In a strained 2012 telephone call with an adviser he was supervising, JPMorgan Chase investment manager Andrew Held invoked his CFP certification to demonstrate his commitment to clients. In the next breath, he then appears to pressure the adviser, Johnny Burris, to sell high-priced, proprietary JPMorgan investments to Burris' elderly clients in the retirement communities near Sun City West, Arizona.
Held's comment came after Burris, who recorded the call, expressed concern about what could happen to him if he didn't sell his employer's products through his position at Chase Private Client, or CPC:
"What am I going to do if I don't sell JPM if it's not right? And then, now, all of a sudden, now my ass is in a sling …?" Burris asks Held.
At first Held sounds sympathetic.
“I'm a CFP and it's the way I've always run my practice and at the end of the day, obviously, we always do what's most appropriate for the client," Held tells Burris in the recording.
"Now with that being said, it does look a bit odd if after 60 or 90 days and you've presented to, you know, let's say, 30 CPC prospects — high–net-worth prospects — and you haven't done any JPMorgan business. Can you understand how that would look odd as a private-client adviser?"
Four months after this exchange, JPMorgan fired Burris for not succumbing to this pressure, he says, despite repeatedly lauding him for being a top producer. At the time, Burris says Held was not only his supervisor, but also his compliance manager.
The recording raises questions about the CFP Board claim on its website and in its advertising campaign that all certificants are fiduciaries.
The conversation appears to be an example of the the same widespread sales practice for which regulators fined JPMorgan $307 million in December — the combined amount the bank agreed to pay in related cases brought by the SEC and the Commodity Futures Trading Commission. The bank admitted it "breached its fiduciary duty" by not disclosing to clients its preference for its own products between 2008 and 2013, according to the SEC.
Burris submitted the recording to the SEC in December 2012 as part of an ongoing whistleblower case against the bank.
The SEC case established that the breaches were widespread in two divisions at J.P. Morgan — its investment advisory business J.P. Morgan Securities and its bank JPMorgan Chase Bank — where many advisers hold CFP certifications.
The CFP board spends $10 million annually on marketing, telling the public that all CFPs are "held to rigorous ethical standards." Its website says all CFPs are fiduciaries when doing financial planning.
'MAKES FIDUCIARY MEANINGLESS'
However, the board does not state that advisers may not always act as fiduciaries when they are recommending commission-based investment products. It's a distinction lost on many consumers, experts say.
"When [clients] see that, how are they to know the difference?" says Rick Kahler, a CFP and founder of Kahler Financial Group. "It makes fiduciary somewhat meaningless in the eyes of the consumer."
Fiduciary Network co-founder Mark Hurley says, "The real question is why does the CFP Board allow people to be partially pregnant? … One minute they are selling product. The next minute they are fiduciaries. You can't be partially pregnant."
Quote"You would hope that the CFP Board would enforce its standards on its certificants and take appropriate action," says Ric Edelman, founder of Edelman Financial Services.
Ric Edelman, founder of Edelman Financial Services, has called on the board to stop telling the public that all CFPs act as fiduciaries.
"It doesn't appear that a fiduciary duty was upheld" by the bank's investment manager, he says.
"You would hope that the CFP Board would enforce its standards on its certificants and take appropriate action," Edelman says.
In response to questions about the recording, the board replied that it "accurately informs the public that CFP professionals have completed extensive training and experience requirements and have agreed to provide financial planning services under a fiduciary standard. ... When [the] CFP Board becomes aware of conduct that may constitute a violation of its standards, [the] CFP Board takes action.” (Read the board's full response here.)
Although he thinks regulatory reform eventually will bring a halt to hat-switching between fiduciary and sales service, Hurley says federal regulation does allow planners to be salesmen in one moment and fiduciaries in the next.
"I wouldn't blame the board for this," he says. "One of the conflicts here is that, like with any professional organization, membership drives revenue. If [the board] took a position that you had to be fee-only, they'd have a lot fewer members and a lot less in resources."
'COMPREHENSIVE' FINANCIAL PLANNING?
Reached by phone, Held, now a market director with J.P. Morgan Securities in Seattle, declined to comment and referred questions to JPMorgan. The bank, in turn, also declined to comment.
Burris, now an RIA, says he recorded his exchange with Held to protect himself against the bank. He has filed whistleblower cases against his former employer not only with the SEC, but also with FINRA and the Department of Labor's Occupational Safety and Health Administration. His practice, Burris Wealth Management in Surprise, Arizona, serves mainly older and retired clients.
At JPMorgan, Burris managed about $90 million in assets for the same client demographic.
"There was no way in the world I was going to take advantage of my clients," he says.
Yet he describes the dilemma faced by wirehouse brokers who want to put their clients' interests first, while their employers judge them on how many high-cost products they sell.
"Advisers [at wirehouses] are clearly considered product pushers," says Burris, who is not a CFP. "In my opinion, there is no way for an adviser who works for JPMorgan Chase to do comprehensive financial planning."
That's precisely what the CFP Board tells the public all CFPs do.
Held's reference to his CFP status has not been published before. However, the second part of his quote appeared in a 2013 New York Times story. It prompted the bank to enter client complaints onto Burris' previously clean FINRA BrokerCheck report, Burris says. He says the complaints were trumped up in retaliation for his decision to go public with his allegations. In interviews with Financial Planning, several of those clients said they never intended to complain about Burris.
Despite these disavowals, their complaints remain on Burris' record. Just last month, FINRA filed a complaint against Burris over a $624 loss to one of his former JPMorgan clients, in a move one critic says smacks of whistleblower retaliation.
Burris says it may cost him as much as $60,000 to defend himself before FINRA's Office of Hearing Officers, given that he projects needing specialized expertise to make his case.
'CLIENTS' INTERESTS FIRST'?
The CFP Board's advertising campaign has been going on for six years. As a banner trumpets on the board's website: "Clients' interests first."
Those CFPs who do not uphold high ethical standards are subject to disciplinary action up to and including being stripped of the use of their CFP designation, the board says.
Quote"The CFP designation was invented predominantly for, and is still used today for marketing purposes," Edelman says.
However, the board lacks the resources to police the behavior of all 75,000 CFPs nationwide. Thousands work at large financial firms or insurance companies where they may face pressure to sell investment products for high commissions. Since the Department of Labor’s fiduciary rule doesn't start to take effect till April, it is too early to assess its impact, although it's likely to reduce the frequency of these practices over time.
Because many CFPs can face pressure to sell commission products, one prominent planning academic has called the board's public fiduciary promise a "fraud" that can expose unwitting consumers to unscrupulous advisers.
In the SEC's case against JPMorgan, Andrew Ceresney, the commission's director of enforcement, said that clients had suffered "significant harm" as a result of JPMorgan's failure to disclose its product pushing.
That said, exchanges like the one between Held and Burris continue to be par for the course at large brokerages, Edelman says.
"The CFP designation was invented predominantly for, and is still used today, for marketing purposes," he says.
'DISSERVICE TO THE PUBLIC'
Any brokerage "adviser who holds a CFP is being told by his boss to sell a certain quantity of product through some form of sales quota and, if he raises an objection because [the quota] conflicts with his duties as a CFP, his boss will say, 'I don't care,' because it's simply not relevant to those firms," Edelman adds.
In 2013, a CFP Board disciplinary official told Financial Planning that the board knew wirehouses were informing their CFPs that the board's fiduciary rules didn't apply to them.
The board should state prominently on its website that many CFPs may not always act as fiduciaries, Edelman says.
Kahler thinks the board should market the CFP designation as a stamp of excellence in education for its rigorous training of advisers, or take the step of applying a no-exceptions fiduciary duty on all CFPs at all times, regardless of whether they are doing planning.
"The sad thing is that we are holding the CFP out to be a mark of fiduciary when it isn't. That's a great disservice to the public," Kahler says. "Pity the consumer, huh?"