CFP Board Lambasted In Wall Street Journal; WSJ Blogger And Practitioner Allan Roth Questions Whether CFP Board Deserves To Be Trusted

Wednesday, September 19, 2012 10:03
CFP Board Lambasted In Wall Street Journal; WSJ Blogger And Practitioner Allan Roth Questions Whether CFP Board Deserves To Be Trusted

Tags: CFP Board | dually registered | fiduciaries | integrity | profession

In a scathing column blasting the CFP Board, CFP licensee Allan S. Roth, who writes for The Wall Street Journal’s personal finance blog, accused the CFP Board of giving little more than lip service in requiring CFPs to act in their clients’ best interests.

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“Recent advertisements by the CFP Board of Standards, the group that licenses certified financial planners, or CFPs, trumpet their ‘fiduciary duty,’” says Roth, an advisor in Colorado. “One ad states CFPs are ‘ethically bound to put your interests first.’ Is it merely an advertising campaign, or is it real?”

Roth, in a post entitled, “Is The Fiduciary Standard A Joke,” tells the story of a client who came to him for a second opinion on advice from another advisor. According to Roth’s account in The Journal, the other advisor had told the client he would provide financial planning services as a fiduciary. When Roth examined recommendations made by the other advisor, who was also a CFP licensee, Roth says he found that the client was charged a commission on top of an advice fee on an annuity a total fee of 5.29% annually.

Charging advice fees on top of commissions is known as “double dipping” and it’s obviously not right. You can’t claim to be a fiduciary and gouge clients.

The client settled with the insurance carrier for his money back plus interest, Roth says.

What happened next, according to Roth, is most disturbing: Roth as well as the client filed separate complaints with the CFP Board and no public action was taken.

While it is possible that the advisor alleged to have been posing as a fiduciary was privately censured, Roth reports that the CFP Board would probably have publicly disclosed the incident if it indeed had censured the CFP for posing as a fiduciary. No such public admonition has been disclosed by the CFP Board, which is responsible for protecting consumers from misbehavior by CFP licensees, including CFPs who pose as fiduciaries but do not do what’s in a client’s best interest.

Roth’s allegations get personal.
During the process of filing his complaint against the alleged fake fiduciary, Roth says he came to be invited by CFP Board CEO Kevin Keller to join the Disciplinary and Ethics Commission. That’s the committee responsible for reviewing complaints and recommending sanctions against CFP licensees. Keller told Roth he wanted him on the committee “so that I could write about the process from the inside,” according to Roth’s WSJ post.
Roth says he would come to view Keller’s invitation as disingenuous. “I initially accepted his invitation but then I received an agreement to sign giving the CFP Board the right to review and approve the article I would write on the process before publication,” Roth says.
Both Roth and his editors at WSJ found the terms set by the CFP Board “unacceptable.”
The CFP Board requires licensees to explain their compensation clearly. A CFP getting paid 5.29% by double dipping on fees and commissions is obviously not telling a client what he’s paying in a simple straightforward way. He’s no fiduciary.
Though the CFP Board says CFPs must disclose fees clearly, it appears to have not censured this particular CFP, despite complaints filed by a former client and Roth. It’s possible Roth is not telling us all the facts, but it seems unlikely both Roth and his client would take this matter so far if there were any doubt about what occurred.
Allan Roth is a whistleblower and CFPs should thank him for blogging about this incident. Criticizing the watchdog responsible for policing his profession is brave. But this incident makes the CFP Board look like it does not deserve the public’s trust, and that’s a serious problem.


Comments (7)

Unfortunately, this is not surprising. I remember a representative of the CFP Board at the NAPFA Long Beach conference a few years ago and his defense of the reluctance of the CFP Board to really enforce a fiduciary standard. If the Board were to do this, they'd lose all but about 2000 members, based on the current membership of NAPFA.
Perhaps the CFP Board should segregate the membership into fully-credentialed and approved Fiduciary CFP's and another section, which recognizes the fact that someone has achieved the ability to use some credential, but not one which indicates that they are "financial planners".

It's hard to believe, that in the year 2012, we have a certification for financial planners which does not restrict that designation to those who truly provide financial planning as a service to their clientele. Without using a financial plan as a method to sell a commission-based product. This is a RIDICULOUS situation, and one that waters down the credential, and does NOT protect the public.
dkinseycfp , September 19, 2012
DKinseyCFP: As you say,"This is a RIDICULOUS situation, and one that waters down the credential, and does NOT protect the public."

Your idea for a separate section for Fiduciary CFPs good but impractical.

A solution that recognizes advisors charging commissions aren't going to stop doing so tomorrow is necessary and pragmatic.

How about a CFP disclosure regime that mandates clients receive a plain-English registered letter when there is double-dipping?

Requiring very specific disclosures about the two fees and specific language could easily solve the problem. It would probably end almost all double dipping by CFPs.

agluck , September 19, 2012
I know that RIAs are held to a fiduciary standard; not sure about CFPs. Yet, the CFP standards do ask for full disclosure of compensation. Sadly, it seems it falls to the consumer to ask the right questions, as the answers aren't usually offered up front.
Patricia , September 19, 2012
All the more reason for clients to be educated on a broad basis about a deeper level of due diligence criteria they should develop based on their individual personal and investment goals. Investors today absolutely must become more proactive in their investment process. Coupled with an advisory relationship they truly can trust, that becomes a strong win-win.
lisagray , September 20, 2012
Once again another forum for bashing those using commissions as compensation. While double dipping should be dealth with as a seperate matter, I happen to know many that use a commission based platform that i would rather see in front of my family memebers than some of those that charge a fee. It is about someones ethics rather than the compensation model they choose. I have been exposed to many CFP's in my 30+ years in this business that have no clue how to help a client (home office employees and wholesalers to name a few).
a guest , September 22, 2012
Andy, I wish it was this easy:

"Requiring very specific disclosures about the two fees and specific language could easily solve the problem. It would probably end almost all double dipping by CFPs."

But its not, disclosure actually leads to systemically worse outcomes, see this article:

As dkinseycfp points out, the CFP Board is caught in a tough spot given the significant power of the commission based brokers and the Wall Street firms.

And they don't always get much help from those who truly want to see the public well served, but in the name of practicality, provide cover for a compensation method that is fundamentally at odds with the very meaning of the term fiduciary.

The concept of fiduciary has absolutely nothing to do with disclosure or education- its legal definition is "a person bound to act for another's benefit, as a trustee in relation to his beneficiary".

There is no room for telling your client "hey, I might be screwing you over", and giving a client such disclosure seems to me to be a clear abdication of fiduciary duty.

bramsay , September 24, 2012
I would want to know how frequently this occurs before I burn the barn down.
Yes, there are fake fiduciaries out there whether they are RIAs or CFPs or both. In fact, I would venture to say that any of the "crimes" committed by CFPs in violation of any of the standards are first Fiduciary breaches before they are anything else. The Board's failure to publicly punish this miscreant is shameful and may indicate some other larger agenda on the Board's part, but we don't know, do we? Publically bashing the Board may make us all feel better, since the Board seems particularly unpopular these days among CFPs. But does it accomplish anything more than making readers of the WSJ and by extension the larger public even more suspicious of planning practitioners?
I, for one, would like the Board to explain its action in this case. I, for one, would like CFP practitioners who feel so strongly that the Board is doing us a diservice to step up to the plate and get on the Board and make the changes they so deeply feel are needed. Roth for one should have taken up the challenge. The stricture that he get pre-publication approval from the Board is onerous but would his presence on the Commission have been a net benefit to his profession. Which is he first? a reporter or a CFP?
mitchellkeil , September 24, 2012

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