One of the fundamental challenges that professionals face when providing recommendations to consumers is that the recipient may struggle to fully understand the ramifications of their decision about whether or not to accept and follow the recommendation in the first place. After all, professionals tend to be engaged with respect to matters that are especially complex or challenging – such that the average person cannot make the decision quickly or effectively on their own, and must rely on the services of a professional. Yet, in a world where consumers still must give their consent to pursue recommendations that may have adverse outcomes, it’s hard to be certain that the consumer really understands enough to give their “informed” consent in complex matters in the first place. Accordingly, various professions have evolved over time the framework of what it takes to ensure a consumer is giving “informed consent” – to act on a recommendation made by the professional with full awareness of the potential risks that it may entail.
And in its latest update to its Code of Ethics and Standards of Conduct (“Code and Standards”), CFP Board will now require that CFP® professionals obtain informed consent with respect to any recommendations they make to clients that may entail a Material Conflict of Interest, to be certain that the Client truly understands the prospective conflict before deciding whether to engage the CFP® professional. In practice, this will entail not only providing upfront information about the CFP® professional’s services and compensation (which may be delivered orally for Financial Advice engagements but must be written for Financial Planning engagements) but also disclosures of the CFP® professional’s Material Conflicts of Interest (which may be oral or written), and obtaining the Client’s informed consent (by any means desired, though clearly for professional liability protection, CFP® professionals will likely want to document this in writing!).
Fortunately, the reality is that for most CFP® professionals individually, such disclosure documents will have already been created by their RIA as their Form ADV Part 2 (for an investment adviser representative), or by their broker-dealer (as a registered representative), along with their respective Form CRSs, such that few will have to create new and separate documents themselves. Nonetheless, being aware of the obligation to provide such information and disclosures, and, in particular, the burden to obtain informed consent (and a likely desire to document it, either with contemporaneous notes in the advisor’s CRM or perhaps with a delivery-and-acknowledgment receipt), means CFP® professionals will still need to be cognizant of what it takes to comply with the new rules.
In turn, CFP Board’s new Code and Standards also expand the obligations of CFP® professionals to report external disciplinary matters to CFP Board, comply with CFP Board investigations, and adhere to CFP Board’s Terms and Conditions. Recognizing that, in the end, the CFP® marks are not a formal license (and CFP Board is not a government-sanctioned regulator), but CFP® professionals who pay CFP Board to use the CFP® marks still, in the process, agree to adhere to CFP Board’s rules… providing CFP Board with the means to ensure that CFP® professionals uphold rules of professionalism, or risk having their CFP® marks suspended or permanently revoked!