The revised standards include a revised duty of loyalty to clients, new prohibitions on lending, and rules on client engagement
The Financial Planning Standards Council (FPSC) has announced amendments to its Standards of Professional Responsibility for CFP Professionals and FPSC Level 1 Certificants in Financial Planning. Approved by the council’s Standards Panel, the revised standards will come into force on January 1.
“It is important that these standards remain current and relevant over time,” said Susan Howe, CFP and chair of FPSC’s Standards Panel. “The recent amendments to the standards will help to further strengthen Canadians’ confidence in professional financial planners and to clarify the expectations of professional financial planners.”
One key revision to the standards is the introduction of a “Duty of Loyalty” in the Code of Ethics. It builds on and replaces the existing “Client First” principle by covering specific obligations such as the duty to act with honesty, integrity, competence and diligence; to disclose and mitigate conflicts of interests in the client’s favour; and to act with the care, skill, and diligence of a prudent professional.
To avoid conflicts of interest, certificants will also be required to refrain from personally lending money to or borrowing money from a client, except when the client is part of their immediate family.
With regards to client relations, certificants will have to comply with the established terms of engagement, whether they’re oral or written. Another new rule says certificants must “fulfil their professional commitments in a timely and thorough manner,” adhering to mutually agreed timelines or, in the absence of such agreements, as soon as possible.
The FPSC also laid out new obligations at the end of an engagement. In cases where a certificant effectively ends a client relationship because they are leaving their firm or employer, the certificant must notify the client unless it’s prohibited by a contract or other obligation to the firm or employer. In cases where the client cannot notify the client directly, the certificant must take appropriate steps to make sure the client is informed of their departure.
In cases where the client ends the engagement, certificants shall take reasonable steps to assist them including, as directed by the client, ensuring a smooth transition to a new financial planner.
Other key amendments include:
- New duties to prospective clients under Rule 20
- New professional obligations relating to referrals under Rule 26
- Amendments to rules 31, 32, and 34 concerning a certificant’s relationship to the FPSC
Full details on the updated Standards of Professional Responsibility can be viewed on the FPSC website.
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