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Inside CFP Board’s Recent Public Policy Activities: Financial Advice Tax Deduction and Commentary on the DOL’s New Fiduciary Rule

The push for financial advice tax deduction and opposition to DOL’s watered down fiduciary rule align with CFP Board’s mission to serve the public and advance the financial planning profession.

By Maureen Thompson, Vice President of Public Policy, CFP Board August 28, 2020

With so many investors reporting feelings of high stress as a result of the financial and emotional uncertainty caused by the pandemic, the value of sound, fiduciary financial advice has never been more apparent.

Over the past few months, as the pandemic and the level of uncertainty facing the United States has risen, CFP Board — alongside its partner organizations in the Financial Planning Coalition — have been advocating on Capitol Hill to expand access to financial advice and also ensure that advice is held to a fiduciary standard. 

Effort to Reinstate the Financial Advice Tax Deduction

Prior to the enactment of the Tax Cuts and Jobs Act (TCJA) in 2017, individuals who received financial advice were able to take advantage of tax deductions so long as the fees for that advice exceeded two percent of their adjusted gross income. Unfortunately, the passage of TCJA (which repealed this deduction), effectively raised the cost of financial advice for the Main Street investor, restricting access to a vital service for individuals looking to save for retirement.

In the years since its repeal, CFP Board has been focused on the best way to reinstate this deduction — and expand it for the benefit of the less affluent — but hadn’t found the right moment to make a push due to the relatively stable economy and record bull market.

Then the pandemic hit the United States.

What began as casual conversations with our partners and policymakers about the best ways to resurrect this deduction, quickly accelerated to legislative action as the economic fallout from the COVID-19 crisis became more apparent — our research suggested that American consumers were seeking out the advice of CFP® professionals at a higher clip due to the pandemic.

This ultimately culminated in a joint-partnership among CFP Board, the Financial Planning Association, the National Association of Personal Financial Advisors, the Financial Services Institute and the Investment Adviser Association, requesting Congress to restore and expand this deduction in order to encourage savers to seek advice and guidance from financial professionals as they navigate the COVID-19 crisis.

While our efforts here have resonated with policymakers from both parties, particularly those who focus on retirement and personal finance, Congress has understandably been focused on other matters. With justifiable emphasis being placed on various forms of coronavirus relief to follow-up some of the federal policies passed earlier in the spring, our struggle here has been a matter of finding the appropriate policy vehicle rather than a lack of interest.

If you’re interested in seeing the return and expansion of the financial advice tax deduction, we recommend reaching out to your local members of Congress and advocating for its inclusion in the next wave of relief legislation.

Beyond the obvious abnormalities of this year, 2020 is also an election year, which means we are down to what likely will be the final weeks of legislation for this Congress. If you’re interested in seeing the return and expansion of the financial advice tax deduction, we recommend reaching out to your local members of Congress and advocating for its inclusion in the next wave of relief legislation.

Regardless of the outcome, we are proud of the groundwork we’ve laid on Capitol Hill and will look forward to building on that foundation in 2021. 

Comment Letter Against the DOL’s New Fiduciary Rule

Immediately following the enforcement date for the SEC’s Reg BI, the Department of Labor proposed rules governing the management of retirement accounts which, if implemented without adjustments, would pave the way for retirement savers to receive professional investment advice that does not meet a fiduciary standard.

In a financial landscape where investors expect that the advice they receive will be in their best interest and CFP® professionals strongly support the fiduciary obligation for financial advice, this outcome is unacceptable, which is why CFP Board, NAPFA and the FPA submitted a comment letter opposing the DOL’s new rules.

It is expected that the Department of Labor will issue a final rule largely along the lines of the proposal, despite widespread opposition from investor advocates and financial professionals who have a fiduciary obligation. Despite this likely outcome, CFP Board and our partners in the Financial Planning Coalition will continue to seek opportunities to advocate for a fiduciary standard, consistent with CFP Board’s Code of Ethics and Standards of Conduct, for all personalized investment advice.