Financial Planners and the Fiduciary Standard, Take Two

by Michael on Sep 25, 2012

Photo of Graphs, Glasses, Pencil, and Calculator

Remember when I wrote about Allan Roth’s article on the fiduciary standard and financial planners? Sure you do, it was just last week. Well… The Certified Financial Planner Board of Standards (a.k.a. CFP Board) has fired back.

In their response, which was written by Kevin Keller (CEO of the CFP Board), the CFP Board argued that they didn’t actually require CFPs to adhere to a fiduciary standard at the time of the malfeasance that Roth wrote about. Rather, this requirement didn’t actually go into effect until July 1, 2008.

Interesting. I had no idea that CFP’s weren’t required to look out for their client’s best interests until the summer of 2008. I’m sure that many (if not most) of them did so prior to that even though it wasn’t required, but still…

They further argued that they put their requirements into place a full two years before the Dodd-Frank Act applied similar requirements to broker-dealers and that they have been “consistently and aggressively advocating for a uniform fiduciary standard of care consistent with Dodd-Frank.”

This is commendable but, as things currently stand, the CFP Board can only do so much. As Keller wrote:

“Under our publicly available sanction guidelines, a breach of the CFP Board’s fiduciary duty would generally result in a suspension to use the marks for one year and one day.”

In other words, instead of getting away without so much as a slap on the wrist, a CFP that gets busted for putting his/her own interests ahead of yours will receive that slap — and nothing more.

Note that this isn’t really meant as a condemnation of the CFP Board. I do respect what they’re trying to do. I’m just pointing out that the penalties for unethical behavior aren’t particularly harsh and are thus unlikely to deter someone who is intent on lining their pockets at your expense.

As I stated before:

“Nobody cares about protecting and/or growing your money as much as you do. You really do need to look out for yourself.”

This is true whether or not the CFP Board asks its members to put your financial interests ahead of their own.


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