A federal court has vacated the Department of Labor’s fiduciary rule for retirement accounts. But the fiduciary principle is far from dead. Not only are state jurisdictions adopting their own fiduciary standards, but the Certified Financial Planner Board of Standards has just approved a new Code of Ethics and Standards of Conduct. The code requires CFP® certificants to uphold a fiduciary standard when providing financial advice to clients. The Board’s prior code only required advisors to act as fiduciaries when performing comprehensive financial planning.

After a two-year process, the CFP-granting organization decided to move to a more comprehensive fiduciary standard that will assure that its 80,000 planners serve the public interest.

“(The) CFP Board took a bold step more than a decade ago in requiring a fiduciary duty when CFP® professionals provide financial planning services. We are raising the bar even higher now with a fiduciary standard that will apply anytime a CFP® professional gives financial advice,” said Richard Salmen, CFP®, Chair of the CFP Board of Directors. “This is a monumental step forward in the evolution of not just the CFP® certification, but also of the profession of financial planning. Consumers, advisors, and firms alike will all benefit from these new standards.”

According to Salmen, the CFP Board spent more than two years working on the revised Code. Starting with the December 2015 formation of the Commission on Standards, the Board held more than 17 public forums and multiple comment periods and received more than 1,500 written comments and hundreds of oral comments. It also conducted a survey and provided multiple opportunities for the public to provide input.

The new CFP Code of Ethics and Standards of Conduct, which will take effect on October 1, 2018, requires CFP® holders to;

  • Place the interests of their clients above their own interests or those of their firms.
  • Strive to avoid conflicts of interest (or if they can’t be avoided, to fully disclose them), to obtain the informed consent of clients regarding the conflicts, and to properly manage the conflicts.
  • Act without regard to the financial or other interests of the CFP® holder, of that person’s firm, or of any individual or entity other than their clients.
  • Perform their duties with integrity, which must transcend personal gain or advantage.
  • Provide professional services with competence, which means with relevant knowledge and skill.
  • Do their jobs with diligence, which entails responding to reasonable client inquiries in a timely and thorough manner.
  • Exercise sound and objective professional judgment, refusing any gift, gratuity, entertainment, non-cash compensation, or other consideration that might compromise a financial planner’s objectivity.
  • Treat all clients, colleagues, and others with dignity, courtesy, and respect.
  • Comply with the laws, rules, and regulations governing the financial-services industry.
  • Keep confidential any non-public personal information about a prospective, current, or former client.
  • Provide sufficient information to all clients confirming the scope of all financial-advice and financial-planning engagements.
  • Provide accurate information to clients in a manner and format that fosters understanding.
  • Refrain from making false or misleading statements regarding methods of compensation, especially regarding claims of operating on a fee-only or fee-based basis.
  • Exercise reasonable care and judgment when selecting, using, or recommending any software, digital advice tools, or other technology to clients.
  • Refrain from borrowing or lending money to a client.

The Code also defines the financial-planning process, applying standards to its seven underlying steps, which include:

  • Understanding the client’s personal and financial circumstances.
  • Identifying and selecting goals.
  • Analyzing the client’s current course of action and potential alternative courses of action.
  • Developing the financial planning recommendation(s).
  • Presenting the financial planning recommendations(s).
  • Implementing the financial planning recommendation(s).
  • Monitoring progress and updating the client.

Finally, the new code reviews a CFP® planner’s duties owed to firms and subordinates, as well as to the CFP Board.

To learn more about the CFP Board’s new Code of Ethics and Standards of Conduct, read the complete document here. You can also review a commentary version, a redline version, and a side-by-side document comparing the new and prior documents.

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