New Ethical Standards Are Now in Effect!

• A description of products and services to be offered; • The manner in which clients pay for these products and services; • How the CFP, their firm and related parties are compensated; and • Disclosure of public disciplinary or bankruptcy information leveraging public websites.

Fortunately, the CFP is able to leverage existing documentation, such as the Form ADV brochure or client agreements, to meet many of these requirements.

In addition, Jeff said the Standards contains a new concise definition of financial planning that is more easily understood by clients and prospects. The financial planning process (including application of the Practice Standards] has been substantially updated and reorganized. It now has more detailed requirements captured in a new seven-step process.

The Standards also sets forth guidelines for determining when the Financial Planning Practice Standards must be applied to a client relationship. Additional guidance is offered to address situations where compliance with the practice standards is required, but the client does not agree to the provision of financial planning services.

Other important updates include:

• Requirements for selecting, using and recommending technology; • Additional guidance on the CFP enforcement process and information on expanded obligations for reporting disciplinary matters to the CFP Board in a timely fashion; • Additional guidance on use of the terms "Fee-Only" and "Fee-Based" to describe compensation.

Remember, the Standards target CFP professionals and not their respective firms. Regulators, such as the Securities and Exchange Commission and FINRA do not supervise or enforce the Standards. However, to the extent that firms include policies and procedures to govern the advisor's activities, regulators may consider these during their review/exam of firms.

This isn't an exhaustive summary, and CFP professionals should be sure to study the Standards carefully. The CFP Board has published several guidance documents, including the Roadmap to the Code and Standards, Frequently Asked Questions, Case Studies Applying the New Standards, and a Commentary to assist advisors in understanding and implementing the new Standards.

Thomas D. Giachetti is chairman of the Investment Management and Securities Practice Group of Stark & Stark, a law firm with offices in Princeton, New York and Philadelphia that represents investment advisors, financial planners, BDs, CPA firms, registered reps and investment companies, and is a regular contributor to Investment Advisor. He can be reached at [email protected].