In a new episode of the Financial Planning Podcast, CFP Board CEO Kevin Keller explains the certification organization’s continuing efforts to reform its enforcement programs.
Since Keller took over the role in 2007, the number of CFP certificants has grown by more than 50% to more than 92,000 certified financial planners. Enforcement has emerged as a key area of change during his tenure, with the organization overhauling its governance and supervision of planners across wealth management. Critics, however, accuse the organization of falling short when it comes to upholding the high standards of the industry’s most prominent planning designation.
In the podcast, FP Chief Correspondent Tobias Salinger asked Keller the following five questions about those concerns and the latest steps that the CFP Board has taken to alter its enforcement procedures:
CFP Board
1. The topic of our podcast today is enforcement at the CFP Board. We know that for a decade or more there has been a lot of discussion about problems with enforcement of the board’s strict standards and disclosure of regulatory cases. What are the latest steps the CFP Board has taken to enhance the enforcement role outlined in its article of incorporation?
2. I want to ask about the December 2019 task force report on CFP Board’s enforcement. It’s still tough to read because of all of the problems it describes as “systemic, longstanding, governance-level weaknesses.” One of their main recommendations concerns public members of the board, particularly those with expertise in regulatory cases and risk. Public members are the non-CFP members of the board who haven’t worked for any financial services firm in the past five years. Their first recommendation was that the board of directors should have a majority of public members or assign enforcement responsibility to a committee with a majority of public members. Has the board taken either of those steps and, if no, why not?
3. Let’s turn to enforcement of the CFP Board’s code of ethics and standards of conduct. As you know, they were recently updated, and the change that stood out the most was the provision requiring all CFPs to act as fiduciaries any time they provide financial advice. It’s much stronger than the industrywide standard. How do you enforce this fiduciary rule, and how many disciplinary sanctions or other enforcement cases has the board pursued under it?
4. With the new standards going into effect, Financial Planning obtained a template document from Northwestern Mutual intended to help CFPs comply with the disclosure rules. The document outlines incentives to sell Northwestern Mutual insurance products to a client often — and for the highest possible commissions. How do incentives like that or other common industry conflicts such as top producer trips, revenue sharing and cash sweeps fit into the CFP fiduciary duty and align with the guidelines?
5. Many of the largest companies employing CFP certificants or working with them sponsor CFP Board activities with substantial donations. That’s a conflict of interest for the board’s enforcement program. The board oversees the certification of the firms’ employees or advisors and the firms and advisors have a financial interest in their status before the board. How does the CFP Board mitigate or at least disclose this conflict of interest from sponsorships and donations?
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