NEW YORK – Tightened ethics rules for certified financial planners seem to have calmed many angered by an earlier version that left an escape hatch from the duty to put clients’ interests first.
The Certified Financial Planner Board of Standards, a nonprofit organization that grants the CFP credential for financial advisers in the U.S., was hit with more than 300 letters when it first attempted to amend its ethics rules last summer. It has received about a fifth as many letters in response to its second effort unveiled in March.
The first proposal drew heavy fire because it established a “fiduciary” standard for advisers, but then allowed them to opt out of the standard at will. The fiduciary standard implies a legal obligation for advisers to put clients’ interests ahead of their own. The new version eliminated the opt-out clause, as many people had urged.
“The CFP board showed guts in their willingness to stop, listen and then admit that perhaps a fatal mistake was inadvertently made in the first draft,” wrote Sam Hull, president of Northstar Financial Planning, a fee-only firm in Londonderry, N.H., in a letter dated March 22. (Hull is a former official with the financial planner board.)
Many of the people who wrote during a six-week public comment period ending Wednesday support the new version, which requires fiduciary duty when advisers provide “material elements” of the financial planning process. But some argue that the standard should apply to everything an adviser offers clients.
Adrian Eddleman, an adviser in Jackson, Tenn., wrote March 19 that to require a fiduciary standard for financial planning, but not all services, “is a mistake that will further confuse the public, and allow practitioners a ‘way out’ for failure to do what is in the clients’ best interest.”
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