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.