The CFP Board to Planners: Conflicts are Dead

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In 2012, an SEC director declared that conflicts kill objective investment advice. But this is no longer true, according to new guidance from the CFP Board.

The CFP Board offered its very different view in its publication, Guide to Managing Conflicts.

But it should be true. The Supreme Court explained in 1963 that avoiding conflicts is a pillar of sound investment advice, as originally articulated in the Investment Advisers Act of 1940. In a landmark case, Capital Gains Research Bureau, the Supreme Court held that the Advisers Act’s “fundamental purpose” was to “to eliminate conflicts between the investment adviser and clients.”

Are conflicts a killer?

Carlo V. di Florio, director of the SEC Office of Compliance Inspections and Examinations, spoke eloquently about conflicts:

…. One can think of ethical concepts as the white blood cells that make an organization’s “immune system” – its compliance and risk management systems and culture – effective (and thus) conflicts of interest can be thought of as the viruses that threaten the organization’s wellbeing. As in the microbial world, these viruses come in a vast array of constantly mutating formats, and if not eliminated or neutralized, even the simplest virus is a mortal threat to the body.