CFP board proposes expanded fiduciary duty

The proposal could affect all those who hold the CFP designation

CFP board proposes expanded fiduciary duty
Holders of the CFP designation in the US might have to abide by tighter standards soon.

In the first potential update to CFP policies since 2009, the Certified Financial Planner (CFP) Board of Standards has released a draft code of ethics and standards of conduct, according to InvestmentNews. Under the proposed rules, CFPs would be required to act in the best interests of clients at all times while providing financial advice, not just while constructing financial plans.

The board’s move is seen as an attempt to get ahead of the Securities and Exchange Commission (SEC), which has put out a request for comment on possible changes to industry standards for retail investment advice.  The SEC is soliciting comments for its own standard as the US Department of Labor’s fiduciary rule remains under review.

If the CFP’s revision pushes through, it would close a loophole that let CFPs follow a fiduciary standard during planning, but adopt a less stringent suitability standard, which applies to brokers, when selling investment products.

Early comments from the industry have been divided.

Some applaud and support the board’s initiative. "We should act like a fiduciary, regardless of what our title is," Levent Durmus, a broker at Charles Schwab & Co., told InvestmentNews. “It's something you have to do anyway.”

Others like Michael Kitces, a partner and director of research at Pinnacle Advisory Group, see things differently. “Will large firms take the CFP Board's expanded fiduciary duty seriously, and really make the necessary adaptations to comply with it?” Kitces said in an email to the publication. “And if they don't, is the CFP Board really prepared to enforce and discipline the CFP certificants who are not in compliance with the new CFP fiduciary rules?"

The 17-page proposal is open to comment until Aug. 21.

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