The CFP Board said it has released a comprehensive guide comparing its own standards in annuity transactions to the best-interest regulation created by the National Association of Insurance Commissioners, Insurance.News.Net reports.
The board said the guide was developed to help CFP® professionals understand the similarities and differences between the CFP Board’s Code of Ethics and Standards of Conduct (Code and Standards) and the National Association of Insurance Commissioners’ (NAIC’s) Suitability in Annuity Transactions Model Regulation (MO-275-1) (Model Regulation).
47 states have adopted or are discussing adopting the NAIC Model Regulation, but the CFP Board noted that if its standards are higher than the Model Regulation, then CFP® professionals are obligated to adhere to the CFP Code and Standards. In the states where both are in effect, CFP® professionals who are agents or broker licensed to sell annuity products will be subject to both sets of standards.
“The foundation of the Code and Standards is its fiduciary duty,” said CFP Board CEO Kevin R. Keller, CAE. “As this guide makes clear, a CFP® professional makes a commitment to CFP Board to act as a fiduciary and, therefore, to act in the best interests of the client at all times when providing financial advice.”
The guide points out the key differences between the Code and Standards and the Model Regulation, which are as follows:
-The Code and Standards imposes a fiduciary duty. The Model Regulation does not.
-The Code and Standards treats compensation as a material conflict of interest. The Model Regulation does not.
-The scope of the Code and Standards is broader than the Model Regulation.
-The Code and Standards applies a prudent professional standard. The Model Regulation does not.
“We wanted to make clear that the scope of these documents is different,” CFP Board general counsel Leo G. Rydzewski was quoted as saying. “The scope of the code and standards is broader than the [NAIC] model regulation. We made clear that we weren’t examining any of the laws, rules or regulations that might apply. We literally were just examining these two documents.”
The Model Regulation applies only to annuities, not other types of insurance, and excludes annuities in many workplace retirement plans. The Code and Standards applies to all financial advice.
In one key difference, the CFP Board stated that, “CFP Board’s Duty of Care requires “care, skill, prudence, and diligence” while the Model Regulation requires a producer to have “reasonable diligence, care and skill.” Thus, the Model Regulation does not require “prudence.” In CFP Board’s view, “prudence” indicates a fiduciary obligation, and CFP Board has provided guidance on how to meet this requirement through a prudent process.”
Click here to view the CFP Board’s comparison guide.
Hyman Cotter PC represents advisors, brokers and other financial professional in all matters involving the CFP Board, including CFP Board investigations. Headquartered in Chicago, our securities attorneys represent clients nationwide. For more information relating to CFP Board investigations and discipline or other matters, contact Hyman Cotter PC at 312-291-4600 or through our online contact form for a free consultation.
