CFP Board’s Proposed Changes – What You Need to Know

In June, the CFP Board released proposed revisions to its Standards of Professional Conduct, for public comment. The public forums on these proposed changes just wrapped up last week. I attended the forum held in Dallas and wanted to share a brief summary with you.

Why are these changes important to you as a client?

The CFP Board is a not-for-profit organization that primarily serves the general public, not the CFP® Professionals it certifies and enforces its standards upon. The primary change being proposed has to do with an advisor’s fiduciary duty, which is the duty to act in the best interests of the client. Previously, CFP® Professionals were only held to a fiduciary standard when providing financial planning services. Under the new proposal, the fiduciary standard would be broadened to apply to all circumstances where financial advice is being provided; not just planning.

Other key takeaways from the forum include:

  1. Most communications from an advisor to a client would be considered advice, and therefore fall under the fiduciary level of care. I am in favor of this change and was impressed with the CFP Board’s stance. This may cause a great deal of concern for advisors who work for large financial services companies and primarily sell their company’s products. It will be interesting to see if some of the large insurance companies and Wall Street firms shift away from the CFP® Certification as the gold standard designation for their advisors as a result.
  2. Hat-switching would no longer be tolerated. Hat-switching is the term used to describe when an advisor shifts from fiduciary-level care to suitability and back again with the same client or in the same meeting. Switching back and forth between advisory and commission-based regulatory care is allowed by FINRA and the SEC, but has been under attack recently by the Department of Labor, who regulates 401(k)s and IRAs. The vast majority of advisors are dually licensed to provide advice for a fee AND sell commission products, and therefore have a major conflict of interest to contend with.
  3. The proposed standards create a great opportunity for Registered Investment Advisory firms like Schulz Wealth. My firm is already committed to fiduciary-level client care as voluntarily stated in our regulatory filings and client agreements. Too many advisors wrongly claim independence from their firm’s or their own profitability motives. As we move forward, I expect to see more consumers appreciating this distinction and gravitating towards firms like Schulz Wealth.

The CFP Board’s proposed new standards have the potential to encourage scores of advisors to do the right thing, and provide a fiduciary standard of care in all advisory dealings with clients. As a CFP® Certificant, I should be held to a higher standard than those outlined by my industry and regulators. Through these proposed changes, the CFP Board is doing its job and safeguarding the public by demanding a higher standard for those who have achieved CFP® Certification.

If you’d like to learn more about the CFP Board’s proposed changes or comment yourself, visit https://www.cfp.net/about-cfp-board/proposed-standards.

Thank you for the trust you place in Schulz Wealth. We appreciate your relationship with us and look forward to continuing to help you build wealth and live well in retirement.