CFP Board Ethics Updates: What they mean for you
February 28, 2019
Lia Bertelson
Lia Bertelson
Certified Financial Planner™
Investment Adviser Representative
470.443.1808

We at Together Planning value the CERTIFIED FINANCIAL PLANNERTM marks[i] because we believe that the public is well served by the efforts of the CFP Board to elevate the financial planning profession through its high standards of both ethics and competence. Jud earned the right to use the CFP® marks in 2009 and I just earned it last December.  We value the work of the CFP Board in establishing norms and standards that serve the public and hold our profession to a high standard.

The CFP Board has released a new Code and Standards to replace the current Code of Ethics and Standards of Conduct. This is part of an effort to continue to clarify the role and responsibilities of CFP® professionals and to raise the standards even higher.  There are a few changes that I thought might be interesting to our clients or others who are shopping for a financial planner.

New preamble

The CFP Board added a new preamble, which is descriptive of the purpose of the Code of Ethics and Standards.

“CFP Board’s Code of Ethics and Standards of Conduct reflects the commitment that all CFP® professionals make to high standards of competency and ethics. CFP Board’s Code and Standards benefits and protects the public, provides standards for delivering financial planning, and advances financial planning as a distinct and valuable profession. Compliance with the Code and Standards is a requirement of CFP® certification that is critical to the integrity of the CFP® marks. Violations of the Code and Standards may subject a CFP® professional to discipline.”

(https://www.cfp.net/docs/default-source/for-cfp-pros—professional-standards-enforcement/CFP-Board-Code-and-Standards Page 1)

Expansion of fiduciary requirement

One distinction between CFP® professionals and other financial advisors is the commitment that all CFP® professionals make to act as fiduciaries for their clients, acting in their clients’ best interests.  This goes beyond the requirements of the law and is consistent with what clients expect of their financial advisers. Under the existing Standards, CFP® professionals have been held to this standard when providing Financial Planning, or the material elements of Financial Planning.  In other words, a CFP® professional who is only selling insurance to a client, or only providing investment advice, is not held to the fiduciary standard.  The new Code and Standards expands the reach of the fiduciary standard to all Financial Advice.

“Consistent with CFP Board’s vision and mission, and in furtherance of a strategic plan that is committed to a fiduciary standard, the Code and Standards expands the application of the fiduciary duty to all Financial Advice. Financial Advice includes discretionary authority as well as communications that would be viewed as a recommendation that the Client take or refrain from taking a particular course of action with respect to a wide range of financial matters. Communications that do not fall within that definition, such as responses to directed orders, are not Financial Advice. The definition of Financial Advice also excludes the provision of services or the furnishing or making available of marketing materials, general financial education materials, or general financial communications that a reasonable CFP® professional would not view as Financial Advice.”

(https://www.cfp.net/docs/default-source/for-cfp-pros—professional-standards-enforcement/CFP-Board-Code-and-Standards-with-Commentary Page 3)

Definition of Financial Planning:

The new Code and Standards includes a new definition of Financial Planning—thirty carefully chosen words that demonstrate the value that Financial Planning provides to all clients.  Read the definition below, as well as the commentary that explains a bit about the CFP Board’s process in choosing the words.

“Financial Planning is a collaborative process that helps maximize a Client’s potential for meeting life goals through Financial Advice that integrates relevant elements of the Client’s personal and financial circumstances.”

(https://www.cfp.net/docs/default-source/for-cfp-pros—professional-standards-enforcement/CFP-Board-Code-and-Standards page 8)

  • “Financial Planning is a collaborative process:” CFP Board is committed to the fundamental principle that Financial Planning is a process, not a document or product. The process is set forth in the Practice Standards. Collaboration between the CFP® professional and the Client, and potentially others, is critical to the process.
  • “That helps:” Financial Planning is not merely designed to help. Financial Planning does help. These two words make a strong statement that recognizes the value of Financial Planning, without equivocation.
  • “Maximize a Client’s potential:” The goal is for each Client to maximize his or her potential. Financial Planning does not guarantee a particular result, but it does help maximize a Client’s potential. In developing the definition, CFP Board carefully considered a long list of alternatives to “maximize,” including achieve, advance, enhance, foster, further, improve, increase, optimize, realize, and support. CFP Board determined that maximize is the word that best fits the definition because the goal of a CFP® professional providing Financial Planning is to make the most out of the Client’s potential. Other terms come close to capturing that meaning, but fall short. Achieve and realize are more precise modifiers for goals than the potential to meet goals. Foster might be appropriate, but only if the second or third-level definition were to apply. Optimize implies perfection, which does not capture the intended meaning. Other terms, such as advance, enhance, further, improve, increase, and support, are too weak because just getting better is not a sufficiently high standard. CFP Board also does not agree that “maximize” is promissory given the context in which the word is used. Maximize is qualified by “helps” and modifies a client’s “potential,” not any specific financial performance.
  • “For meeting life goals:” The purpose of Financial Planning is to develop and meet goals. Defining the goals as “financial goals” would be too narrow. The goal of each Client is to obtain what they want in life. Financial goals are a means to that end, not the end itself. The definition’s reference to “life goals” also does not imply that a CFP® professional must provide life planning. A CFP® professional provides Financial Advice, not life advice. Moreover, a CFP® professional does not need to engage in life planning to determine a Client’s life goals.
  • “Through Financial Advice:” Financial Advice is the financial planner’s tool. While a financial planner is focused on life goals, the advice that a financial planner provides is Financial Advice.
  • “That integrates relevant elements of the Client’s personal and financial circumstances.” Integration is essential to Financial Planning. A financial planner examines a Client’s circumstances and evaluates how one element of the Client’s life affects other elements of a Client’s life. Relevant elements vary from Client to Client.

(https://www.cfp.net/docs/default-source/for-cfp-pros—professional-standards-enforcement/CFP-Board-Code-and-Standards-with-Commentary Page 13-14)

We at Together Planning are proud of our designations as CERTIFIED FINANCIAL PLANNER.TM We appreciate the hard work and careful thought that went into producing the new Code and Standards.  We pledge to uphold our duties to our clients and bring them considerable value through financial planning and investment management.

[i] Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

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