The Certified Financial Planner Board of Standards Inc. (CFP) states that their new fiduciary standards will be delayed, pushing the enforcement of these important ethics back to June 30, 2020. With this news comes questions about the quality of service people can expect from those handling their money, and what this all means to them in the long run.
The CFP started reviewing their standards almost four years ago, in an effort to identify areas for improvement. Their code of ethics and standards of conduct, which were approved last year, require that all CFPs and brokers act in the best interests of their clients when providing financial advice. This is in contrast to the established set of standards that only required client advocacy with regards to their financial planning. With the current rule, if a CFP is not providing elements of financial planning, then they do not need to place their clients’ interests ahead of their own. It can come as a shock to many that those tasked with handling their money are not necessarily obligated to act in the best interest of investing it.
When you start to appreciate the significance of these standards or lack thereof, you can see why the CFP’s decision to delay enforcement has many concerned. Currently, the CFP has 85,000 financial advisors certified under their current standards. When you factor in that many planners with a CFP designation have multiple clients with varying amounts of money under their management, you can start to see the magnitude of all this.
To be a fiduciary means to act in the best interest of your clients. To uphold the integrity of such a title means that there cannot be any motivation of profiteering off clients in the interest of personal gain. A fiduciary is always to provide advice which is in the best interest of their clients.
The world of finance can be a tricky landscape to negotiate. We use money every day, and it touches upon every aspect of our life, direct or indirect.
That in mind, it’s important to consider regulations that may seem distant to us at face-value, but do in fact have a genuine impact on our wellbeing. Consider all this when you assess who handles your money. Huge firms that employ many advisors with the CFP designation were in fact the ones pushing for the delayment of the new fiduciary standards, stating that many of them needed more time to make the necessary business adjustments. The fact that they must alter their business strategies in order to incorporate stricter fiduciary standards proves that they have not consistently been acting in their clients best interest all along. An independent financial planner has the advantage of weighing all the options available to their clients, without being mandated to sell internal financial products. It’s characteristics like this that uphold the definition of a fiduciary, and help maintain the integrity associated with the term. Always be sure to take the time to consider these important characteristics, so that your financial wellbeing has as much integrity as those who are handling it.