CFP Board: Let CFPs Vote on the Future of Financial Planning’s Character

Rhoades advocates that the Board should revise its policy to meet its promise. That is, that it simply require CFPs, as a criteria for holding the designation, to always conduct themselves as fiduciaries. There are other possible approaches. One is to revise its promise to meet its policy, and part of doing so might entail disclosure, such as the disclosure required by the SEC on brokerage accounts:

Your account is a brokerage account and not an advisory account. Our interests may not always be the same as yours. Please ask us questions to make sure you understand your rights and our obligations to you, including the extent of our obligations to disclose conflicts of interest and to act in your best interest. We are paid both by you and, sometimes, by people who compensate us based on what you buy. Therefore, our profits and our salespersons’ compensation may vary by product and over time.

This approach merely acknowledges in public and to the public what the industry knows very well in private: currently, CFPs, as a group, are sometime fiduciaries.

This approach has its own difficulties: Effective execution requires disclosure that actually works (academic research complements much experience of practitioners that underscores how most disclosure simply does not work), and this means clients truly understand the implications of advisors not putting their interersts first. This will not be easy.

The two positions represented here are fundamentally at odds, with no true middle ground available. Yet there may be no more important discussion in the advice profession than what is at the core of a CFP professional’s advice. Or, to use Dr. Martin Luther King Jr.’s words, “The content of your character.”

The CFP Board affirms that it welcomes this dialogue. As such it should affirm its importance and welcome a referendum of its designees to determine its way forward.