The Ace in the Hole

Journal of Financial Planning: January 2014


Dan Moisand, CFP®, has been a practicing financial planner since 1991. He is a principal at Moisand Fitzgerald Tamayo LLC in Melbourne, Florida, and former president of FPA.

Considering recent events, it would be easy to think that sensible regulatory reform for financial planning may never happen. Some of the most ardent supporters of the profession have expressed extreme frustration, even hopelessness. I feel it too, a little. After all, the last half of 2013 was marred by discouraging development after discouraging development.

My message today is simply don’t let these things keep you from doing what you can to advance the profession. We have an ace in the hole. And we will need it.

Obstacles Are Coming from Many Sources

A guide for consumers about bogus and inflated credentials was issued. In it, our nation’s regulators describe how some designations are basically crap (this is true), and that some advisers present their credentials in a misleading way (also true). Therefore, consumers should be careful (true again).

The guide is actually fairly decent, but the question I couldn’t get out of my mind is if the regulators know these things are crap, why do they allow advisers to use them in the first place? At the very least, if someone is touting a weak credential as evidence of real expertise, instead of hoping their clients somehow magically see this guide, maybe the regulators should look into what other things the adviser has been up to. If they are misrepresenting themselves on their very first impressions, it seems reasonable to be suspicious about their ability to run a clean operation.

The U.S. House of Representatives passed HR 2374, the laughably named “Retail Investor Protection Act,” which simultaneously called for the Department of Labor to wait for the SEC to come out with a fiduciary rule first, while also imposing new requirements on the SEC making it very difficult for the SEC to come out with a rule at all. At a time when the House should be focused on enabling regulators to protect consumers’ interests, they seem more concerned about protecting the business models of their deep-pocketed buddies in the brokerage industry.

FINRA put out a “report on conflicts of interest” where they outlined the many areas in which, despite all the disclosures, brokerage firms or their reps fleece the public. Instead of banning the offending practices, the report encourages firms to be careful not to make the conflicts too lucrative.

SIFMA came out with a whole campaign to restore investor trust called “Investor First.” That would be nice, but with all the rhetoric about serving the customer’s interest came many digs at the initiatives to actually hold advisers to a fiduciary standard.

The sad part of all this is that we already have laws in place that can protect the public if enforced. Brokerage firms have been operating under an exemption from the requirements of the Advisers Act of 1940 for providing advice that is incidental of the brokerage function. If the SEC would do its job and tell the brokerage firms that if they are going to hold out as advisers or provide advice, their activities will be deemed clearly not incidental, and public confusion could be radically reduced.

The events described here lay out the same basic problem. The focus has shifted to how to craft a rule that allows firms to continue to imply they put investors first without actually requiring them to do so or allow conflicts to persist as long as they are disclosed.

CFP Board had an issue arise as well. Their Board Chair, Alan Goldfarb, resigned when he was accused of misrepresenting his compensation. The resolution of that case spawned debate about the adequacy of the CFP Board definition of “fee-only” and a lawsuit against CFP Board from CFP practitioners Jeff and Kim Camarda, claiming that the CFP Board disciplinary process was unfair.

In 2008, I was asked by CFP Board to serve as chairman of the Discipline and Ethics Commission (DEC) after several members of the DEC resigned. What I found was a messy debate about organizational governance. The actual disciplinary process itself was in good shape. Still improvable, but solid and fair.

Many designations don’t have any enforcement. That disciplinary process is a big part of what makes the CFP certification valuable. The Goldfarb and Camarda cases speak to a change with respect to the process that is troubling and a huge problem for the profession if the accusations are true.

I will neither defend nor criticize CFP Board in this matter, because my DEC experience makes me certain that being in the middle of things is a lot different than being on the outside. I will refrain from speculating on what happened or what will happen from here. Hopefully, the legal process will sort it out in a way that gives us some clarity. If the process has changed for the worse, we can get to work fixing it. If the process is OK, we can move on to continuing the advancement of the profession.

You Are the Ace

With so many disheartening developments coming from regulators, ­legislators, and within the profession, why am I still optimistic? It’s the ace. It has comforted me many times in the past.

The ace is the community of financial planning professionals. You are the ace. Thousands like you are the ace. The public needs, wants, and deserves to get objective advice. The more commercial interests mislead the public, the more they seek to confuse, the more they rely on fine print, the more they work to make it harder for the public to see who is who, the more valuable the true planning professional becomes.

I see the damage done by the people working the system and I am sickened by it. I also see the impact true professionals have on their clients and it is uplifting. One planner at a time, one client at a time, may be a slow road to travel, but it is the most critical in the battle to advance the profession.

There are too many people pretending to be you. They don’t do it right, and know they don’t have to. Every time you act like a fiduciary, even if you are not going to be held accountable as such, you advance the profession. You are doing it right. Just keep doing it.

If you can spare some time to help in other ways, great. If not, take a moment to tell the ones who are volunteering or speaking out to keep their heads up. Taking a moment to make these contacts will help.

The marketplace will be the ultimate arbiter of our debates. If we actually keep serving clients like the pretenders say in their ads, the public will keep finding us.

Most things worth doing are hard. Isn’t that what we teach our kids? Don’t let the recent challenges get you down. Just keep doing great work for your clients and eventually we will get there.

General Financial Planning Principles
Professional Conduct & Regulation