Financial planners know that when you want to uncover the truth about an investment, you need to delve into the fine print. The same goes for uncovering the truth about financial planners themselves.

This week's headlines said that the organization that grants the Certified Financial Planner credential had raised the bar on ethics, proposing tough, improved standards for caring for customers.

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But when you read past the big print — and most of the coverage never went that far — it becomes clear that the CFP Board of Standards was dancing a two-step, and that the proposed changes move forward while leaving open loopholes that allow for a step back.

So while the changes appear to be a step in the right direction, it's clear they don't go far enough. To see why, let's look at what the CFP board is proposing; the suggested rules are open for discussion through October, by which time they are expected to be approved, although they might be slightly amended.

The big deal in the proposal is that the changes to the ethics code and practice standards would require advisers to take on a "fiduciary" obligation to the client. The standard that the 50,000-plus financial advisers who hold the CFP credential would have to live up to says that a fiduciary acts "in good faith ... and in a manner he or she reasonably believes to be in the best interests of the client."

You might be surprised to know that financial advisers do not have to put customer concerns first, but under existing CFP rules planners must only disclose compensation arrangements and any potential conflicts of interest and act in "a manner that is fair and reasonable" to the clients.

So the proposed language is better — clearly, consumers should be looking for someone to act as a fiduciary — except that it allows one key out. An adviser who does not want to step up to the role of fiduciary — and many are fearful of the added responsibility and liability — can operate under other terms and conditions, so long as the lower standard is laid out in the client agreement.

You'd think the CFP board would know that most clients don't read those agreements too carefully, but maybe that's the point.

Ongoing battle

In addition to allowing advisers to get out of the new fiduciary standard, the CFP board eliminated the so-called "practice standard requirements," which effectively told the customer what to expect when hiring a CFP designee. The proposed rules require the adviser to talk about certain elements of the practice before signing a written agreement that defines the relationship.

There are other, lesser changes in the proposal as well. That said, the next key step will occur when the CFP board issues a set of "best practices" that define the adviser-client relationship more fully.

The fiduciary issue is at the core of a battle between investment advisers — who typically help consumers manage money for a fee — and stockbrokers, who traditionally have sold investment products on commission. Several big Wall Street brokerage houses have moved in recent years to reposition their brokers as providing fee-based planning; those brokers, however, have never had a responsibility to operate as a fiduciary, in the best interests of the client. All those brokers have needed to do was meet "suitability" standards, which required picking investments that a reasonable person would believe were suitable for the client's age, needs and risk tolerance.

For years, the brokerage community has maintained that suitability is enough, and that fiduciary standards are not necessary.

The CFP Board of Standards does not represent all financial advisers; plenty of planners do not have the credential. In fact, violating the rules, if they are approved, is not against the law. But the adviser who gets caught doing it could lose their right to use the CFP mark.

That inconsistency and lack of punishment is part of the problem for consumers. Every adviser appears to be providing a service that is more or less similar, but they do it under different rules and industry standards.

"What you have here is a standard that says 'The financial planner is supposed to act in the best interest of the client, if that's what they feel like doing," says Daniel Moisand, the Florida-based financial adviser who currently serves as president of the Financial Planning Association. "I don't want to force anyone into a fiduciary role, but I don't want them to market themselves like your buddy and friend and then not live up to it."

The CFP Board of Standards seems content to let others do most of the talking, for now; no one from the organization returned my calls to discuss the topic.

All up to consumer

When the comment period has ended and the fiduciary requirement becomes the rule for CFP certificants, it still will not go far enough.

Until the securities industry can come up with a definition for what each type of financial adviser does and what is expected in the counselor-client relationship, confusion will remain a big part of the problem. Whether the adviser is a broker, planner, wealth adviser or some other description, the key issues boil down to what services are being provided and for what compensation. Equally important is what customers expect to get for their money.

So while the players in the financial services industry argue with each other over how to best serve and protect the consumer — and how to protect their own interests and assets — consumers need to take the entire exercise as a reminder that the best protection is asking a lot of questions, defining the relationship and making sure that any written agreement reflects all of the terms that have been discussed.

Says Moisand: "We've gone from a situation where a person who read the CFP board's code of ethics and the practice standards would have some idea of what to expect, to a situation where someone reading the new code of ethics and rules of conduct comes away no better informed than they'd be without reading things.

"The consumer has to define everything, and should assume nothing; while we can say the proposed rules may help, we can't say they have cleared anything up."

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