phones
menu

Your Certified Financial Planner May Have FINRA Disclosures

When you go online to find a Certified Financial Planner (CFP), you’re looking for a trusted professional with a clean record. Many investors head over to LetsMakeAPlan.org, a database of CFPs maintained by the Certified Financial Planner Board of Standards Inc. According to a recent Wall Street Journal article, however, many CFPs listed on LetsMakeAPlan.org might not be as illustrious as they seem at first glance. Of the 72,000 CFPs listed on LetsMakeAPlan.org, 6,300 have FINRA disclosures—but the CFP Board failed to list these red flags on their website, long considered a trusted source for consumers. While CFPs with questionable ethics were listed on the CFP database, the CFP Board spent one-third of their $36 million budget on a marketing campaign, putting out videos that touted their database as a source to find highly-qualified financial planners who have earned the prestigious CFP designation.

Certified Financial Planners (CFPs) must have a college degree and obtain 18 credit hours of finance classes (which often comes from completing an MBA). After typically obtaining three years of professional experience in the field, they must then pass a 170-question, two-hour exam that encompasses 100 topic areas relating to financial planning.

In their response to the Wall Street Journal, the CFP board asserts, “CFP Board has conducted an average of 6,900 background checks of individuals each year for the past three years. As part of this, CFP Board checks BrokerCheck or the Investment Adviser Public Disclosure database (IAPD). We also conduct a background check for criminal matters, civil litigation, liens and judgments, and bankruptcies.” Yet this begs the question: how did a trusted professional body admit—and continue to certify—6,300 financial advisors with customer complaints and disputes on their FINRA records? CFP relied on their own members to disclose when they were facing a dispute with a client or were accused of a crime. According to the Wall Street Journal, “Financial planners who have faced felony charges not mentioned by LetsMakeAPlan.org include Kevin Daniel Jr., a Seattle adviser who entered into a felony diversion program last year after threatening to kill someone.” Another CFP possessed child pornography on his work computer.

The CFP Board concedes that in the past they have “relied heavily on self-disclosure, complaints from either clients or other CFP® professionals, and news scans. Every two years, CFP® professionals are required to make disclosures when renewing their certification. Effective immediately, we are reviewing BrokerCheck and IADP for existing CFP® professionals.”

The CFP Board also explained how they differ from a self-regulatory organization like FINRA. They are much smaller and do not have subpoena power. While FINRA discloses if advisors have been accused of crimes, CFP only acts when they’re convicted. CFP’s policy on bankruptcy disclosures also differs from FINRA’s. While FINRA reports any bankruptcies within the last ten years, CFP checks for bankruptcies within the last five years and “verifies the bankruptcy filing by checking publicly available court records, then notes the bankruptcy filing on the CFP® professional’s public profile for 10 years,” according to their response to the Wall Street Journal. But the differences between the CFP board (a 501(c)3 private board) and FINRA (a self-regulatory organization) could easily be lost on consumers looking for a financial planner they can trust.

On July 30, one day after the release of the Wall Street Journal article, the CFP Board announced the formation of an independent task force that will make recommendations about show to modernize enforcement practices. Denise Voight Crawford will chair the task force. She formerly served as the Texas Securities Commissioner for 17 years and who is a public member of the CFP Board’s Board of Directors. The CFP Board also reiterated that their new code of ethics goes into effect on October 1, 2019, and this standard mandates that all CFPs act as fiduciaries.

This revelation about the inner workings of the Certified Financial Planner Board of Standards illustrates why it’s important to gather as much information as possible about a broker or financial advisor before doing business with them. It’s important to choose a fiduciary—a financial planner legally bound to put the client’s interests before their own. Do your own due diligence and be your own advocate. Your first step should always be BrokerCheck, FINRA’s tool that allows consumers to explore the track records and career histories of brokers and investment advisors.

Clients should be able to trust their brokers and financial advisors. If you have questions about your broker, feel free to reach out to the experienced securities attorneys of Fitapelli Kurta. Your consultation call is free, so call (877) 238-4175 or email info@fkesq.com.