Opponents of the Labor Department fiduciary rule are leveling the same criticisms they made of that measure on a proposal to strengthen advice standards for certified financial planners, with one trade association asserting the changes could result in a "CFP tax."
Earlier this summer, the Certified Financial Planner Board of Standards Inc. released a
draft update of its code of ethics and standards of conduct that would require all CFPs, including brokers who use the mark, to act in the best interests of their clients at all times when they are providing investment advice. The current standard holds CFPs to a fiduciary standard only during the financial planning process.
Similar to what it said in opposing the DOL regulation, the Financial Services Institute, which represents independent brokers and financial advisers, said the CFP fiduciary rule would not be "workable."
"The result will be millions of dollars spent to adequately supervise financial advisers with regard to the proposal," Robin M. Traxler, FSI vice president for regulatory affairs and associate general counsel, wrote in a
comment letter. "A natural result of this increased expenditure will be to ask financial advisers with the CFP designation to pay a fee to cover the extra expense incurred by their firm as a result of their voluntary use of the designation. This will essentially create a 'CFP tax,' which FSI presumes the CFP Board does not intend to create."
Another vocal opponent of the DOL rule, the Securities Industry and Financial Markets Association, said the potential new CFP standard would be too "burdensome" and costly for brokerages to implement, which echoes the group's criticism of the DOL rule.
In its
comment letter, SIFMA managing director and associate general counsel Kevin M. Carroll said the CFP rule would impose varying requirements on the same client and account depending on whether the adviser holds a CFP designation. Brokerages would have to decide whether to apply the CFP standard to all its brokers or create distinct compliance procedures for CFPs.
"In either case, it would require a significantly expensive, burdensome and time-consuming undertaking by firms to accommodate the proposal's hopefully unintended, complete re-engineering of the regulatory regime," Mr. Carroll wrote. "We recommend that the proposal be modified to provide that if a CFP professional complies with his or her B-D and/or [registered investment adviser] employer firm's policies and procedures, then such CFP professional shall be deemed to be in compliance with the new proposed standards."
The deadline was Aug. 21 for
comment letters about the CFP proposal. The responses have reflected the ongoing battle over the DOL rule, which would require all financial advisers, including brokers, to act in the best interests of their clients in retirement accounts. The Labor regulation has been
partially implemented, but is undergoing a review ordered by President Donald J. Trump that could result in
revisions to the measure.
The
mother of the DOL rule, former Labor assistant secretary Phyllis C. Borzi, wrote a letter in support of the CFP Board's proposal.
"Requiring advice professionals to embrace a fiduciary standard of conduct at all times and for all types of financial planning advice as a condition of their CFP professional certification is a critically important consumer protection and one which the board should unanimously adopt as soon as possible and rigorously oversee and enforce once effective," Ms. Borzi wrote in
her letter.
Interest groups — such as
AARP and
Better Markets — that support the DOL rule, also wrote letters backing the CFP proposal. The Consumer Federation of America also expressed strong support for the CFP rule, but also encouraged the organization to
provide more detail on how conflicts of interest should be managed by CFPs.
Both the FSI and SIFMA urged the CFP Board to stand down until the DOL and Securities and Exchange Commission act on advice standards.
"By stepping into this space in front of the DOL and SEC, the CFP Board is adding another layer to an already uncertain space," Ms. Traxler wrote.
