A Major Insurer Exposes the Weakness in the CFP Board’s Standards

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The CFP Board had noble intentions with its new standards that became effective last month. However, its handling of conflicts falls so short that absent significant new guidance the credibility of the standards is in serious doubt. This is clear from the recent publication of a major insurer’s eye-opening disclosure intended to address conflicts.

The CFP Board established the Commission on Standards in December 2015 to recommend changes to the CFPB standards. After an extensive process involving subsequent public forums, proposals, re-proposals and comments, the CFP Board approved new standards in March 2018 that became effective October 1 2019.

CFPB is providing guidance on what they mean. This includes commentary, a roadmap and case studies. Some case studies are already out (see here). Other case studies are in process.

The case studies aim to give the standards meaning for CFPs, investors and consumers, and how the standards will be interpreted and applied. They will be a “roadmap” for compliance that can be understood by an ordinary investor.

Compliance gives conduct standards meaning. State securities administrators and NASAA pointed this out in regard to the SEC’s Regulation BI. According to Andrea Seidt, Ohio commissioner of securities and chair, noted, “If (Reg BI) is going to mean anything, if it's really going to be a step up from suitability. The way that that's going to happen is from regulatory examination and enforcement.”