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CFP Board Offers Broad Amnesty to Rule-Breaking Advisors

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The CFP Board extended a broad amnesty to hundreds of advisors who had been breaking its rules by calling themselves fee-only on the board’s website. The surprise move prompted calls for the board to reconsider and possibly rescind recent sanctions of other CFP holders for similar transgressions.

By unilaterally changing thousands of its certificants’ profiles -- removing “fee only,” regardless of the circumstances, and inserting “none provided” – it became temporarily impossible to definitively identify advisors based on their compensation.

In addition, resetting the profiles without any forewarning also insulated the board from the prospect that it might receive thousands of complaints about rule-breakers. The board says its policy has been to initiate investigations after it receives complaints about rule violators.

The board made the changes on its website last week just hours after Financial Planning reported that 486 wirehouse advisors – and hundreds more at banks, insurance companies and other firms –were calling themselves fee-only against the board’s rules on its Find a CFP Practitioner search tool.

A day after stripping out all fee-only declarations, the board sent an email to all advisors who had been marketing their practices by using the term. The email directed them to re-read the board’s compensation disclosure rules and then re-select their compensation disclosures, including fee-only, if they chose to.

‘Same Courtesy’

The new development came as the board continues to face controversy over its decision to publicly sanction former Chairman Alan Goldfarb for his use of the term fee-only, and for its private sanctions of two other former board officials, including Tina Florence, of dually registered firm Lane Florence in Folsom, Calif.

“If CFP Board is contacting the hundreds of CFPs [who] are clearly in violation and giving them the opportunity to change public information and not be investigated or disciplined, why didn't all of us … get the same courtesy?” Florence asks. “Given the glaring inconsistency and disparate treatment, when will they vacate the cases against us, refund the costs associated with defending ourselves and issue an apology?”

Neither the board’s chief executive, Kevin Keller, nor Michael Shaw, its director of disciplinary and legal matters, responded to emails. According to its 2011 IRS filings for its tax-exempt status, the board says it “provides a fair disciplinary and investigative process.”

However, it was the threat of legal action over compensation disclosure from a pair of husband-and-wife planners in Florida in 2011 that prompted the board to investigate Goldfarb and the other two former officials, according to current and former members of the board’s disciplinary and ethics commission. The couple, Jeffrey and Kimberly Camarda, sued the board in federal court in Washington in June. 

Revisiting Cases

The board’s amnesty to rule-breakers prompted various industry leaders to call for the board to reconsider the cases of Goldfarb and others accused of similar transgressions.

"I do believe revisiting those cases is appropriate," says Harold Evensky, widely considered a dean of the planning industry and a co-founder of Evensky & Katz Wealth Management, with offices in Lubbock, Texas, and Coral Gables, Fla.

NAPFA Chairwoman Linda Leitz says she supported the board's surprise move to force all planners to re-consider and re-select their fee-only disclosures.

"I would not want [the board] to pick out specific people and made an example of them," Leitz says. She adds that forcing all self-described fee-only CFP holders to reconsider whether they are eligible to make that declaration is “very smart. I think that is a very good way to handle that. It’s great to have a warning shot across the bow.”

Tarnished Standard

Ron Rhoades, a former NAPFA board member and head of the financial planning program at Alfred State College in Alfred, N.Y., calls the widespread rule-breaking on the board’s site “a dark stain upon the gold standard the CFP certification professes to be.”

“I hope that the board of directors will review all of the actions taken, and sanctions handed down, in connection with compensation disclosures,” he says.

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