Last month, I wrote about what I consider to be a potentially consequential initiative in the financial planning space: the efforts by a CFP Board commission to create new standards of professional conduct for CFP certificants—which will replace the current standards. I said that the biggest question involves whether the new standards will require all members of the CFP community who hold themselves out as advisors to act at all times as fiduciaries with their clients. And I speculated that five members of this commission will, due to their industry ties, voice their opposition to fiduciary requirements—which brokerage firms have opposed, and managed to evade by using an arguable SEC exemption from registering as RIAs.
After the comments appeared in the “Early Warning” section of my March 2017 newsletter, I received a letter from the General Counsel at the CFP Board. These letters always (and did in this case) express appreciation for my interest in CFP Board activities, but then took issue with my selectively identifying just five members of the commission. “The Commission includes fourteen members, including CFP professionals who operate under diverse business models,” the letter stated, plus a consumer advocate and a public representative.
The letter also said that I didn’t clearly state that the commission’s role is to recommend standards to the Board of Directors, and that the final determination will be made only after a public comment period.
I’m happy to revisit this issue, because I think the decision whether or not to require people with the CFP designation to act as fiduciaries will either move the profession forward or retard its progress, and my readers should be following these developments closely. What worries me is a conflict at the heart of the debate. Many CFP certificants are brokerage employees of large wirehouse organizations who might, if a strict fiduciary standard were applied, encourage everybody to drop their designation (and stop paying membership dues). There is evidence that the CFP Board wants to avoid this outcome; all I have to do is point to the very gentle hand laid on wirehouse brokers who were falsely claiming to be fee-only on their websites some years back.
I also believe, based on conversations with staff and members of the board of directors, that it’s high on the CFP Board’s priority list to maintain its influence in the brokerage world. That influence would surely diminish if brokers were pressured to drop their CFP marks.
If the CFP Board, on the other hand, took the courageous stand of making fiduciary conduct mandatory, it would instantly create more credibility for the fiduciary concept, and give consumers more confidence that their interests would be put first if they received advice from a CFP professional. I think such a strong declaration would move financial planning one step closer to becoming a real profession. And I also think that many brokers, faced with losing either the CFP designation or their relationship with their brokerage employer, would opt to leave and choose to become a fee-compensated professional.
Obviously, there is a lot at stake here, and I think the entire financial planning community should be paying close attention to this process, which could result in proposed standards, out for public comment, as early as July of this year. The five members of the commission who I expect to voice opinions against the strong fiduciary standard are Allison Bishop, Director of Global Client Strategy at Bank of America Merrill Lynch; Terry Lister, Senior Vice President of Waddell & Reed; Peter Richardson, Assistant General Counsel at Northwestern Mutual Life; Jeffery Sills, Senior Vice President at Capital One Investments (a former national executive at Shearson and Smith Barney); and Robert Plaze, former SEC Deputy Director of Investment Management.
The members of the commission whose names I did not list (but am listing here) include a number of people who I know personally to be strong advocates of a fiduciary standard, and I have no reason to doubt that their voices are being heard in the discussion and formulation process. These remaining members (you can see the full list here: http://www.cfp.net/about-cfp-board/commission-on-standards#members) include Chairperson Ray Ferrara, CEO of ProVise Management Group in Clearwater, FL; Chris Beard, Vice President of Gateway Wealth Strategies in Greenville, SC; David Foegal, a Senior Manager of Wealth and Estate Planning at the Vanguard Group in Scottsdale, AZ; Diahann Lassus, President and Co-Founder of Lassus Wherley in New Providence, NJ; Linda Leitz, Co-Owner of It’s Not Just Money in Colorado Springs, CO; Sue Meisinger, former Deputy Under Secretary for the Employment Standards Administration at the U.S. Department of Labor; Matt Murphy, founder of Murphy Capital Advisors in Goodyear, AZ; Christopher Rand, Partner at Fides Wealth Strategies Group in San Diego, CA; and Barbara Roper, Director of Investor Protection at the Consumer Federation of America in Washington, DC. Which way will the Board’s commission go? Stay tuned.