It is a hallmark of an occupation seeking to be recognized as a profession that its services must be rendered ethically. In turn, this means that part of the path to becoming a profession includes developing a Code of Ethics, and defining appropriate rules of conduct that apply the ethics to the particular situations faced by those delivering professional services. In turn, the profession's code of ethics and rules of conduct are ultimately only effective if they are taught to those who deliver professional services - so they can in fact act within the guidance of the prescribed code - and if disciplinary actions are taken to enforce the code against those who violate it. Notwithstanding the importance of having a Code of Ethics, the rules of conduct that accompany it, and the need to teach professionals delivering services about the code and associated rules so they can act accordingly, the latest rules change from the CFP Board may be going a little too far. Because starting in October, the ONLY content that will be eligible for satisfy the Ethics CE requirement for CFP certificants will be teaching the CFP Board's own Rules of Conduct and Practice Standards. The other 99.9% of Ethics knowledge that has been developed over the past two millenia? Don't even bother applying.

The inspiration for today's blog post comes from an inauspicious looking email delivered yesterday from the CFP Board to its CE Sponsors entitled "CFP Board Updating Ethics CE Sponsor Requirements." In the email, the CFP Board explains new changes that it will be implementing to the Ethics CE requirements, effective later this year in October. The changes include new learning objectives requirements for Ethics CE content, and new instructor eligibility requirements.

The new learning objectives requirements state:

Learning Objectives for CFP Board Ethics CE Programs

Effective October 1, 2011, Ethics CE programs registered with CFP Board must be designed to accomplish the following required learning objectives.

Upon successful completion of the course, the student should be able to:

1. Demonstrate an understanding of, and be able to define financial planning, the financial planning process, and financial planning subject areas.

2. Describe the material elements of financial planning.

3. Determine if a CFP® professional is providing financial planning or material elements of financial planning.

4. Demonstrate an understanding of the required elements of a written agreement when financial planning services are provided.

5. Articulate disclosure requirements and apply disclosure requirements to their practices.

6. Define and outline elements of the fiduciary standard and know when it applies.

Ethics CE programs may go beyond the learning objectives to include additional information specific to CFP Board’s ethical standards as outlined in the publication titled Standards of Professional Conduct. However, all Ethics CE programs must, at a minimum, address the required learning objectives.

CFP Board will evaluate the learning objectives every two years to ensure relevance and consistency with CFP Board’s ethical standards.

Wow. Simply put, the only Ethics CE that will count in the future is Ethics CE that specifically teaches the CFP Board's own Rules of Conduct and Practice Standards, especially those provisions pertaining to defining exactly what constitutes financial planning. If it is "ethics" content, but it doesn't otherwise specifically pertain to these learning objectives, it doesn't count. In fact, the guidance even notes that if ethics programs want to go beyond the 6 learning objectives provided, they can do so... by including additional information specific to CFP Board's own ethical standards. In other words, even if you wanted to include some choice tidbits from the past two thousand years of knowledge about ethics, in addition to teaching the learning objectives, the content could still be declined, because the additional information is not outlined in the Standards of Professional Conduct! And perhaps in the most embarrassing part of the learning objectives, the CFP Board forgot to actually include its own Code of Ethics as a learning objective for Ethics CE! Thus, by the end of an Ethics CE course, you may be able to fully explain how to define financial planning, what constitutes material elements of financial planning, and articulate your disclosure requirements, but you still don't actually have to know anything about the 7 Principles in the Code of Ethics itself!?

Now, to be fair, I understand why the CFP Board is taking such a focus on these particular issues associated with the Rules of Conduct and the Practice Standards - it's because these are the areas where they are seeing the most disciplinary activity, a clear sign that in fact the general CFP certificant population really does need a deeper education on these complex and messy professional conduct issues. And I don't want to diminish their importance; every CFP certificant who engages in financial planning services with a member of the public really should intimately understand these crucial issues and their professional obligations.

My concern, though, is that the Ethics CE requirement has deviated too far away from its core purpose - to require a knowledge base of the professional ethics we must apply with our clients - to something else. Almost literally, we have left a focus of teaching principles-based ethical conduct - starting with the 7 principles in the CFP Board's own Code of Ethics, which are sadly not even required learning objectives for Ethics CE - and progressed to teaching the messier rules-based system of how to apply the Rules of Conduct and Practice Standards in various sticky situations. Yes, it's important to know the latter, but the former matters a lot, too. Perhaps even more. After all, isn't the whole point of Rules of Conduct and Practice Standards simply to apply the underlying principles of a Code of Ethics. The point isn't the rules. The point if the principles of the ethics themselves. And if we're not going to teach ethics (and the actual Code of Ethics itself!) in Ethics CE, where else will it be taught?

I will repeat again, though, that I do believe it's still crucial to teach these rules, too. In point of fact, my proposed solution to the CFP Board would actually be to expand the CE requirement, and insist that practitioners have not only 2 hours of Ethics CE every 2 years as is currently required, but to also have 2 hours of "Rules and Standards" CE that covers specific applications of the Rules of Conduct and Practice Standards. Both are very important to the effective delivery of professional services as a profession. But subjugating the Ethics CE requirement into a rules-based compliance-style series of learning objectives isn't the way to do it in my opinion. True professionals need to have both a strong ethics framework, and the knowledge of how to apply those ethics in specific client situations via Rules of Conduct and Practice Standards. Let's put the knowledge of both in their hands.

It's worth noting that the second change to the CFP Board's Ethics CE changes is also pretty significant:

Instructor Requirements for CFP Board Ethics CE Programs

Effective October 1, 2011, instructors of Ethics CE programs registered with CFP Board must meet the following requirements.

The instructor of an Ethics CE program must:

1. Hold current CFP® certification, with all CFP Board continuing education requirements up-to-date and all CFP Board renewal and other fees paid in full.

2. Have held CFP® certification for 5 years or more.

3. Must not be the subject of a pending investigation by CFP Board or any federal or state regulator.

4. Must not have been the subject of a CFP Board discipline (i.e. private censure, public letter of admonition, or suspension) received within the past five years.

Individuals who do not meet all of the above criteria may submit a Policy Exception Request to CFP Board. The Policy Exception Request is subject to review by CFP Board staff.

So apparently just being someone who has dedicated their life to teaching ethics will no longer be sufficient to deliver Ethics CE to CFP certificants. In fact, ironically, there is absolutely no requirement to have any formal knowledge of ethics whatsoever to teach Ethics CE! Instead, one must simply be a CFP certificant, and must have held the marks for at least 5 years (or apply for a Policy Exception request; who knows how easy or difficult it will be to obtain one in practice). Yet this 5-year CFP certification requirement would seem to be a problem unto itself. I understand that it's otherwise difficult to oversee in particular the quality of people teaching Ethics content, but aren't most people who would meet these new requirements and have had the CFP marks for at least 5 years already be practitioners... and therefore not be looking to do the travel and teaching required to deliver 2 hours of Ethics CE content to 60,000+ CFP certificants every 2 years? In other words, are we going to have a huge shortage of Ethics CE providers soon? Is limiting the pool of Ethics educators to former practitioners who now want to teach a viable long-term strategy? And given that these rules take effect in October, if you haven't already had your CFP certification for at least 4.5 years, don't bother trying to step up to fill what will likely be a huge void in the availability of Ethics CE speakers. On the other hand, perhaps this is a tremendous opportunity for yours truly to develop my own Ethics CE content, since I am one of the very few 5+ years CFP certificants who does travel the country speaking to and educating CFP practitioners.

The bottom line is that while I do think the CFP Board is right that we need more education on some of these sticky issues relating to the Rules of Conduct and Practice Standards, pure Ethics content itself still absolutely has a place in the Professional Continuing Education requirements of any profession, including financial planning. If we really need to teach the Rules and Standards, in addition to Ethics, then let's have a formal requirement for both, not substitute one with the other. Accordingly, the new Instructor Requirements would appear to more suited to a new Rules and Standards educational requirement; let's recast them as a requirement for teaching Rules and Standards, and then we can actually let people who are formally trained in ethics at least be eligible to teach ethics!

So what do you think? Is the CFP Board right to focus the Ethics CE requirement on the Rules of Conduct that practitioners need to know more about? Should the Ethics requirement be split into two pieces, one for Ethics and the other for Rules and Standards? Will the new Ethics CE instructor requirements leave us with a shortage of Ethics CE instructors? Should I just look at this as a great personal business opportunity and get to work on a new Ethics presentation to become part of my own speaking activity?!

  • Kathy

    HI Michael,
    Touchy subject…

    I’ve been taking CE courses in my geographical area for 3 two-year cycles now. Every ethics course I’ve ever taken has been…ah……an extreme disappointment (waste of time). There’s been no hint of 2000 years of knowledge about ethics in any course I’ve attended. The courses I’ve taken rather remind me of the electric fence we installed for our dog…through training the dog, we’ve taught it just how far it can go before it gets zapped. I’m not surprised to hear that the new proposal is based on where all the disciplinary activity has been.

    My experience may not be representative I suppose.

    CFP ethics training definitely needs to be vastly improved. I like your idea of 4 hours versus 2 but the content needs, in my opinion, to be upgraded (overhauled) too – tightened up from what seems to be “anything you feel like”. The proposed changes sound like a “let’s get back to square one and rebuild” approach. I’m not against the idea.


    • Edward Culotta

      Hi Kathy,

      Since you’ve gone through a few cycles maybe you can recommend the “least bad” course to take to complete the 2 hrs Ethics requirement?


  • Steven “Shags” Shagrin

    I have been the instructor for the FPA East Bay Chapter’s Ethic Presentation for the past several years, and I agree that the available programs that have been accepted by the Board have been less than stellar. Further, one that was provided as a video presentation was so dry that the projector fell asleep — or so it seemed.

    Here’s something interesting for you, Michael: those who teach the class can’t get CFP Board Ethics Credit, only Teaching Credit, because they “didn’t attend” the class. In the exact words of a denial of credit to me: “Ethics CE credit is not provided for teaching CFP Board Ethics CE programs because the focus of the instructor is on teaching the material. And, for the purpose of CE on CFP Board’s ethical standards, the organization requires the practitioner to be focused on the learning
    of the material. The purpose of the Ethics CE requirement is to prepare the practitioner, not to prepare instructors.”

    I offer up this question: How can the instructor teach the materials without first having a “focus on the learning of the material” so it can then be taught to the class? I certainly learned more than the attendees, because I had to know the material well enough to interpret and present it to the group. I have not yet pressed the issue with the CFP Board, but I am considering doing so, because I believe their rationale to be lacking logic.

    Bottom line: this year I need the CE credit so I will not be teaching the course for the Chapter.


  • Don Martin, CFP

    What happens if someone takes an ethics class (that does not meet the new standards) in April, 2011 and uses it renew their CFP(r) credential on Oct. 31, 2011? Is taking the class grandfathered in if it does not meet the new standards and the class was taken before oct. 1, 2011?

    Don Martin

  • Michael Kitces

    It’s worth noting that the prior version of the Ethics content requirements also had some stipulations that the content tie back to the CFP Board’s Rules of Conduct and Practice Standards (although the Learning Objectives were not so narrowly defined). So that’s probably why you’ve experienced the kind of content that you have, and frankly I don’t know that it will necessarily be different going forward here (although obviously not everyone has to teach compliance-style rules of conduct as “here’s how far you can push the line before you get zapped”!).

    I suppose in many ways, the fundamental challenge is: How DO you improve educational standards in this area, given CFP Board’s role in reviewing and approving (but not delivering) the content?
    – Michael

  • Michael Kitces

    Classes that have been approved for 2011 are eligible for 2011, period.

    Because class approvals only last for a year, the new rule essentially applies for content that is approved for 2012, which has to be (re-)done annually for every program submitted for CE anyway.
    – Michael

Michael E. Kitces

I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them.

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