In New Fiduciary World, Should Governance of the CFP Board Be Tweaked?

To follow up on my last blog, (Professionals and Conflicts of Interest: Not Hard to Gauge), I caught up with financial planner Mike Ross of Cocoa Beach, Florida, who had made the comments I’d referred to. Based on the veteran advisor’s 20 years of experience on FINRA arbitration panels and a couple of years on the CFP Board’s disciplinary panels, he firmly believes that “financial planners are head and shoulders above brokers when it comes to client care: I couldn’t believe some of things that even veteran brokers would try to pull on their clients.” 

And that difference, he believes, is going to become even more important in coming years: As the financial services industry moves toward fiduciary only. “The world is changing,” he said. “I think five years from now America could end up like the United Kingdom [with all advisors required to be fiduciaries for their clients]. We’re seeing the same kind of public demand and response from the regulators.” And to keep pace, he believes that financial advisors in general—and financial planners in particular—are going to have to become more professional.

In last week’s blog, I voiced concerns about both CFPs’ ability to be “part time” fiduciaries, and the CFP Board’s lack of aggressive enforcement of its own standards: “I don’t see how we can ignore the harm or potential harm to clients when financial planners hold themselves out to be “fiduciaries,” while in fact, their fiduciary duties apply only to a plan’s broad recommendations, and not to the specific “product” recommendations… … As I understand it, the Board has essentially three sources for the “ethics” cases it hears: enforcement actions by other regulators, and complaints brought by clients of CFPs or CFPs themselves…”   

And while Ross partially agreed with this assessment, he disagreed that other “financial planners” were an inadequate method of enforcement: “In my career, I’ve seen a lot of bad advisors. Unfortunately, some of them have been CFPs. But other CFPs have no reason to look the other way. The CFP community is basically honest. Most of us understand that when one financial planner mistreats his/her clients, it reflects badly on all of us. All CFPs have a stake in the integrity of the mark.” 

In fact, to compete and prosper in the new “fiduciary” world, Ross believes that the CFP Board and CFPs themselves need to go to the next level: become a true profession. “The history of the fiduciary standard is a business decision,” he said. “When the CFP Board first adopted a fiduciary standard, they would have lost the Wall Street crowd if they’d required planners to be ‘fiduciary only.’ But in today’s environment, CFPs will need to offer full-time fiduciary services to compete. We need to become a true profession: not just an industry.”