CFP Board Reinstates Fee-Only Search Function On Its Website

Users of the CFP Board’s website can, once again, search for fee-only financial planners.

But the results are dramatically different compared with just a week ago, when fee-only searches turned up profiles for hundreds of advisors at wirehouses, banks and insurance companies who received or were eligible to receive compensation beyond fees.

Following revelations by Financial Planning last week that the CFP Board allowed advisors to violate its rules – which stipulate that fee-only advisors cannot associate with any “related parties” that receive salaries or commissions – the board stripped all fee-only designations from advisors’ profiles and replaced them with "none provided." It disabled the website's fee-only search function at the same time. The next day, it asked advisors to review their compensation disclosures and make new ones, extending a broad amnesty to all rule-breakers.

“In an email we sent to the 8,000 people who stated that they were fee-only,” board spokesman Dan Drummond says, the “CFP Board reminded [those] who previously self-identified on [our] Find search tool as fee-only of its rules related to compensation disclosure and [their] obligation to provide clear and accurate compensation disclosure. We notified these CFP professionals that, should their … disclosure be inaccurate, they have the opportunity to modify it.”

SELECTIVE ENFORCEMENT

The amnesty has led to calls for the board to reconsider and possibly rescind sanctions of at least three of its former officials for similar compensation disclosure violations.

After years of not addressing widespread violations of this rule among CFP holders, the board began selective enforcement action more than two years ago without announcing a policy change to its 68,000 certificate holders nationwide.

Earlier this year, it sanctioned former Chairman Alan Goldfarb publicly for calling his practice fee-only on the FPA’s website even though he owned a 1% ownership stake in a broker-dealer owned by his former firm. Although the board says it was not making an example of Goldfarb, it acknowledged that his punishment was the first of its kind.

‘PUBLIC ENEMY’

However, many call the rules used to sanction him excessively vague and worded too broadly. It took a 53-slide PowerPoint presentation for the board to clarify those rules in a webinar on Aug. 7, four months after the Goldfarb sanction.

It also chose to punish Goldfarb, and at least two other former board disciplinary and ethics commission members, because of the threat of a lawsuit from two Florida planners, according to several current and former members of its disciplinary panel.

After 11 years of service to the board, Goldfarb stepped down last year in the middle of the investigation, left his former employer and started his own firm after 40 years in practice. The board did not find that any of Goldfarb’s clients were harmed, nor any funds misused.

His profile on the CFP Board now says “Yes” in the Disciplinary History section. By checking his disciplinary history elsewhere on the site, users are directed to the board’s 438-word sanction of him. “Now I’m a public enemy,” Goldfarb says.

Having a public sanction, he adds, makes it difficult to attract new clients to his new firm, Financial Strategies Group in Dallas.

The punishment doesn’t fit the crime, says one of the early founders of the CFP Board, Malcolm Makin, president of Westerly, R.I.-based Professional Planning Group. “This is heavy, heavy, heavy duty stuff,” Makin says. “You really are crippling peoples’ careers.”

‘GLAD TO CORRECT THE ERROR'

Ironically, during the five months that Goldfarb’s sanction has been listed on his board profile, users who passed over Goldfarb could have chosen three other planners in Dallas also committing a fee-only violation. Until late Thursday last week, 26 wirehouse planners in Texas were calling themselves fee-only on the site.

Due to the amnesty, those and many other advisors are protected from punishment. “Why didn’t all of us … get the same courtesy?” says Tina Florence, one of the two other board officials who was sanctioned.

Several wirehouse advisors from around the country this week said they were not perturbed by the board’s decision to go into their profiles and alter them unilaterally.

“I really don’t have a strong objection to them doing that,” says Erik Bohn, a newly minted CFP with Morgan Stanley in Washington, D.C., who had called himself fee-only. “I’m glad I get to correct the error before I get penalized because I do market myself as a CFP.”

WIDESPREAD CONFUSION

Bohn’s professed understanding of the rules seemed to serve as an example of the widespread confusion over their definition.

“If the finding is that I work for a wirehouse and I have to put down fee-based and commission, then that’s what I want to write down,” Bohn says. “I don’t want to misrepresent what my business is, if that’s what is proper to do.”

He chose the term fee-only, he says, because he thought the board was asking for his interpretation of his compensation. And, given that he earns mainly fee income, that seemed like the right choice, he adds.

“That was how I wanted to present myself to the public,” Bohn says. “It may not be the case with 100% of my clients because, in my reality, that’s not how it works. … In my leg of this business, I don’t know anyone who 100% takes fees.”

Having a CFP certificate is something Bohn says he values in emphasizing the importance of holistic financial planning. Completing the requirements to obtain his CFP certification “was a pain, but I’m glad I did it,” he says. “It has enabled me to dig deeper.”

Asked if he thought it was fair that the board punished other CFPs for using fee-only as he had, Bohn says simply, “No.”

Read More:

• CFP Board Allows Wirehouse Advisors to Call Themselves Fee-Only
  
• CFP Board Strips Fee-Only Listing From its Website
  
• CFP Board Offers Broad Amnesty to Rule-Breaking Advisors
  
• Ex-CFP Board Disciplinary Official Says Board Punished Her Amid Lawsuit Fears