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Evercore takes on another US Trust alum -- an expert in Asian American philanthropy

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Bill Winterberg

Bill Winterberg

October 3, 2009 — 3:30 AM

This is a very difficult topic with a large grey area with respect to regulations.

First, CFP® practitioner’s must abide by Rule 302 that states (my emphasis added) “A CFP Board designee shall offer advice only in those areas in which the CFP Board designee has competence. In areas where the CFP Board designee is not professionally competent, the CFP Board designee shall seek the counsel of qualified individuals and/or refer clients to such parties.”

I believe that planners who are not licensed psychiatrists or certified therapists should not attempt to provide emotional counseling.

But in reality, the line is difficult to draw between financial counseling and emotional counseling, as the two are so closely intertwined. There’s the rub.

According to the survey, some 10% of planners became aware of clients’ suicidal thoughts. In many states, health care professionals are required by law to report incidents of suicidal thoughts to authorities (rights of confidentiality are overridden for suicide, homicide or child abuse).

Imagine in a meeting a client tells a planner of suicidal thoughts and, for whatever reason, the planner does not report the information to authorities. The following day the client commits suicide. To what extent is the planner liable in failing to report the information. Is this an incidence of malpractice?

Again, a very difficult topic to consider.

Brooke Southall

Brooke Southall

October 3, 2009 — 4:11 AM

Bill,

There’s no doubt that this article is all about gaining greater sensitivity to where the line of financial counseling spills over to true emotional counseling. I’m sure that many advisors reading this will duly note its message and make adjustments where needed by making referrals or gaining greater training.

It also occurs to me that financial advisors are not likely to overreach their bounds. Does the advisor have anything to gain? The article is another reminder of what a vital role a good financial advisor can play in society. For many people, money is the ultimate emotional issue. Nobody is more expert in spotting this than a financial advisor.

Brooke

P.S. I wonder if there are articles in psychiatric journals about when a client distressed by fiscal circumstances would be better served by a financial advisor. If there aren’t, maybe there should be.

David Dubofsky

David Dubofsky

October 5, 2009 — 5:38 PM

Bill’s comment is very relevant. In our second JFP paper we also cite Rule 302 and add that “Referrals are typically thought of as being necessary to get financial advice for clients in areas that you are not licensed or equipped to provide; referrals to get nonfinancial help appear to fall under this rule as well.” The CFP Code of Ethics should directly address this issue.

Roger Wellington

Roger Wellington

October 6, 2009 — 9:24 PM

Financial planners are always dealing with charged subjects. Death, divorce, investment losses, health issues—all of us feel pain and anxiety around these subjects but that doesn’t mean we necessarily need a psychologist. We need a professional who understands and appreciates their gravity and significance. Our work at the Kinder Institute of Life Planning shows that it’s relatively straightforward to train advisors to listen well and empathize appropriately so that clients provide the depth of information necessary to create successful financial plans. We make it very clear that Life Planners are coaches, not counselors. Registered Life Planners are trained to know when to refer people to qualified therapists.

Michael Shaw, Managing Director, Professional Revi

Michael Shaw, Managing Director, Professional Revi

October 20, 2009 — 12:15 AM

CFP Board has addressed the importance of <acronym title="R">CFP</acronym> professionals providing competent advice in its “Code of Ethics” and “Rules of Conduct.” The Code identifies seven principles, one of which is “competence,” defined as “... includ[ing] the wisdom to recognize the limitations of [one’s] knowledge and when consultation with other professionals is appropriate or referral to other professionals necessary.” This principle led to the development of Rule 4.2 (formerly Rule 302), which provides that a <acronym title="R">CFP</acronym> professional “... shall offer advice only in those areas in which he or she is competent to do so and shall maintain competence in all areas in which he or she is engaged to provide professional services.”

I agree with Professors Sussman and Dubofsky that providing non-financial advice without the proper training and coursework would be a violation of Rule 4.2. I should point out, however, that Rule 4.2 applies only to <acronym title="R">CFP</acronym> professionals, not all financial planners. It is not clear whether the professors’ survey of 2,006 financial planners included any <acronym title="R">CFP</acronym> professionals.

A second point that needs to be made is that CFP Board vigorously investigates all allegations of misconduct by <acronym title="R">CFP</acronym> professionals. CFP Board would treat no differently an
allegation that a <acronym title="R">CFP</acronym> professional gave non-financial advice to a client when the <acronym title="R">CFP</acronym> professional lacked the proper training and education to do so.

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