financial advisor explaining investment plan to couple on laptop at office desk

Financial planners that hold the certified financial planner (CFP) designation will be subject to a new “duty of loyalty,” which aims to enhance their obligation to prioritize clients’ interests, the Financial Planning Standards Council announced Tuesday.

The FPSC Standards Panel, an independent panel of planners and members of the public, appointed by the FPSC board, has approved amendments to the standards of professional responsibility for CFP professionals and FPSC level 1 certificants in financial planning (the standards of professional responsibility). The revisions take effect Jan. 1, 2019.

The revised standards introduce a new “duty of loyalty,” which “enhances the duty requiring [planners] to place the client’s interests first by encompassing specific obligations, including the duty to act with honesty, integrity, competence and diligence; to disclose and mitigate conflicts of interest in the client’s favour; and to act with the care, skill and diligence of a prudent professional,” says the FPSC in a news release.

The new duty replaces the “client first” principle that is part of the current standards.

The revised standards also introduce: a prohibition on lending to, and borrowing from, clients; new compensation disclosure requirements; and new obligations to prospective clients.

“The Standards of Professional Responsibility set the framework for the financial planning profession in Canada. It is important that these standards remain current and relevant over time,” says Susan Howe, chairwoman, FPSC 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.”

The revised standards were published for public comment in August.

More details about the revised Standards of Professional Responsibility are available on the FPSC website.