UPDATE 1-U.S. financial planner group scolds ex-chairman on ethics
By Jed Horowitz and Suzanne Barlyn
NEW YORK, June 18 (Reuters) - A group that develops standards for financial planners publicly admonished its former chairman on Tuesday for ethics violations related to how he characterized his fees.
The Certified Financial Planner Board of Standards said Alan Goldfarb, a Texas-based planner, misrepresented his compensation as "fee-only" when in fact he worked for and "partly" owned a firm whose advisers were permitted to collect commissions and ongoing 12b-1 fees for marketing mutual funds.
Goldfarb also misrepresented his compensation as a "salary" on an online financial planner database, the board said.
A public admonishment is the most lenient disciplinary action the CFP Board publicly discloses. It also can permanently or temporarily prohibit advisers who pass its certification requirements from using the CFP designation.
Goldfarb abruptly resigned as CFP Board chairman last year. He has since quit as director of advisory services at Weaver Wealth Management in Dallas and now runs Financial Strategies Group in that city.
The CFP Board plan to bring an action against Goldfarb was reported earlier by Reuters. The censure followed an investigation by a special disciplinary and ethics commission set up by the CFP Board to assess allegations against Goldfarb and some other planners active in the group.
The term "fee only" can be used if an adviser collects fees exclusively from clients, according to the CFP Board ethics code. Fee-only advisers say they are aligned more closely with clients because their pay rises or falls with the value of client portfolios and they do not make money by selling products. Stockbrokers are more conflicted, they say, because they are compensated by their firms with commissions and fees related to product sales.
Goldfarb said he thinks it would have been more appropriate for the group to sanction him privately.
In its announcement, the CFP Board announced censures against 25 other certified planners for a range of violations, including filing for bankruptcy and giving unsuitable advice.
In one case the CFP Board's appeals committee modified the disciplinary commission sanction against Raymond Martin, a planner in Saratoga Springs, NY, who was the former president of ING Investment Advisors, LLC, a unit of Dutch banking firm ING Groep NV. The commission had recommended that Martin be barred permanently from using the CFP designation, but the appeals panel instead suspended his right to use it for a year and a day.
Martin had earlier been suspended from working in the U.S. brokerage industry for six months by the Financial Industry Regulatory Authority for conducting his advisory business without informing his employer and brokers who executed trades for the business and was fined $5,000. The CFP appeals panel affirmed the findings of its disciplinary commission based on the FINRA action, but said the recommended lifetime ban "was not supported" by the Board's sanction guidelines.
Martin could not be reached for comment.
The CFP Board has been trying to beef up its enforcement program in recent years, but also conducts Web seminars to help advisers avoid infractions. The next Web seminar, scheduled for July 31, is closely tied to the Goldfarb sanction. It is titled, "How to Avoid Misleading Compensation Disclosures."
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