The Certified Financial Planner Board of Standards has received more than 1,000 comments on the proposed revisions to its Standards of Professional Conduct that were announced in mid-June.
On Tuesday morning, the CFP Board held a public forum in New York City to review and discuss its proposal. There are five remaining public forums throughout the United States this week, and the 60-day public comment period for the draft of proposed revisions ends Aug. 21.
The Commission on Standards, which was in charge of reviewing and recommending to the Board of Directors proposed changes to the standards, will then meet in September and review all the comments.
According to Ray Ferrara, chairman of the Commission on Standards, the panel will then submit any changes to the draft to the Board at its November meeting.
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“The Board hopefully will do something at its November meeting, and at the same time they hopefully approve these standards, they’ll also probably enact a date that they become effective and some period after that an enforcement date,” Ferrara said during the public forum.
The draft proposal, titled Code of Ethics and Standards of Conduct, is a significant revision to the standards with a range of important changes, including broadening the application of the fiduciary standard for CFP professionals — effectively requiring them to put a client’s interest first at all times — and enhancing and updating standards related to financial planning.
The “big change” to the standards Leo Rydzewski according to Leo Rydzewski, CFP Board’s general counsel — is the extension of the fiduciary duty to cover all financial advice.
“We define financial advice very broadly,” Rydzewski said during the public forum. “Financial advice is effectively any time you’re telling somebody ‘you should.’ Financial advice is anytime you make a suggestion that the client take or refrain from taking some kind of action.”
Under the current Standards, CFP professionals are expected to act in the best interest of their clients when providing financial planning.
According to Ferrara, “when the financial planning was done, one could — not necessarily — but one could switch hats and no longer use the fiduciary standard when implementing a plan but begin to use a suitability standard, which in our opinion is a lower standard.”
That’s why, Ferrara said, one of the Commission on Standards’ early decisions was to extend the fiduciary duty at all time when providing financial advice.
When questions arose at the forum as to how the CFP Board’s fiduciary standard compares to the Department of Labor’s fiduciary rule, Ferrara clarified that he sees more freedom in the CFP Board’s new standards.
“I can assure you, as a practitioner, I did not want to see our standards become the DOL requirements,” he said during the forum.