An Open Letter To NAPFA's Board Regarding Ron Rhoades

Tuesday, September 04, 2012 11:40
An Open Letter To NAPFA's Board Regarding Ron Rhoades


NAPFA should re-instate Ron Rhoades as chairman-elect of the Board of Directors for 2013. I don't say that lightly. I know the great folks at NAPFA (though I am not a member) and I know their hearts are in the right place.
But I also know Mr. Rhoades personally and professionally. I, like Ron, am a CEO/CCO of an RIA firm, and I, like Ron, have been very involved with advancing the cause of fiduciary standards for all and am very active and involved with a number of organizations (currently as chairman of the AICPA's PFP Division Executive Committee, as leader of their Fiduciary Task Force, and as a founder/steering committee member of The Committee for the Fiduciary Standard).

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Here is why NAPFA needs to re-instate Ron Rhodes for the betterment of our loosely defined and still evolving financial planning profession. Setting aside the fact that Mr. Rhoades is brilliant, and tireless in his efforts to improve an industry that desperately needs improvement, the fact is that if what essentially constitutes a deficiency from a state (or federal) regulator becomes cause for not holding a leadership position with a credible organization like NAPFA, then quite frankly I imagine that many officers (CEOs, CCOs, COO's, etc.) of regulated firms could not meet this litmus test. 
The precedent being established is neither reasonable nor supportable. Anyone who has been in this business at an officer level knows full well that an examiner's goal when performing an exam is to find deficiencies. It is what they do. Individual examiners will tell you that the likelihood of surviving an exam without a deficiency is about 1 in a hundred (and some will confide that in their experience it never happens).  And let's be realistic, if the state of Florida has decided not to assess a penalty or fine, then this filing deadline oversight constitutes little more than a minor administrative deficiency.
So here we have an individual of unquestioned character who, because he is all about full disclosure and is scrupulously honest, confesses a minor deficiency and in return is rewarded with a vote of no confidence from the board he has faithfully served and stripped of his much deserved leadership role.   
So here's my plea - NAPFA, we all know that Mr. Rhoades not only deserves this position, he can and will elevate the status of the organization throughout the financial services industry. The message that you will send by reinstatement will be positive and important - the character, reputation and contributions of an acknowledged thought-leader are not so tenuous, frail and unimportant as to be lost forever through the inadvertent oversight of a filing rule that any innocent and well meaning firm could find itself subject to. Please, rethink your position and re-elect Ron Rhoades as chairman of NAPFA's Board of Directors. It's the right thing to do for the membership of NAPFA, the profession, and every volunteer who ever made the hard and selfless decision to contribute time, energy and expertise to our emerging "profession."
There will be those who will criticize giving Mr. Rhoades his due. To them, and to those that might give their criticism some weight, I’d suggest contemplating the words of President Theodore Roosevelt:
“It is not the critic who counts; nor the man who points out how the strong man stumbled, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood. Who strives valiantly; Who errs and comes short again and again; Who knows the great enthusiasms, the great devotions; Who spends himself in a worthy cause; Who at the best knows the triumph of high achievement and who at the worst, if he fails, at least fails while daring greatly, So that his place shall never be with those cold and timid souls who know neither victory nor defeat.”
Clark M. Blackman II


Comments (3)

Chris Winn
I agree with your points Clark.

An error was made. We can't make light of the error or the implications to Ron and his RIA.

That said, in 2004, the SEC implemented Rule 206(4)-7 of the Advisers Act to require a compliance program administered by a competent person as CCO. They further state a compliance program must be assessed annually, meaning continuous improvement.

In my many years as a compliance consultant, I have yet to encounter an exam with zero deficiencies. When an Advisor tells me they have never made an error, I politely ask "Have you ever looked for one?"

Firms are run by people and people can and do make mistakes. It is how we handle these mistakes that is most important. Ensuring clients are never harmed, understanding what went wrong and fixing it so it never happens again. That was the intent of the CCO rule. Ron is certainly accountable for his oversight, but the disclosure of the issue and perhaps a statement from Ron to learn from his mistake should have been all that was required.

It is unfortunate that Ron and NAPFA both lost sight of this when reacting to this unfortunate decision.

Advisors -- keep this in mind when you manage the risks of your firms. It is not about getting the straight A for compliance. It is about process and continuous improvement while acting in the best interests of clients.

Good luck out there.

Chris Winn , September 04, 2012
I am concerned that Rhoades refers to himself as Dr. Rhoades, JD. It implies that his doctorate is something other than his law degree. Cannot find anywhere where he obtained a PhD or MD.

Therefore, he is lucky to have been able to resign instead of have the state hit him with unethical practices of misrepresenting his qualifications.
brentb843 , September 04, 2012
I think this all may end well enough.

I hope Rhoades has more time while NOT on the Board, and therefore continues to help NAPFA persuade Congress to have RIAs examined by the SEC, not the broker dealer's trade organization.

I'm pretty sure Rhoades can be elected Chair of NAPFA again one day.
JakePlanner , September 04, 2012

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