Tuesday, May 09, 2006

Will The CFP Designation Step It Up?

Will The CFP Designation Step It Up?

What follows is the text of a letter sent from The National Association of Personal Financial Advisors (NAPFA) to the Certified Financial Planner Board.  It details what I have been pushing for with the CFP designation for a long time – a required Fiduciary Responsibility.  I have come across too many CFP Practitioners who abuse their clients and put their own interest first, it’s about time the board acted.

May 5, 2006

Sarah Ball Teslik, CEO
Certified Financial Planner Board of Standards, Inc.
1670 Broadway, Suite 600
Denver, CO 80202-4809

Dear Sarah:

On behalf of the NAPFA Board of Directors, we are writing you and the CFP Board to express our concerns regarding the CFP Code of Ethics.  We understand that the Code of Ethics is currently being revised and that these revisions are due to be published soon.  

We encourage the CFP Board of Standards to strengthen its Code of Ethics to require, without any qualifications or exceptions, that any financial advisor giving financial planning advice adhere to a fiduciary standard to place the client's interest first.  As you surely know, this is the same standard that is required of an advisor giving investment advice under the 1940 Investment Advisors Act.  And it is the standard that the SEC has chosen not to impose on broker-dealers who claim to provide something less than "financial planning."

Leading professions that are held in high regard by the public inevitably reach their level of credibility by developing and adhering to high standards. In numerous professions in which practitioners work with clients' money, a strong fiduciary standard is part of the commitment to the public. NAPFA and the CFP Board of Standards stand side-to-side in attempting to bring financial planning to the status of a true profession. If financial planning is to be considered a profession, we must make certain that our members put their clients' interests first.  We urge the CFP Board of Standards to maintain the CFP as a mark of the profession, not the mark of a professional salesperson.

Consumers need clarity if they are to be confident about where they turn for financial advice.  Not only do they need to know that their advisor is a fiduciary, but they also need full and complete disclosure of all possible conflicts of interest.  The CFP Board should set the mark with a requirement of a fiduciary relationship and full disclosure - both conditions are necessary, but neither is sufficient by itself.

At the moment, the only guarantee that an individual client has that his or her advisor is adhering to a fiduciary standard is if the advisor is an RIA or a member of NAPFA.  Our Fiduciary Oath has been effective for more than 20 years as helping our members define what they stand for, and how they will conduct themselves.  Our Fiduciary Oath has contributed to the success of our members and our organization, as it has built credibility with consumer advocates, regulators, and others. It has not resulted in professional hardships or difficulties for our members; to the contrary, it is a strong argument in their favor, as they offer their services.  

By contrast, a holder of a CFP might be a fiduciary, and might not be a fiduciary. The public is confused, and the CFP certificant must go through an additional layer of explanation about where his loyalties lie. It would be simpler for all CFP holders to be able to say they are fiduciaries, and to explain why a consumer should value that type of relationship.

We encourage the CFP Board of Standards to adopt a Code of Ethics that will give consumers the guarantee that when they work with an advisor who provides financial planning advice under the CFP mark, that advisor will hold to a fiduciary standard.  


Peggy S. Cabaniss
Chair, NAPFA Board of Directors

Ellen Turf