CFP adopts new ethics standards
The CFP officially adopted new ethical standards May 31, 2007. I think it’s a move in the right direction but it’s still not enough. The new ethics require more disclosure, clarify that saying “fee only” must mean fee only and that a CFP must let the CFP board know of any criminal allegation against them.
If you go back and read the list of actions taken against CFP holders, you will find that most of the cases against CFP’s are in response to an investigation by a state source or federal source. This is not necessarily a bad thing but does it really matter that you pull someone’s CFP after they have been stripped of their license?
The CFP needs to be setting tougher standards than those designated by law and starting their own investigations. It seems that they are starting to set the tougher standards but they need to be going after people on their own. Just coat-tailing on other organizations investigations is not enough.
What I think the CFP organization should be doing is random audits and random client client calls to survey CFP clients. Let the people who use the CFP designation know the CFP board is serious about it’s reputation and it will find crooks who use the designation. This is an aggressive stance to keep crooks from using the designation altogether and let mom and pop know that if their planner has a CFP designation they are trust-worthy.
I am also against written disclosure. If you have closed on a home loan in the last 10 years you know how effective disclosure is. 100 pages of stuff to read means nothing really gets read and so disclosure becomes useless. Set the rules, investigate randomly and find violators.
As I said, I think the new standards are a move in the right direction, they set a higher standard for the CFP than the law dictates. There is still a long way to go though. By the way you have until July 1, 2008 to comply.
Bill Ramsay said,
June 14, 2007 at 1:56 pm
I’m with you about audits, not sure about client calls though. Most clients are not knowledgable enough to judge, and getting a call from a pseudo regulatory body would probably be disconcerting to a lot of clients.
You are also right on about disclosure. “Full” disclosure is pointless and counterproductive as too often the important points are lost in the maze.
I believe there would be a huge reduction in problems if CFPs were not allowed to receive commissions. Of course the Board’s concern is that they would lose a large number of licensees and risk the marks becoming irrelevant due to the reduced market share of the industry. Of course given how successful NAPFA is at getting free promotion from the media given their tiny number of members, its worth considering that it might raise the profile and reliability of the marks.