What the New Standard for Financial Advisers Means for Your Money

What the New Standard for Financial Advisers Means for Your Money Photo by pikcha / Shutterstock.com

Starting next year, certified financial planners must act in their clients’ best interest whenever they provide financial advice — and not just during financial planning.

The Certified Financial Planner Board, the nonprofit organization that oversees the CFP designation, recently announced that it has unanimously approved a new “Code of Ethics and Standards of Conduct” that includes the new, stricter standard.

The change is good news for consumers who seek financial advice from an adviser who has earned the certified financial planner designation. It’s especially welcome news in light of the striking down of the federal government’s fiduciary rule.

As the CFP Board explains the change:

“The new Code and Standards adds even more rigor to the CFP certification requirements, and enhances the integrity and value that CFP professionals bring to the clients and communities they serve.”

A key change in the new code and standards is a broader application of the fiduciary standard, which requires CFP professionals to act in their clients’ best interest.

Currently, the fiduciary standard applies only to financial planning. Under the new requirements, it will apply to all financial advice, according to the board’s commentary on the new code and standards.

The board defines financial advice as including “discretionary authority as well as communications that would be viewed as a recommendation that the client take or refrain from taking a particular course of action with respect to a wide range of financial matters.”

The board’s commentary continues:

“Under the Code and Standards, the public will know that a CFP professional is committed to acting as a fiduciary at all times when providing financial advice, and not just when providing financial planning, as is the case under the current Standards.”

The broader application of the fiduciary standard is also a big part of why the Consumer Federation of America, a nonprofit watchdog group, says it supports the CFP Board’s new code and standards.

The new Code of Ethics and Standards of Conduct is effective Oct. 1, 2019. So, CFP professionals have until then to comply with it.

What’s your take on this news? Sound off below or on our Facebook page.

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