CFP Board Campaigns Against Advisor Rip-Offs Even As Its Rules Largely Exempt CFPs From Acting As Fiduciaries

Monday, April 22, 2013 16:57
CFP Board Campaigns Against Advisor Rip-Offs Even As Its Rules Largely Exempt CFPs From Acting As Fiduciaries

Tags: CFP Board | fiduciaries | financial planning

CFP Board of Standards has been on a campaign to warn consumers about bogus advisors who get certifications that are largely marketing ploys. Yet the CFP Board’s own rules about when CFPs are required to act as fiduciaries—and only offer advice in the best interest of clients—exempt CFPs from a duty to act as fiduciaries in most client engagements.

This Website Is For Financial Professionals Only

To its credit, CFP Board last week issued a press release urging federal and state policymakers “to swiftly adopt recommendations made by the Consumer Financial Protection Bureau to prevent the misuse of senior designations, certifications and titles used by individuals working in the financial services industry.”



Even bolder, CFP Board on March 27 released a consumer guide in which it singled out the “Senior Certified Advisor” (SCA) designation and issued a warning to consumers: “The fact is that there are more than 170 known designations and certifications used by financial professionals,” CFP Board said in a statement. “Many of them are little more than marketing tools, with no real education needed —much less an exam—to ‘earn’ them.” (While there is no Senior Certified Advisor designation, incidentally, there is a Certified Senior Advisor designation.)

If CFP Board is serious about creating a licensing body that has credibility with consumers, it must first clarify its own rules, which essentially exempt CFPs from owing a fiduciary obligation in many—if not most—client engagements.

The CFP Board rule exempting CFP practitioners from acting as fiduciaries is spelled out in a video published on CFP Board’s website. The video, accessible by clicking on the picture below, is part of a series of multimedia presentations provided by CFP Board to guide practitioners in applying CFP Board’s Standards of Professional Conduct.


According to the CFP Board video, CFPs are required to act as fiduciaries only when they performing financial planning for a client. Financial planning is defined so narrowly, however, that most CFPs can easily avert owing a duty to act as a fiduciary to clients.


As the video on CFP Board’s website indicates, if a CFP is advising on a single subject area—like estate planning, college planning—a CFP is able to avoid owing a fiduciary obligation to a client. A CFP practitioner is, thus, allowed to sell clients products that pay commissions through a broker-dealer.

In contrast, a fiduciary cannot be paid on a commission basis. Commissions create an incentive to sell products, and to sell the products with the biggest commissions. So the CFP Board's rule provides CFPs with a huge out from always acting as fiduciaries.


Understandably, CFP Board cannot summarily decree that CFPs can no longer accept commissions. It would gut the business model of many, if not most, CFPs. It would also, arguably, not be in the best interest of consumers or advisors, but that's beside the point.


However, as CFP Board aligns itself with NAPFA and FPA in the Financial Planning Coalition, it is embracing a single fiduciary standard for registered reps and fee-only advisors. That position seems contradictory to CFP Board's own policy? 

If CFP Board wants to be a credible protector of financial consumers, can it embrace a position effectively exempting many of CFPs from owing clients a fiduciary duty by allowing them to sell products? It’s a difficult issue. Do you think CFP Board is doing the right thing? What's the better way?

Comments (4)

barry korb
I have asked both the CFP Board and FPA to help me explain to consumers how they can know that their relationship is a fiduciary relationship and that the advice they are receiving from a CFP(R) practitioner is in their best interest (even as defined by the Board and FPA which claim to be compensation indifferent). The Board as you noted has difficulty explaining its position even to practitioners. Its advertising campaign touts the CFP(R) designation, but does nothing to help consumers ensure that they are getting advice in their best interest. Barry Korb
barry korb , April 24, 2013
CFP Board ignores my questions or takes weeks to answer them.

I've asked for interviews with CFP Board leaders but that never happens, unfortunately.

Some months back I asked CFP Board about disclosure language that was on CFP Board's website and that was suggested for use by RIAs and that said a CFP was a fiduciary. It seemed misleading in light of CFP Board's video showing that advising in a single subject area would be exempt from a fiduciary obligation.

See my post at entitled, "Does CFP Board’s Suggested Disclosure For Form ADV Mislead Consumers About Whether Their Advisor Is A Fiduciary?"

No one from CFP Board ever responded to that post or answered my questions.

I don't means to be a troublemaker, but CFP Board's credibility with consumers won't be on a solid foundation without clear answers to these difficult questions.
agluck , April 24, 2013
Andy - good post. Sad it almost seems like something you'd see on The Onion. I've asked about standards in the calculations inside planning applications. No answer aside from 1 person who seemed confused. Alot of 'planners' use illustrations instead of plans.
brentb843 , April 25, 2013
Thanks for bringing this to the attention of your readership and the industry. I echo your sentiments about some of these designations. I've heard from some estate planning attorneys I work with that the CSA (Certified Senior Advisor) designation is notorious for being used by annuity salespeople (I have no firsthand knowledge of this practice, only what I've heard from colleagues). This upsets the estate planning attorneys who are wise to the manipulation of the clients, particularly the elderly. I also appreciate the fact that you had Jim Dobbs raise this issue in the A4A webinar today, which was excellent, by the way, particularly for young people thinking of entering the profession and confused by the array of certifications.
FamaFiduciary , April 26, 2013

Write comment

You must be logged in to post a comment. Please register if you do not have an account yet.