By the end of the month, the CFP Board is expecting Certified Financial Planners to prove that they have done their due diligence in selecting the technology that they’re using—and to have an understanding of how the tech they use gets from input to outcome. The responsible use of technology that’s expected of CFPs is outlined as a series of duties listed under the CFP Board’s Code of Ethics and Standards of Conduct, which hold designees accountable for the tech they select and employ in their practice. The code has been in effect since the beginning of October, but it will be enforceable on June 30.
“Black box” technology implementation, where an advisor utilizes tech that he or she doesn’t fully understand, will no longer suffice, according to the standards. CFPs are expected to “exercise reasonable care and judgment when selecting, using, or recommending any software, digital advice tool, or other technology.” The onus is on planners to understand how their software works: They “must have a reasonable level of understanding of the assumptions and outcomes of the technology employed” and “have a reasonable basis for believing that the technology produces reliable, objective, and appropriate outcomes.”
With enforceability around the corner, discipline for violations is also set to go into effect. That means violations of "Duties when Selecting, Using, and Recommending Technology," the code's technology provisions, can lead to sanction—with consequences ranging from private censure to permanent bar. For now, there isn't a specific sanction guideline for that item, but by "late 2020" the CFP Board will commence a Commission on Sanctions "to evaluate and propose to the Board of Directors potential changes to the current Sanction Guidelines and Fitness Standards," said a CFP Board spokesperson.
In order to establish and track technological competency, the CFP Board reviews publicly available information, self-disclosures by CFPs and complaints from consumers, other CFPs and members of the public, the spokesperson added. “Technology has never been more important to a CFP professional’s delivery of financial advice.”
In establishing technology standards, the board “addresses both the selection, and use, of technology,” according to the spokesperson. “The standard is principles-based, and thus will be able to adapt to the changes that will continue to occur in the use of technology.”
But while continuing education is an important component of the CFP designation, some wonder if certifications, or other more tangible means for CFPs to demonstrate adherence to the new code, shouldn’t be a requirement.
Financial planning software provider eMoney Advisor already provides students in its university programs with training that leads to a certificate, and it is considering eventually developing something similar for its users, said Celeste Hernandez Revelli, director of financial planning at the firm. A major difference, however, is that students use the certificate on their resumes, while CFPs would presumably be using the certificate as a way to demonstrate to the board that they meet standards they have agreed to live up to—and are worthy of a designation that could be revoked.
The CFP technological proficiency standards also raise questions for vendors, said Hernandez Revelli. “There’s no standard for fintech companies like us,” she explained. “The hope is that the tech firm is acting as a fiduciary, but there’s a lot of trust there without some sort of oversight or standard.”
As code enforceability comes into play, eMoney is approaching the code’s provisions as “beginning stages” for more accountability across the industry’s vendors.
The CFP Board has recognized the importance of technology to advisors, she said, but clarification is welcome. “They know and acknowledge a growing use of technology,” she added. “They haven’t gone further than that. How, from a compliance standpoint, should they track that?”
