The Certified Financial Planner Board of Standards is finally taking measures to clean up the error-filled reporting on its website that classifies many troubled financial advisors as having “clean” records.
The CFP has been relying on these advisors to self-report any bad behavior, and with predictable results that has failed. Many of the advisors, who are mostly brokers and insurance agents, are regulated by FINRA as well. FINRA has disclosed their bad behavior, but CFP has missed the mark. That might finally change.
Jason Zweig and Andrea Fuller report at The Wall Street Journal:
The CFP Board had been relying solely on planners to self-report red flags in their records when they renewed their certification annually. The Journal’s investigation found that many such red flags were publicly disclosed on a website run by the Financial Industry Regulatory Authority, a watchdog organization funded by the brokerage industry—but not in the CFP Board’s LetsMakeAPlan.org directory.
Separately, the Journal found that the CFP Board reviewed far fewer planners for potential misconduct in recent years than it had a decade ago, with investigations falling by three-quarters even as the number of CFPs rose by almost one-third. The CFP Board called that interpretation “inaccurate” and “not comparable.”
In July, the CFP Board appointed a task force, which it described as independent, to review its enforcement and disclosure procedures. The task force was headed by Denise Voigt Crawford, a former Texas state securities commissioner who also serves on the board of directors of the CFP Board.
The task force submitted its report to the group’s board of directors on Nov. 1. It found that the failings identified by the Journal’s investigation resulted from “systemic, longstanding, governance-level weaknesses” at the CFP Board and warned that “these weaknesses will inevitably result in a recurrence of the kind of events reported by the Journal unless the Board of Directors acts to implement reforms.”
The report recommended a series of steps including a “substantial increase” in spending on investigations, hiring an enforcement chief with regulatory experience, expanding staff, upgrading technology, analyzing data more effectively and eliminating private disciplinary actions so all sanctions would be public.
Stronger protections for investors are necessary. Many of the brokers and agents calling themselves “financial advisors” have no obligation under the law to put their clients’ interests ahead of their own. That leads to a lot of bad behavior.
If you are seeking a relationship with a professional advisor, make sure you hire someone who is an investment advisor, bound with a fiduciary duty to put your interests ahead of their own. Make sure they understand the Prudent Man Rule and want you to achieve Your Retirement Life.
