Certified Financial Planners will have an additional nine months to align their business models with the CFP Board of Standards’ newly revised Code of Ethics and Standards of Conduct before enforcementbegins.
The Board of Directors of the CFP Board of Standards announced July 16 that it has set a date ofJune 30, 2020when CFP professionals’ compliance with the new “Code and Standards” will be enforced, instead of beginning enforcement on the previously announced date of October 1, 2019.
The new timeline coincides with the effective date of the SEC’s Reg BI package of broker and investment advisor rules, even though Reg BI standards do not satisfy the CFP Board’s updated fiduciary requirements.
Delay in enforcement praised by FPA
The delay in enforcement drew immediate praise from trade associations and financial services firms affected by the new Code and Standards.
“We are pleased with CFP Board’s decision to begin enforcement of the new Code of Ethics and Standards of Conduct on June 30, 2020,” the Financial Planning Association (FPA) said in a July 16 statement. “By giving professionals more time to make the necessary business adjustments to ensure full compliance, they are demonstrating their responsiveness to the needs of the CFP professional community as they look to embrace the new Standards.
Denver-based FPA, the principal membership organization for CFP professionals and those who support the financial planning process, reiterated in the statement that it fully supports the new Code and Standards.
“Make no mistake. While FPA asked CFP Board for a June 30, 2020 enforcement date for the new Standards, we have been steadfast in our support of the new Standards and their effective date of October 1, 2019,” the statement reads. “The new Standards are right for the profession and those bearing the CFP marks, and an enforcement date nine months later will provide the necessary cushion for our members—particularly those who are dually registered—to fully integrate the new Standards into their business processes and culture while also accounting for the SEC’s recently passed ‘Regulation Best Interest (Reg BI).'”
401k Specialist asked noted fiduciary expert Fred Reish to chime in with his thoughts on the change in timing.
“My personal view is that [it] benefits all involved. It helps broker-dealers since many of the changes they need to make for Reg BI are consistent with how the CFP Board Standards will apply to their advisors who are certificants,” Reish said. “It should also help the CFP Board because many of the objections to the new fiduciary standards will go away with the alignment of Reg BI’s best interest and conflict of interest requirements and the new CFP Standards.”
CFPs must always act as a fiduciary
October 1, 2019 remains the same for CFP professionals to understand and comply with the new rules, but the Board of Directors says the new enforcement date was in fact changed to provide CFP professionals additional time to prepare.
“In order to best benefit the public, the Board wants CFP professionals to have time to adjust to the new Code and Standards. By setting this enforcement date, we are ensuring they have ample time to modify their policies, adapt systems and be in alignment with the new rules,” said Board Chair Susan John, CFP. “With these new standards, CFP professionals will be required to provide clients with fiduciary financial advice at all times.”
John specifically noted that none of the Code and Standards themselves had changed. This includes, what she called, the “iron clad” commitment of CFP Board to require CFP professionals—no matter their compensation method—to adhere to a fiduciary duty whenever delivering financial advice.
“Since the beginning of the nearly four-year process to review our standards, we said that CFP Board would not be led by what actions regulators take. But we won’t ignore them either,” John said. “The Board, however, does believe that the alignment of the SEC’s enforcement date of Regulation Best Interest (Reg BI) is helpful to our CFP professionals in that there is significant overlap in the two sets of standards—with a notable exception that CFP professionals are required to act as a fiduciary whenever they are providing financial advice to clients.”
For conduct that occurs between October 1, 2019 and June 29, 2020, CFP Board will continue to enforce violations of the existing Standards of Professional Conduct. Starting June 30, 2020 and onward, CFP professionals will then be subject to potential disciplinary action for any violations of the new Code and Standards.
CFP Board will focus its efforts on educating and working with CFP professionals to help them better understand and comply with the new Code and Standards. Already, CFP Board has held dozens of public forums, met with firms and developed a suite of guidance materials that can be found on www.CFP.net/code.
The non-profit professional certifying body will continue developing these materials with the assistance of its Standards Resource Commission as well as hold meetings with firms large and small as well as CFP professionals themselves.
It is during this phase that CFP Board will also continue to implement the new Code and Standards. For example, the educational material for the ethics CE requirement is focused on the new standards. Additionally, the exam starting in November 2019 will include material from the new Code and Standards.
“We appreciate the valuable input of CFP professionals, their firms, trade associations and membership organizations representing CFP professionals in helping the Board come to this decision,” John said. “It is now time for all of us to pull together and comply with the new standards so that we can provide the public with the highest level of financial advice.”
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
