Executive Summary
On Sunday, January 26th, a decision was issued in the latest round of legal motions between the CFP Board and the plaintiffs Jeffrey and Kimberly Camarda regarding their looming public disciplinary action from the CFP Board for what it claims were violations of the compensation disclosure rules.
In a blow to the CFP Board, the judge fully accepted an amended complaint from the Camardas, which is now seeking monetary damages in addition to "just" blocking the CFP Board's public disciplining of the Camardas. In addition, the judge denied all of the CFP Board's various motions to limit the scope of the case, including requests to quash subpoenas of various individuals for deposition. As a result, the breadth of discovery for the Camardas will be fairly wide, as they attempt to substantiate their claims that the CFP Board is in breach of contract, engaging in unfair competition, has violated due process, and may even be responsible for antitrust violations and having engaged in "false advertising" by misleading the public about its standards.
Of course, the fact that the judge has ruled that the full scope of the Camarda complaint will be considered and that the full breadth of their discovery requests will be honored does not actually mean that the CFP Board has been found guilty of anything at this point. Nonetheless, given the coming depositions that must now move forward, and the information requested by the Camardas on various other CFP Board disciplinary cases, a whole lot of additional detail about the inner workings of the CFP Board is about to come to light. To say the least, this case is no longer "just" about the definition of fee-only; it's now about the legitimacy of the organization's enforcement process and the standards for all CFP certificants, and raises the question of whether the CFP Board may have made a serious strategic mistake by trying to make Camarda vs CFP Board of Standards its defining case.
Latest Decisions in Camarda Vs CFP Board
The latest decisions from the District Judge in Camarda vs CFP Board were entered as Minute Orders on Sunday, January 26th. Although there were ultimately six different orders rendered by the judge, they essentially amount to two key developments: that the amended complaint from the Camardas filed last September, which expanded from the original complaint to include a wider array of charges and to seek monetary damages, was accepted; and that the CFP Board's various motions to quash subpoenas and other discovery requests that it claimed were outside the scope of the Camarda case and were nothing more than a "fishing expedition" were uniformly denied.
As a result of the motions, the legal proceedings will now move forward again, and in the coming weeks and months various members of the CFP Board staff (after a recently contentious deposition of CFP Board staff member Adam Zajac last month), the Disciplinary and Ethics Commission, and potentially some others as well, will go through depositions. In addition, the CFP Board will be compelled to turn over various documentation on its disciplinary proceeds in other cases, as the Camardas try to establish that either their case was handled in an inconsistent manner, or conversely that the CFP Board had a pattern of problematic rulings in matters brought before the DEC.
Perhaps even more significant, though, is that in the process of accepting the Camardas' amended complaint, the court will now be considering issues that speak to the very legitimacy of the CFP Board as an organization seeking to promote the CFP certificant and oversee its CFP certificants.
Understanding The Amended Camarda Complaint
In the original Camarda legal complaint, the Camardas had simply sought declaratory relief that the CFP Board had "fail[ed] to adhere and follow its own rules, guidelines, and standards for disciplinary proceedings and... [had] render[ed] a disciplinary sanction wholly devoid of evidentiary support or basis in the CFP Board's own rules." In essence, the Camardas were asking the court to agree that they shouldn't be disciplined as a result of the CFP Board not honoring the integrity of its own process. Accordingly, the Camardas also sought injunctive relief that the CFP Board would be barred from issuing a public letter of admonition, if the court agreed with their position.
However, as the case escalated publicly, the Camardas filed a motion last September to amend their original complaint and expand its scope. In their expanded and amended complaint, the Camardas claimed that due to the publicity of the case their business had already been damaged, and that they were seeking monetary damages as well as an injunction against the CFP Board to block its public letter of admonition. Perhaps more significant, though, the Camardas expanded the scope of their complaint - ostensibly to help substantiate their claim for damages - and in the process have raised new concerns for and regarding the CFP Board. Specifically, the Camardas now allege 7 different counts against the CFP Board:
I. Breach of Contract. That the CFP Board's rules that its CFP certificants must adhere to amounts to a contract, where certificants agree to obey the rules and the CFP Board agrees to honor its own rules and guidelines for investigating and prosecuting disciplinary actions, but that in the Camarda case the CFP Board failed to adhere to and follow its own rules, denied the Camardas due process, and issued a disciplinary action without sufficient (or any) evidence.
II. Unfair Competition. Alleged primary because the public Letter of Admonition would damage the Camardas' business and render them at a competitive disadvantage, given that the Camardas claim that the CFP Board's ruling of a compensation disclosure violation itself was without merit.
III. Common Law Due Process/Fair Procedure. An extension of (I), that the CFP Board did not provide due process and did not use fair procedures when making its decision.
IV. Violation of Lanham Act. For those not familiar, the Lanham Act imposes a civil liability on an organization that makes false and misleading statements (think "no false advertising" to consumers or the public). In this regard, the Camardas allege that because the CFP Board has an unfair process for implementing its own rules and guidelines, that its public statements regarding the standards for CFP certificants and their adherence to those standards is suspect.
V. Violation of Sherman Act. The Sherman Act is basically anti-trust legislation, and while the existence of membership and trade associations can be legitimate (as is the granting of a professional designation), the Camardas alleged that "in enacting vague rules governing members' conduct, [and] in enforcing those rules in an arbitrary and capricious manner" along with the (problematic) specifics of its disciplinary and appeals process, the CFP Board was engaged in an unreasonable restraint of trade (i.e., an anti-trust violation) given the public ramifications of being found guilty.
VI. Violation of Sherman Act (part 2). In this section of the complaint, the Camardas also allege that "the CFP Board has monopoly power in... the nationwide market for financial planning services" because granting the use of the CFP mark has significant commercial benefits and because the Camardas would be significantly damaged "in an anticompetitive way" by the CFP Board's public Letter of Admonition.
VII. Permanent Injunctive Relief. This would bar the CFP Board from ever publicly admonishing the Camardas regarding this incident (if the courts find that the CFP Board violated one or several of the above provisions such that this remedy is warranted).
As evidenced from the list of charges itself, the amended Camarda complaint (as now accepted by the judge) has significantly expanded the scope of the lawsuit with the CFP Board, and this is no longer just about the definition of fee-only. While initially the lawsuit was little more than an attempt to block a public Letter of Admonition, the introduction of damages has introduced additional charges to substantiate the damages. In essence, charges I, II, III, and V are all various ways that the Camardas allege the CFP Board failed to adhere to its own processes and the consequences of failing to do so.
However, section VI is more substantive, in that it alleges the CFP Board is using its trademarked CFP marks to create a monopoly around financial planning. Of course, anyone who is an active financial planning practitioner is probably highly cognizant of the wide range of people who conduct financial planning services or hold themselves out as financial advisors/planners/consultants without the CFP marks, so it's hard to imagine that the CFP Board has really 'cornered the market' on financial planning services. Nonetheless, the issue is now on the table.
Perhaps the most concerning allegation facing the CFP Board, though, is section IV - the Lanham Act charge - suggesting that the CFP Board has effectively been engaged in "false advertising" by claiming that its certificants adhere to certain standards when in practice it is not effectively overseeing and enforcing those standards. In point of fact, this is not the first time that some have claimed the CFP Board is engaging in "false advertising" to the public - there have been others in the past who have suggested that the CFP Board's "Fiduciary promise" is not real, and fiduciary advocate Ron Rhoades has written about the issue on his blog as well. Yet it's one thing for fiduciary advocates and CFP Board detractors to suggest the CFP Board has been engaged in "false advertising" around its standards; it's another thing to actually test it in a real court of law.
Implications For The CFP Board And Financial Planning
While being found guilty charges I, II, III, and V (and the associated VII for injunctive relief) would be damaging to the CFP Board, and the anti-trust "monopoly" allegation seems a stretch (to put it mildly, though ironically it least it would substantiate just how valuable the CFP marks are!), it seems the greatest risk to the CFP Board is that the court rules against them on the Lanham charges and finds that the CFP Board has in fact been engaged in "false advertising" to the public with respect to the standards for those that hold the CFP marks.
Ultimately, it's hard to know how any of these rulings will go - which to some extent, is the wild card reality of taking a case to court. The affidavit from the Camardas filed last year telling their side of the story does not paint a pretty picture, raising that the CFP Board started the process with an unwarranted complaint from a disgruntled former employee, that their hearing had an "utter lack of evidence of rules violations" and the CFP Board Appeals panel just "rubber stamped" the original ruling, and that throughout the CFP Board has acted in an "arbitrary and capricious" manner.
Notably, as discussed previously on this blog, one of the concerns that the Camardas raised during their disciplinary process was that others who had an ownership or other affiliation to a broker-dealer were also using the fee-only term - the charge for which the Camardas are being disciplined - and the CFP Board ultimately found its own former Board of Directors Chair Alan Goldfarb guilty on this basis as well. Given that the CFP Board has insisted on maintaining the line in this definition, it's certainly hard to call them capricious - if anything, it speaks to their intent to maintain consistency and integrity of the precedent they have set for themselves - yet the strange way that the compensation disclosure "line" has been drawn still raises the concern of whether it is an arbitrary and inappropriate definition (even if it is not capricious). On the other hand, as I've written in the past, the CFP Board's current interpretation of their "three buckets" rule is a strange line that makes little logical sense and deserves to be re-evaluated, and the fact that it inexplicably chose to grant open amnesty to hundreds of brokers in violation of its rules - despite the fact that the issue had been pointed out months earlier on this blog - suggests that the CFP Board's enforcement process may be more capricious than the organization implies.
Technically, if the CFP Board is found guilty on these charges, it still doesn't necessarily mean that it was 'wrong' in its definition of "fee-only" compensation titles or its ruling on the Camardas, per se, but that its disciplinary process itself is lacking and needs to be bolstered. At a minimum, expect that if the CFP Board loses on the initial charges, it will be an embarrassing black eye for the organization, and force it to more heavily reinvest into its enforcement and disciplinary process - though notably, because in the end the CFP Board is a 501(c)(3) entity protecting a trademark, and not a regulator overseeing actual laws regarding financial planning, it's not entirely clear if the CFP Board even could enforce its rules in much greater depth without bumping into privacy laws (i.e., the CFP Board doesn't have the right to subpoena evidence, compel witnesses to testify, etc.).
Perhaps most damaging - though questionable if it's really a risk - would be having the CFP Board found guilty of an anti-trust/monopoly violation, though its hard to see how this is realistically a concern. There are many professions that have 'advanced' voluntary designations that also have a Code of Ethics and Professional Standards to which certificants must adhere, and they are not routinely ruled a monopoly just because there's a designation with standards. And ultimately, while the share of financial advisors that are CFP certificants has been growing, it's still only about 25% of all financial advisors (and it's hard to have a monopoly with a minority!). Nonetheless, the potential for anti-trust/anti-monopoly laws to be applied against the CFP Board does raise the long-term question of what happens when it really is the case that the majority (or more) of financial advisors are CFP certificants? At some point, the CFP Board must either shift from overseeing a trademark to becoming a legally recognized regulator, or must otherwise get the CFP marks codified into law and make itself the standards board for those legally-recognized marks. While arguably that doesn't have to happen for several more years (or a decade or few?), the Sherman Act allegation is a reminder that the CFP Board must cross this bridge someday.
But as noted earlier, the greatest danger to the CFP Board in the Camarda case now - especially if it ever hopes to be recognized as a regulator for financial planning and/or have the CFP marks codified into law - is that it might be found guilty on the Lanham Act charges. In this area, the Camardas are certainly not the first to allege that the standards the CFP Board holds out to the public - for which the CFP Board conducts a significant public awareness campaign, funded by a nearly 80% dues increase a few years ago - might not be as clearly enforced as the CFP Board implies (and notably, the Camarda complaint is also subpoenaing Fondulas Strategic Research, raising a question of whether there's an issue with the survey research it conducted for the CFP Board's latest certificant survey about the success and satisfaction of its own CFP certificant base). Yet again, it's one thing for allegations that the CFP Board overpromises on its standards to be made in the industry press; it's another if the CFP Board is actually found guilty in a court of law, which would be a potentially massive setback to consumer and media support of the CFP marks, its public awareness, and its future aspirations to see the CFP marks codified into law. One wonders whether CFP Board detractors and competing organizations may even attempt to file "friendly" briefs in the court on behalf of the Camardas or otherwise provide statements/evidence to challenge the CFP Board on the Lanham Act charges of "false advertising" around its standards.
By this point, some might be wondering - as I did early on - why this case hasn't been settled long ago between the CFP Board and the Camardas. According to the Camardas, they have actually made attempts to settle the issue repeatedly and keep it out of the courts, but it has been the CFP Board that has firmly held the line that it was in the right with its actions, and therefore that it will see the case through, regardless of the apparent cost. To be fair, it's worth noting that a victory for the CFP Board would be a resounding victory across the board, adding further gravitas and legitimacy to the organization that its enforcement process and standards were substantiated. Yet a defeat could be equally or more damaging in the opposite direction, and while the CFP Board has yet to be deposed and tell its side of the case, the story the Camardas tell in their affidavit does not paint a very pretty picture. And we still don't know if/whether anything else will come to light as the Camarda discovery process gets underway again and the depositions with the CFP Board get underway and other documents are provided to the court.
Personally, in the end I can appreciate the CFP Board trying to draw a line in the side and stick to it - a crucial step to its legitimacy in enforcing its CFP marks - but as the details of the case emerges, it raises the concerning question about whether the CFP Board really chose the "right" line to defend, or whether it has overplayed its hand after cruising through nearly 5 years without any setbacks or bad press. Was this really the right case, with such a "messy" fact pattern, for it to try to fight for its court-recognized legitimacy as an financial planning standards organization? Was it really a good idea to keep raising the stakes from what was initially just a dispute regarding a public Letter of Admonition into the court case that will determine whether the CFP Board is guilty of Sherman Act and Lanham Act violations? I guess we'll know soon enough, but I have to admit that while even losing won't mean "the end" of the CFP marks - though it would clearly be a material setback, and a costly one given the legal costs that are being incurred on both sides to fight the battle - the whole case is leaving me nervous about whether the CFP Board may have made a serious strategic mistake about making this the defining case about the legitimacy of the organization's enforcement process and the standards for all CFP certificants.
So what do you think? Has the CFP Board made a mistake in pursuing the Camarda case? Should the CFP Board be worried about the Lanham Act charges of "false advertising" to the public? Will this be a victory for the CFP Board if they win? What are the consequences to the CFP Board and all CFP certificants if they lose?
Michael, thanks for your in-depth reporting on this issue.
Eric,
Happy to be of service. Wish it was better news to report though! 😉
– Michael
Great article Michael. As you point out, the CFP Board have drawn a line in the sand with this case, and it will either make or break the CFP marks. I’ve found that most of the general public don’t know that much about CFP marks and certificants, so this will mainly go under the radar.
Courts have articulated the purposes of lawyer discipline in various ways — protection of the public, the courts, and public confidence in the legal system’s administration of justice. Other courts have focused upon protecting the legal system’s reputation or upon guaranteeing that the lawyer whose conduct is at issue is fit to practice law. If we use lawyers as an example, while deterrence is often mentioned as a purpose of professional discipline, protecting the greater good is usually the “real” purpose of disciplinary proceedings. Because of our adolescence as a profession, it makes me nervous whenever our standards, and public confidence in them, fall under scrutiny. Then again what doesn’t kill you makes you stronger, right?
Michael
I think that the CFPBOS does think it is a layup case because at the origin, the plaintiffs did use the term fee-only. The tenacity that has been displayed by the plaintiffs is admirable, no doubt, and it will be interesting to hear the testimony of some of the firms, such as TDA. If I recall, the plaintiffs are in a program where they get some referrals or something from TDA.
I hope that this does see the light of trial and that the inner-workings of the CFPBOS are exposed. For years, they have overstated the qualifications of the license and Ron Rhoades may be correct that they have been deceiving the public.
Regardless of the outcome, I do suspect that the value of the mark diminishes and that public trust will be less ( if that really matters).
PPott,
I don’t see any relevance to TDA in this, and I’m not aware they’re part of the discovery/subpoena process at all.
The lawsuit technically has nothing directly to do with the fact that the Camardas called themselves “fee only” at this point. This is not a lawsuit about whether they did/didn’t do so. This is a lawsuit about whether the CFP Board’s disciplinary process legitimacy considered the matter and gave them due process.
Technically, they could be 100% “guilty” of the matter of improperly using the “fee-only” term, and the CFP Board could still lose all 7 counts of the lawsuit because the lawsuit itself is about the CFP Board’s disciplinary process, not what the Camardas did.
– Michael
If I recall the Camarda’s alleged that they would be damaged by not being allowed to be in the TDA program. I would expect that to be questioned, after all, a confirmation is expected. The plaintiffs need to show some damage don’t they?
I realize that the scope of the suit has morphed –
Well, not only that, but everyone needs to understand that “fee-only” is a purely generic term, not protected by any law that I know of other than perhaps “truth in advertising”. NAPFA tried and failed to trademark it and no one else has been stupid enough to try since because the ruling was pretty clear from the USPTO. Certainly, fee-only can be defined by CFP Board, but as a private membership organization they can ONLY impose their definition on individual CFP® Certificants who execute a licensing agreement with them. Nobody has explained how Camarda’s companies can be CFP® Certificants beholden to CFP Board’s rules and definitions yet. As previously stated, I don’t know whether the Camarda’s were claiming to be personally “fee-only” on CFP Board’s website prior to the action, but if they weren’t, I’m wondering how anything could have happened in the first place… The fight is going to be about much, much more now because the Board is making claims and writing checks it cannot conceivably cash IMHO. In fact, the deeper this goes, the more murky the waters look and things may well come to light which could seriously harm the Board’s reputation. It IS becoming clearer that NAPFA may be exerting some influence and using CFP Board as a kind of revenge/enforcement arm of their little organization. Whle I’m speculating at this point, I think there’s merit in this argument. After all, CFP Board has not publicly castigated a single one of the hundreds of NAPFA, CFP® Certificant, fee-only planners in CA who are flagrantly violating CA’s criminal code by offering fee advice in the business of insurance without a license. I wonder why? Certainly the Camarda’s claim that the enforcement is arbitrary and capricious is well founded in fact, ask Errold Moody whose been fighting the Board and passing names on for 20 years without a single action being taken!
This is a REALLY complex case, involving what is probably some charted and some very uncharted waters regarding “due process” within private, voluntary membership organizations. We can only hope the board’s lawyers know what they are doing.
Courts have articulated the purposes of lawyer discipline in various ways — protection of the public, the courts, and public confidence in the legal system’s administration of justice. Other courts have focused upon protecting the legal system’s reputation or upon guaranteeing that the lawyer whose conduct is at issue is fit to practice law. If we use lawyers as an example, while deterrence is often mentioned as a purpose of professional discipline, protecting the greater good is usually the “real” purpose of disciplinary proceedings. Because of our adolescence as a profession, it makes me nervous whenever our standards, and public confidence in them, fall under scrutiny. Then again what doesn’t kill you makes you stronger, right?
Great piece Michael. Really makes me think NAPFA made a huge blunder by “hopping into bed” with the CFP designation. I also noticed that there is very little mention of trying to help the investing public with seemingly trivial issues like planning for retirement and the like. I understand the Camarda’s reasons for fighting this, but it seems like a lot posturing by the CFP Board when I think the whole profession might have been better served by a reasonable settlement here. I really haven’t followed this much so my reaction is based on reading your piece only.
Roger,
I don’t think NAPFA made a blunder by “hopping into bed” with the CFP Board, but I do think this makes the point that if NAPFA (and FPA) want to control their fate, they should have a more active advocacy approach towards the CFP Board itself. The extent to which NAPFA (and FPA) have been hands-on and deferring to the CFP Board regarding compensation disclosures is a crucial loss of accountability, and we’re seeing the results of allowing this to play out.
NAPFA and FPA wouldn’t just stand by if the SEC or FINRA made “questionable” rules that apply to financial planners. I don’t know why they’re taking such a hands-off deferential position with respect to the CFP Board, either. If they’re threatened by the potential outcomes to the CFP Board, they should be taking a more active role in the process.
– Michael
As I understood it (and I may be wrong) NAPFA opted not to change it’s definition of fee-only in light of what the CFP Board did, a move I agree with.
That means NAPFA is openly endorsing NAPFA planners to violate CFP Board compensation disclosure rules. What happens when NAPFA planners are brought up on a complaint to the CFP Board for improper compensation disclosure? Is NAPFA ready to defend its members for receiving public discipline because they followed NAPFA but not CFP Board rules?
It’s utterly incompatible to require members to be CFP certificants and use definitions that would cause some members to violate CFP Board rules. If NAPFA is really doing this, it’s sowing the seeds of a total debacle when someone files a complaint with the CFP Board against some NAPFA members who follow the NAPFA-but-not-CFP Board fee-only definition.
If NAPFA isn’t ready to come to the legal defense of its members for violating CFP Board rules, it should be REALLY wary about encouraging members to violate those rules, since in the end it’s not NAPFA who gets publicly disciplined, it’s the CFP certificant.
– Michael
My read on this is that NAPFA rightly didn’t feel the need to cow tow to the CFP Board on this and I agree with that. The CFP Board admits all sorts of commissioned types and I hardly view them as the authority on what is or is not fee-only. I also highly doubt NAPFA is encouraging anyone to violate any rules here. This is also why I feel that NAPFA made a huge mistake in recognizing only the CFP for new members. What is frustrating is that there is this nonsensical debate and posturing that takes away from what we as financial planners should be focused on and this includes the CFP Board as the supposed main body in the financial planning world. I don’t know how much the public is aware of this issue but it would rightly give them another reason to be skeptical of financial advisors. But if you truly want NAPFA’s position on this I suggest that you contact their Board as I am happily just a dues paying member.
Roger,
If NAPFA is telling members to claim that they are fee-only with “the NAPFA definition” even if it violates the CFP Board’s definition, they’re openly encouraging members to violate the CFP Board rules. If NAPFA doesn’t want to encourage members to get themselves publicly disciplined by CFP Board, they should be lobbying the CFP Board to change/”fix” its definition.
That aside, it’s also worth noting that NAPFA was the primary organization that advocated for CFP Board to incorporate these compensation definitions into the standards in the first place, and were a part of the process of setting these definitions (albeit not with the strange way the CFP Board is interpreting those definitions). To advocate for these compensation disclosures and then walk away from them when it (temporarily?) doesn’t go NAPFA’s way seems a strange advocacy stance and one that puts their members at risk.
Think of it this way – if the SEC or FINRA came out with an inappropriate compensation disclosure rule with a questionable definition of “fee-only” what would NAPFA do? They’d lobby aggressively to the regulator to “fix” the definition. Why is NAPFA treating the situation any differently because it’s the CFP Board and not the SEC or FINRA?
– Michael
Michael your questions and comments are far better addressed to the leadership of NAPFA. I was not part of any of this but I think your term “strange way” is operative here. At the end of the day this whole episode is stupid and shameful and all concerned need to find a way to move onto what is important, serving the investing public.
John Bell Keeble who funded the IAFP well over a decade in its earliest formulative stages would roll over in his grave. An immense amount of good work over five decades have been set back by this inept blunder. hopefully something productive will result.
SCW
Michael Kitces’ article on the developments in the CFP Board case is extremely well-written, and I appreciate his in-depth analysis of the recent developments in the case.
Let me be clear as to my current views about this litigation.
1) I do not like to see the CFP Board under attack like this. The CFP Board needs to move forward in a number of areas, and this legal action is a distraction from its core mission (as it would be for any organization or firm – including the firm of the Carmadas).
Moreover, a great deal of money can be spent on the many, many attorneys involved in this case. And a great deal of time of the litigants can be absorbed by a case such as this. I believe a valid business reason exists for both litigants to seek a settlement of this matter. This would enable both the CFP Board and the Carmadas to focus on their core business.
Both parties must also realize that there is no certainty in litigation; anything can happen. And any plaintiff should realize that the burden of proof (and having the evidence to proceed) is a very heavy one, indeed.
2) I do not agree with the Carmada’s RIA firm’s prior use of the term “fee-only,” when at least one of them appeared to have owned an insurance agency that sold insurance products, presumably on a
commission basis. In my view, “fee-only” is applied first at the individual level – to the person. I believe the Carmadas were in error in using the term “fee-only” to describe themselves (or at least one of them) and/or their firm. But while that is the initial fact which triggered all of this, as Michael Kitces points out there are many, many aspects of this case that don’t revolve around this fact. I would hope that, if a settlement were to occur, the CFP Board and Carmadas would both agree that the Carmadas cannot, in the future, use the term “fee-only” while they (or one of them) continue to own a separate insurance agency which (apparently) sells insurance products on a commission basis.
3) I don’t personally believe the anti-trust claim has merit. I’ve often read that there are at least 200 financial services designations out there (and I’ve heard verbally that there are 300 or more). And, while it’s been a few years since I’ve examined in any fashion consumer knowledge of the CFP mark, I suspect that the majority of consumers of financial services still don’t recognize the CFP mark as essential nor as the only mark of consequence. Competing marks such as CFA, CPA/PFS, and NAPFA-Register Financial Advisor, all possess stature and validity, as well. Like Michael Kitces (and while I am not an expert in anti-trust law), I don’t see the merit in the Sherman Act (anti-trust) claim, as I don’t believe the CFP Board’s market power has risen to such a level that it meets the tests for liability.
4) Yes, I’ve been concerned that the CFP Board’s advertising campaigns might be misleading – as to consumers – in implying that CFPs are fiduciaries when so many do not practice as such when providing investment advice and/or certain types of financial advice. I have been hoping that the next versions of the CFP Board’s advertising campaign might address my concern.
However, the Carmada’s complaint, and in particular its Lanham Act claim, does not address the concerns which I previously raised (and, as the Carmadas are not consumers, they would not appear to possess the ability to raise my previously expressed concerns about consumer deception).
Rather, the Carmadas allege that the CFP Board makes certain representations about its adherence to fairness in connection with disciplinary proceedings – an altogether separate issue.
And, even if the Carmadas’ claim were true, it’s one thing to say that an entity’s actions were unlawful or wrong. It’s quite another to connect those actions to a causal harm and damages. This would seem, to me, to be a significant uphill battle in this regard. How would the Carmadas go about proving causality and damages, as to this Count of their Amended Complaint?
Hence, I believe that this aspect of the Carmada’s legal action is very tenuous.
5) As I have written in the past, I do not believe that Alan Goldfarb, a leader of this profession who devoted countless years to advancing the profession, and whom I have worked with on industry issues and whom I greatly admire, should have been publicly sanctioned by the CFP Board. I come to this conclusion as, over the past seven years, there were changes in the “fee-only” definition over time that could have entrapped anyone. Moreover, there appeared to me to be significant ambiguity over the term “salary,” as well. I would ask – can anyone call themselves that, in reality? Why did such category even exist? Also, why were not clear definitions of the various terms provided for certificants (during the sign-up process) on the various web sites at which these terms could be displayed. Also, in my view, the entire matter could have been handled differently, and quietly.
I feel especially so now, when so many hundreds of registered representatives of large BD firms were
essentially given amnesty for similar violations (holding out as “fee-only” when not meeting the CFP Board’s definition of same) by the CFP Board’s action last year.
Does this mean that the Carmadas were mistreated by the CFP Board, as well, in the context of the complaint filed against them (apparently by a disgruntled former employee) for the use of the term
“fee-only”? None of us are privy to the communications between the Carmadas and the CFP Board. We simply do not know why the CFP Board determined to proceed against the Carmadas with a disciplinary proceeding, rather than just caution the Carmadas against any future use of the term
“fee-only.” We do not know how contentious the early communications between the parties could have been. In other words, did “selective enforcement” occur? If so, why? This may be the critical issue in the Carmadas’ case. Yet, in other legal contexts I have often observed that selective enforcement allegations carry an extremely high burden of proof.
And – does not the CFP Board’s heavy-handed handling of the Alan Goldfarb matter tend to negate, at least to a degree, the Carmada’s allegation of similar unfair treatment?
6) There are so many more important matters for our profession to focus upon at this time.
a) Whether fiduciary standards will be imposed by SEC rule upon BDs who provide personalized investment advice. If so, what fiduciary standard – a bona fide one or a watered-down “suitability plus casual disclosure” standard?
b) The DOL’s “Definition of Fiduciary” re-proposal, now scheduled for August 2014, which the CFP Board has been largely curiously quiet about. I wish the CFP Board would realize how important a true fiduciary standard is to the profession, and how important (and linked) the DOL/EBSA’s proposal is to the subsequent actions which the SEC may undertake. It’s time for the CFP Board to “get in the game” and lobby the DOL, OMB, Treasury Dept., and Congress in support of the “Definition of Fiduciary” re-proposal. At least to get the rule released, for a comment period to then occur.
c) Whether mandatory arbitration should exist in a fiduciary-client relationship, and whether the SEC should utilize its newfound power to prohibit mandatory arbitration for both RIAs and for BDs.
d) Whether the SEC’s inability to examine RIA firms without spending months doing so – and not focusing their limited resources on the all-important issue of asset verification – can be fixed by having the SEC adopt a much more focused examination regime, especially when so many RIA firms don’t possess custody of their client’s assets, or only very limited forms of custody. RIAs should be treated as professionals during exams, not as criminals.
e) The ongoing threat of FINRA oversight of RIAs – the big gorilla is not going away. And there are so many more issues the CFP Board needs to address (and is trying to address, in many instances). Improving the Standards of Professional Conduct. Reviewing the body of knowledge required of CFP Certificants. And other periodic reviews of its standards in all areas, as any good organization would undertake.
In conclusion, we need the CFP Board to move proactively forward on these issues, and not to be distracted by this legal action. Hence, regardless of whether the Carmada’s allegations possess any merit, there exists a valid business reason for the CFP Board to enter into settlement negotiations.
And I would hope that the Carmadas recognize that winning on procedural issues is quite different than winning on the merits, and even then proof of damages (and causality between the harms alleged and damages) can be tough as well. And that, for them as well, the stress of such litigation, the consumption of time and resources, and the inherent uncertainty of recovery in any legal action, also suggest that consideration be given to settlement.
I also wonder if any judge or jury would be that sympathetic to the Carmadas’ claims, given that their improper (in my opinion) use of the term “fee-only” was the underlying fact that led to all of this. Any litigation has an uncertain outcome. Often the outcomes of trials don’t depend upon legalistic interpretations of process, but rather come down to assigning blame. I don’t believe the Carmadas would be viewed by the trier of fact in this case as “pure innocents.”
And federal court litigation can drag on for years and years – with more and more motions, trials, judgments, and countless appeals. Almost certainly the CFP Board would move for rehearings, and then appeal, any verdict against it, in the event such a verdict would be entered. Do the Carmadas desire to spend their next several years, and fortunes, pursuing this case?
Both parties would appear to have better things to do than to have their time and their fortunes consumed by this litigation.
My two cents.
Your points may have some validity but isn’t this a CFP issue and not a “profession” issue? There are too many excellent advisors embracing the fiduciary standard that are not CFP licensees to make a blanket “profession” statement. Furthermore, having case law may be important years down the road – and I hope that each side does continue to present their arguments in court.
A question – If I read your post correctly, you feel that the Jeff and Kim Camarda may not be able to claim deception because they are not consumers, but as licensees don’t they have the right to expect that the licensor will provide accuracy and non-deceptive descriptions of the product?
Re #5 this were the Camarda’s really have the most credence… it will be impossible for the Board to argue that they were treated the same as every other CFP that has violated fee-only compensation rules given that they gave amensty to hundreds if not thousands of brokers, in addition to the 150 or so NAPFA members as well. As for Goldfarb getting a public letter as some sort of mitigant, unfortunately there has never been a public letter for fee-only violation prior to his (and both the other DEC members got private censure for theirs) and the timing is such that it seems like they went public just to protect themselves from Camarda — very transparent and doesn’t look good.
Ron, allow me to address just one issue… You write:
“I do not agree with the Carmada’s RIA firm’s prior use of the term
“fee-only,” when at least one of them appeared to have owned an insurance agency that sold insurance products, presumably on a commission basis. In my view, “fee-only” is applied first at the individual level – to the person.”
Let’s think about this in a little more detail… Whose behavior exactly does CFP Board try to control and manipulate by means of Federal Trademark law and licensing agreements? The answer is CFP® CERTIFICANTS ONLY. You disagree with a firm that is NOT a CFP® Certificant using the term “fee-only”? Why? Because the CFP Board now controls and regulates the provision of fee-only investment advice by Investment Adviser firms?? This isn’t a show me the money moment, this is a show me the signed agreement between the RIA and CFP Board that surrenders control to them over the firms advertising moment… Is there any written and signed agreement between Camarda’ firm and CFP Board… Does CFP Board otherwise posses ANY legal regulatory authority over an RIA firm that is not a CFP® Certificant, whichit cannot be anyway?
You are suggesting CFP Board now has the right to usurp the authority of States and the SEC to regulate the investment advisory profession?? If you allow this to apply, then CFP Board controls the actions and disclosures of ALL investment advisory firms in the United States, whether or not they employ CFP® Certificants. Do YOU think the courts, States and the SEC are going to let that one slide in??
My surprise to date is that Camarda’s lawyers haven’t filed a compulsory joinder motion against the SEC and Florida to make them exert their authority over Investment Advisers and push CFP Board back to where it belongs, OR, become defendants and have to answer why they should still be allowed to regulate investment adviser firms if CFP Board is doing such a bang up job for them!
A trademark licensing agreement is not executed between an investment advisory firm and CFP Board, it is the Certificant ONLY who executes this agreement in his individual capacity. Hands up if you think American Express or Goldman Sachs would allow CFP Board to influence their ADV Form and website disclosures on fees! One of the arguments raised by CFP Board is that because the Camardas operated a separate and distinct insurance agency, which was fully disclosed, CFP Board opines that these are functionally one and the same… Now go back a paragraph… What CFP Board claims in this instance is IRRELEVANT because their licensing agreement is between them and the individual CFP® Certificant, not his firm or anything to do with his firm. In other words, who cares!
The ONLY relevant question here is: did the Camardas’ PERSONALLY claim to be “fee-only” on CFP Board’s website. If yes, that “could” be slightly problematic because they did collect commissions in a roundabout way. If, however, they list their compensation as commissions and fees on CFP Board’s website, (which they currently do) they have fully disclosed to CFP Board and the public using the site that the Camardas are personally compensated by commissions and fees and include information concerning outside business activities NOT connected with the RIA for which they may be compensated differently, then they have done nothing wrong. They have met their duty to correctly disclose their compensation structure to CFP Board and the public. There companies are compensated differently, regulated by others who have different rules on disclosure, OH AND BY THE WAY, have NO rules to date on use of the term FEE-ONLY…
What their companies do or disclose is IRRELEVANT. Remember, if Camarda Advisory is making false disclosures about compensation, it is the job of the SEC to regulate and enforce their rules, NOT CFP Board. In the instant case, my reading is that Camarda’s investment adviser is NOT registered as an insurance agency, is prohibited by law from accepting commissions, the firm makes 100% of its money from fees only and therefore THE FIRM can advertise truthfully that it is FEE-ONLY. It would actually be a fraudulent and deceptive practice under securities regulations for Camarda’s wealth advisory firm to claim it is compensated by fees and commissions because it’s not.
Remember, NOBODY has given permission to CFP Board to regulate investment Advisers and tell them what they can and cannot say and certainly, NO legislation, law or regulation from a REAL regulatory agency has given CFP Board the authority to regulate the term fee-only.
Fee-Only is a generic term inlaw. Remember, NAPFA tried to trasdemakr and restrict its usage, they failed miserably and the trademark was tossed out years ago… NAPFA, is using their influence through their coalition with CFP Boardto try and enforce something they couldn’t manage by themselves and CFP Board is being used to try and create unfair competitive practices whereby NAPFA planners enjoy an uneven playing field. NOT FORGETTING, hundreds of NAPFA planners in over 30 states that require a level of licensure to offer insurance advice for a fee are flagrantly violating the law right now, have been for years and CFP Board has failed to act… tending to justify Camarda’s claim that CFP Board imposes their rules in an arbitrary and biased manner, one of Camarda’s allegations.
So your first statement holds no water, weight or argument… your second statement is correct… “”fee-only” is applied first at the individual level – to the person.”
It is applied at the individual level because it can ONLY BE APPLIED AT THE INDIVIDUAL LEVEL!! To individual CFP® Certificants and their PERSONAL compensation as a whole.
If you know of the battles fought in the 90’s NOT JUST regarding CFP Lite before the resignation and recission of certain other initiatives, you’ll know already that CFP Board knows they have no authority over RIA firms… Clearly, as previously stated, if the Camarda’s claimed commissions and fees on CFP Board’s websites and the firm disclosed outside business activities on their ADV Form for which they earned a separate commission not connected with the firm, CFP Board’s goose is cooked, sorry!
We run into this issue all of the time. Investors are very confused by the sales claims of advisors and how they are actually compensated. A central issue is the claim of fee-only. This method compensation has some grey areas. It is easy to apply fee-only to planners who are “only” compensated with fixed or hourly fees. This puts the planner into the same payment category as CPAs and attorneys. There is a grey area when you expand the definition to include asset-based fees that drive the investment businesses of RIAs and IARs. This method of compensation has built-in incentives and is not as clean or simple as hourly and fixed fees. And, then you add-in the fee-based advisors who are compensated with fees and commissions. No wonder investors are confused.
as the resigned cofounder of NAFPA and who took on the CFP Board (then just an interlocking directorate controlled by the College for their Own Financial Planning abusing tax exempt status), the CFP Board was born in SIN and stupidity and it continues. Unfortunately, NAPFA has taken on the role (not unaccustomed to it) of useful idiots. At the very best (remember the Evansky trial balloon and the recent balloon of creating courses which it would be the certifier of) the CFP Board can do the wrong thing very well. It is time for NAPFA to merge in some way with the CPA FInancial Planners – and just jettison from the less than innocent but always Keystone Cop CFP Board. But don’t worry – NAPFA will continue to have it’s head up its tuchass as it is just a bureaucracy in search of officers wanting name recognition like Seattle Seahawks Richard Sherman for practice development.
It costs too much to maintain my CFP license as it is, now I will have to pay even more to cover their costs of litigation. Starting to wonder whether the designation is worth the price.
When I started in the financial planning business 6 years ago, I took the CFP(R) classes and took the test. I did it to learn more about financial planning and I thought it was pretty good. I was unable to display the marks until I had the required experience. I have not paid to renew my yearly fees which are due this Friday, but the only reason I continue to renew is because I believe having the marks after my name still makes prospects and clients feel good about engaging with me in financial planning.
I have never seen a study that proves that (except from the CFP board). Michael, why do you keep the marks as you are very well established? All of this fee only/ legal stuff has not leaked into the general public from what I have seen…but if it does I definitely will not pay the fee of worry about the marks. I get little to no known value from the CFP board but the perception that the marks help. Do they do anything behind the scenes that I am unaware of?
Any comments would be appreciated