The Certified Financial Planner Board of Standards on Wednesday released a revised version of its proposed Code of Ethics and Standards of Conduct. Like the earlier version released in June, the proposal sets a fiduciary standard that requires CFP professionals to act in the best interest of clients when providing financial advice, not just financial planning as the board’s current standards require. (Planning is a category within financial advice.)
The latest proposal also expands the current standard concerning conflicts of interest to include “full disclosure of all material conflicts” and it contains specific descriptions of different types of advisor compensation.
A fee-only CFP professional cannot receive any sales-related compensation, but a fee-based advisor can and should clearly state that she earns fees and commissions.
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In addition, sales-related compensation such as commissions, 12(b-1) fees and revenue sharing must be disclosed, but reasonable and customary custodial fees not tied to the value of a client’s transactions and fees for professional services under a Turnkey Asset Management Platform do not need to be released.
The CFP board will be seeking comments on the revised proposal between Jan. 2 and Feb. 2 and expects to issue final standards by the end of the first quarter in 2018 to take effect on Jan. 1, 2019. It would like to receive feedback on the custodial fee and TAMP exclusions from sales-related compensation as written, as well as on several other items.
Advisors can access the proposal as well as a a redlined version showing changes from the previous version, a side-by-side document highlighting differences from the current standards, and commentary on some of the comments received on the initial proposal and the changes the CFP Board made in response. All these documents are available on CFP Board’s website.