Already Confusing CFP Compensation Rules Will Tighten When New Standards Take Effect in October

Posted on May 21st, 2019 at 3:40 PM
Already Confusing CFP Compensation Rules Will Tighten When New Standards Take Effect in October

From the Desk of Jim Eccleston at Eccleston Law LLC:

The CFP Board is expecting fee-only advisors to follow a more rigorous framework for disclosing and managing conflicts of interests, when its new standards of conduct take effect in October.

According to a FinancialPlanning article, the CFP Board describes its new standards as a “milestone event” that will guide fee-only CFP professionals to effectively comply with the new provisions. The Board published new Code and Standards guidance last week as part of an effort to educate CFP professionals and their firms as to how to comply with the new standards.

The cornerstone of the new Code and Standards is the requirement that all CFP professionals act as a fiduciary at all times when providing financial advice to a client. In addition, the new standards seek to clarify compensation models. They specify, for example, that CFPs may describe their practice only as fee-only if they, their firm and related parties do not receive any “sales-related compensation” in connection with the advisory services provided to clients.

In addition, the CFP Board urges advisors to closely examine its standards for the definition of operative terms such as “sales-related compensation,” which includes both commissions and other incentive-driven compensation.

The Board, however, emphasizes that no business model is conflict-free. For instance, the Board’s new guidance cautions advisors who charge hourly fees to be mindful of the potential to overbill. If remains to be seen how hourly fee overbilling will be measured.

Eccleston Law LLC assists CFPs nationwide in regulatory matters, and defends CFPs in disciplinary matters.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

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