarily important and has no easy solution. CFPs should be allowed to express their voice—to vote on what their CFP designation should mean to investors.
The particular issue prompting this discussion is whether CFPs should be deemed fiduciaries by the CFP Board, case by case depending on the facts and circumstances and the CFP’s services rendered, as suggested by Kevin Keller in a blog posting last November on Financial Planning’s website, or at all times by virtue of the CFP Board holding CFPs out in general communications and advertising as trusted advisors, as suggested by Ron Rhoades in another blog posting. There are legal arguments on both sides.
Yet is this question only a matter of parsing the law and following the most compelling legal argument? Or are there other considerations? Are there compelling ethical arguments on both sides consistent with investors’ best interests?
The ethical basis underlying Rhoades’ argument seems straightforward enough. If Rhoades is correct that the Board plainly suggests in its advertising that all CFPs are fiduciaries at all times, then CFPs should, presumptively, be fiduciaries at all times.
The ethical basis for the CFP Board’s position is not clear. It must reconcile its promise to investors that CFPs always serve clients’ best interests and are always fiduciaries against its clear policy that states otherwise: i.e.: CFPs are not always required to be fiduciaries and put clients’ interests first.
An example is the CFP Board’s promise to investors, stated on its website:
Your needs will be at the heart of all your planner’s recommendations. CFP® professionals have an ethical obligation to follow their financial planner duties and act in your best interest, putting your needs above their own.