CFP Board Urges Better Disclosures, Clearer Language for Investors

Encourages Reforms to Better Educate the Investing Public

March 26, 2012 – Investors need simpler, easier to understand disclosures that are written in plain English and are provided before the investor hires a financial intermediary, Certified Financial Planner Board of Standards, Inc. recommended in a letter sent to the Securities and Exchange Commission in connection with the SEC’s study on financial literacy among investors.

“We believe that investor education, including timely and effective disclosures, is important to the protection of investors, regardless of who is providing the advice,” wrote CFP Board Chief Executive Officer Kevin Keller, CAE. “The additional disclosure requirements we recommend, many of which are currently embraced by CFP® professionals under our Standards of Professional Conduct, will help investors make key financial decisions including what type of advisor is best suited for them. Additional disclosures alone are not enough to protect investors and build confidence in our capital markets. That is why we will continue to urge the SEC to adopt a uniform fiduciary standard of care applicable to all who provide personalized investment advice to investors.”

In the letter sent to the SEC, which can be viewed here, CFP Board recommended among other things:

• Requiring disclosures in four focused areas: conflicts of interests (including a financial intermediary’s standard of care), fees and costs, background of the financial intermediary and scope of representation;
• Requiring that the recommended disclosures be made prior to the engagement of a financial intermediary (i.e., financial advisor, financial planner, broker-dealer); and
• Requiring all disclosures be written in plain English, be provided in writing and be made available electronically.

Keller noted that a recent survey by CFP Board showed more than two-thirds (67 percent) of all Americans believe that they are solely responsible for their own financial security, including retirement. At the same time, 67 percent of survey respondents also agree that the government has a role in protecting investors from fraud and abuse.

“This indicates to us that enhanced investor protections and better information is needed for the individual investor,” said Keller.

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