It was a year ago that CFP Board established an enforcement date for the revised Code of Ethics and Standards of Conduct. In doing so, CFP Board mandated that all CFP® professionals must commit to CFP Board, as part of their certification, to act as fiduciaries whenever they provide financial advice to a client. In addition, CFP Board revised the Code of Ethics to better reflect the attributes that the public wants when seeking financial advice: honesty, integrity, competence, and diligence.
Simply put, a fiduciary should deliver financial advice that is clear, specific, objective and thorough. Consumers want to know that their private information will be protected. They want advice that they can rely on to be in their best interest and to know that the advisor worked carefully to develop advice that maximizes the potential for achieving their goals. On this anniversary of the Enforcement Date, consumers should be pleased that CFP® professionals have made a commitment to CFP Board to act as fiduciaries when providing financial advice, as required by the revised Code and Standards.
HOW CFP® PROFESSIONALS ARE DIFFERENT
Before a CFP® professional can place those three letters after their name, they must meet strict requirements. They must be a college graduate. They need to demonstrate mastery of a rigorous curriculum across a prescribed range of financial topics. They need to pass a comprehensive examination. CFP Board also demands that successful applicants have at least two years of prior, appropriate experience in the field and demonstrate an understanding of and commitment to sound, ethical judgment. But those are just the entry requirements.
Upon earning certification, CFP Board requires CFP® professionals to maintain and expand their knowledge by meeting continuing education requirements every two years, including ethics training acceptable to CFP Board. All of this is more demanding than what is required by most of the hundreds of designations and certifications that allow financial advisors to display initials after their names. As a result, CFP® certification has among the most rigorous requirements for financial professionals since CFP Board’s establishment in 1985.
WHAT IT MEANS TO BE A CFP® PROFESSIONAL
With the revised Code and Standards, CFP Board raised the bar even higher in terms of the commitment that CFP® professionals make to CFP Board. The revised Code and Standards place greater emphasis on conflicts of interest. CFP® professionals commit to CFP Board that conflicts that are not avoided will be fully disclosed and managed. Full disclosure requires giving sufficiently specific information to clients, so they know how the conflict could influence the advice and decide whether to work with the CFP® professional. If the client consents to the conflict, then the professional commits to managing the conflict in the client’s best interests.
It’s important to understand that in financial services, government regulators often focus on firms. That is not the case with CFP® certification. CFP Board certifies each professional individually. CFP Board requires annual attestations from anyone who is allowed to display the CFP® marks. And, they require that CFP® professionals report potential violations of the Code and Standards. When CFP Board determines that there is probable cause that a potential violation of the Code and Standards exists, the case is turned over to a robust adjudicatory process for determination and potential sanctions up to and including permanent revocation of the right to use the CFP® marks.
EVERY CLIENT DESERVES A FIDUCIARY
CFP Board put the revised Code and Standards into effect in 2019 and provided time for CFP® professionals to adopt the new requirements. Just one year ago, CFP Board began to enforce the revised Code and Standards. With enforcement, CFP® professionals are accountable for the commitment they make to CFP Board to act as fiduciaries, and to act in the client’s best interest, whenever they provide any form of financial advice. They commit to acting with honesty, integrity, competency and diligence in every case. As professionals, they commit to CFP Board that they will maintain client confidentiality and take steps to protect the privacy of the information that clients share. They agree that they will not benefit from their knowledge of the clients’ information.
As part of their commitment to CFP Board to act as fiduciaries, CFP® professionals must fulfill three specific duties. First, the Duty of Loyalty to place the client’s interests above all others. Second, the Duty of Care to act with care, skill, prudence and diligence in order to tailor their advice to the unique needs of each client. Finally, the Duty to Follow Client Instructions to obey the reasonable and lawful requests of their clients.
Meeting these three duties enables CFP® professionals to honor the commitment they make to CFP Board to act in the client’s best interest. Certainly, that is what every client deserves. While CFP Board may sanction a CFP® professional who does not abide by this commitment, CFP Board doesn't guarantee a CFP® professional's services. Consumers deserve a financial advisor who has made a commitment directly to them to act as a fiduciary. Therefore, whomever a consumer chooses as their financial professional, including a CFP® professional, they should be sure to ask for—and get—a written engagement that requires the professional to have a fiduciary obligation to the consumer.