CFP Board Suspends Probe After Advisor Drops CFP
Nigel Taylor, a longtime CFP activist called a "watchdog" for his efforts a decade ago to protect the integrity of the CFP designation, has dropped his CFP certification.
Taylor says he made the move to protest the CFP Board's leadership. Shortly thereafter, the board halted an investigation over an alleged compensation disclosure violation -- similar to one involving two Florida planners, Jeffrey and Kimberly Camarda, who are suing the board -- according to a letter to Taylor from one of the board's lawyers that was shared with Financial Planning.
"CFP Board actions have forced me to surrender what I hold most dear," the founder of Los Angeles-based Taylor & Associates wrote in a letter to the board.
Board spokesman Dan Drummond declined to comment on the specifics of Taylor's situation.
The board informed Taylor in May that it was investigating him. Like the Camardas, of Fleming Island, Fla., Taylor owns an insurance company that is separate from his planning practice.
The board's rules forbid planners from calling their practices "fee only" if they take commissions from "related parties" such as insurance brokerages. The board had threatened to publicly sanction the Camardas for calling themselves fee only.
Yet after receiving a letter in July from Taylor saying that he was dropping his CFP and threatening to sue, the board informed Taylor that it had suspended its investigation into him.
The Camardas case has likely cost the board more than $600,000, according to estimates made by outside legal experts.
In the late 1990s, Taylor was a leader in the ultimately successful campaign that stopped the board from implementing a "CFP Lite" designation that opponents said would have created a dumbed-down alternative to the regular CFP.
At the time, Taylor was the subject of a Financial Planning cover story; a fellow planner told FP that Taylor was a "watchdog of the profession."
Taylor's persistence on the issue helped "give voice to the outrage and helplessness felt by members of the planning community, and it paid off. The board not only admitted its error, but also recognized that it had not been communicating effectively with its members," FP reported at the time.
Taylor now says he's had further worries about the board for many years, but had held back on airing them -- and wishes he had spoken up sooner.
"In the past few years I've watched with increasing alarm as CFP Board has morphed from a private organization with ownership of a couple of certification marks into a 'wannabe' regulator, but with no actual regulatory authority whatsoever," Taylor says in an email. "Clearly, from many of the disciplinary cases brought before them recently, they are affecting the reputations and lives of financial planners with what I consider in many cases to be a ridiculous witch hunt."
"Mr. Taylor is entitled to his opinion," Drummond responds -- but adds that, "In exchange for the right to use the CFP marks, CFP professionals agree to abide by the terms and conditions of CFP certification. These include an agreement to comply with our Standards of Professional Conduct and be subject to CFP Board's disciplinary process for any alleged violation."
Taylor, who advertises his planning practice as fee only, takes commissions from his separate insurance venture. He would be breaking California state law if he were to describe his RIA's compensation structure as "fee and commission," he says, since it receives only fees.
He adds that he explains this two-tiered compensation structure to clients. (The home page of his website describes him as a "a FEE-ONLY Fiduciary Registered Investment Adviser.")
Taylor actually helped the CFP Board rewrite its compensation disclosure rules about a decade ago, says Louis Garday, who was board CEO at the time.
In a July 10 letter to Taylor, which he also shared with Financial Planning, the board asked him to turn over 11 different documents or pieces of information regarding his practice and his insurance license.
INDIVIDUAL VS. FIRM
In response, Taylor threatened to sue the board, objecting to most of the requests on the grounds that the board does not have authority to investigate the actions of his RIA, when it only maintains a legal relationship with him as an individual.
Taylor writes a variant of the following sentence repeatedly in the letter: "If you believe you have the authority to supervise, audit and regulate Taylor & Associates, a California registered investment advisor, then I suggest you contact [the firm] directly for this information and stop harassing me personally."
The distinction between an individual planner and that planner's firm is actually a knotty question, says one legal expert.
"The issue reveals a real structur[al] defect of the CFP Board and their disciplinary function in that they only have control over its individual certificants," says securities lawyer Brian Hamburger, who routinely represents planners before the board. "But many of them are employed as agents of companies that are engaged in broader business practices than the certificants," adds Hamburger, who cautions that he is not familiar with the full details of Taylor's situation.
Taylor says that he hesitated to raise these issues about the board in recent years partly because he didn't want to publicize the board's legal problems. When the board began to investigate him, he changed his mind.
On July 30, the board wrote Taylor to say that, given that his CFP was not current, it would be suspending its investigation into his case.
Taylor replied to the board, urging it to continue its investigation of him, even though he had dropped his certification.
To end the investigation without rendering a decision, Taylor wrote to the board, "would in my opinion show an unprecedented lack of confidence in your own rules, procedures and investigative processes and suggest that, when challenged and things become uncomfortable, you try to 'just get rid of the problem' by allowing the certificant to leave by the back door while declaring the investigation 'suspended.'"
In general, CFP certificants "remain subject to the filing of a complaint under the Standards of Professional Conduct for up to five years following his/her relinquishment of the CFP certification" if the complaint is related to "acts or omissions that occurred prior to relinquishment," Drummond says.