R.F.P.s to join CFPs in following practice standards

(October 28, 2003) Adherence to practice standards will soon be a requirement for holders of the Registered Financial Planner (R.F.P.) designation. Hot on the heels of a similar project by the Financial Planners Standard Council (FPSC) — promoters of the CFP designation $#151; the Institute of Advanced Financial Planners (IAFP) has released its own set of practice standards for review.

“We’re all working for the same goal, which is to raise the level of professionalism and protect the public,” says IAFP director David Christianson, who presented a seminar on the R.F.P. practice standards yesterday at the institute’s first annual conference in Toronto.

Similar to the FPSC, the IAFP’s practice standards are based on the six-step financial planning process, and include a code of ethics as well as a requirement that all planning relationships include a letter of engagement and disclosure.

Under the R.F.P. standards, all client relationships are assumed to be financial planning relationships unless it’s been put in writing that they’re not, Christianson explained.

“There’s an assumption that the financial planning relationship exists and will always exist, you can’t opt out,” said Christianson, a planner with Wellington West in Winnipeg. “This is a different approach than the FPSC.”

The R.F.P. also calls for detailed standards of analysis for six elements of financial planning: cash/debt, income tax, investments, retirement, insurance and estate planning.

Both the FPSC and the IAFP require disclosure of advisor compensation and fees at the beginning of a financial planning relationship. But the R.F.P. standards also require planners to make a commitment to disclose future compensation, Christianson pointed out. “That’s a clear distinction from the FPSC standards.”

Despite the minor differences between the IAFP and FPSC standards, Christianson, who holds both an R.F.P. and CFP designation, insists this not a competitive process. “It’s not a ‘we or they’ thing,” he said. “I’m very pleased the FPSC is introducing higher standards for CFPs, I think that’s a very positive thing.”

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FPSC’s new practice standards clearly define financial planning Making it clear: An advisor’s guide to written engagement & disclosure

During a question-and-answer session following the presentation, an R.F.P. noted that introducing letters of engagement for long-time clients doesn’t make much sense, considering the relationship is already well-established.

IAFP president Lynne Triffon responded, calling the engagement letter an “opportunity to show your clients that you care about raising standards.”

The R.F.P. practice standards were released last week and approved by the IAFP board this past Saturday. Following a brief review period, they will take effect on January 1, 2004. The FPSC’s timetable is longer; their practice standards will be open for comment until October 31, 2004, with the final document expected to be released in January 2005.

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For a guide examining the importance of written engagement and disclosure and a customizable “starting-point” template to help you produce your own engagement and disclosure document, please click here.

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What do you think of the IAFP’s practice standards? How do they compare with the FPSC’s standards? Share your thoughts and opinions about this initiative in the Talvest Town Hall on Advisor.ca.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca

(10/28/03)

Doug Watt