After a sudden resignation last fall, Alan Goldfarb, the former Chair of the Board of Directors of the CFP Board, has been found to have violated the CFP Board's Rules of Conduct for failing to properly disclose his compensation, after he claimed on FPA's PlannerSearch that he was "fee-only" and later "salaried" when in reality a "related party" was eligible to receive commissions from Goldfarb's clients. As a result, the CFP Board's Ad Hoc Disciplinary and Ethics Commission that investigated the matter has issued a public Letter of Admonition for Goldfarb's conduct.

Yet the details of the case suggest that the matter was not as clear as the initially reported findings suggested; Goldfarb's ties to the "related" broker-dealer were through a parent accounting firm that owned both his RIA and the broker-dealer, and Goldfarb himself held only a small 1% equity interest in the firm and was otherwise not compensated. By contrast, even NAPFA guidelines dictate that less-than-2% interests are de minimis, yet the CFP Board declare that because of these related interests Goldfarb should not have labeled himself as "fee only" even though all of his clients in reality only ever did in fact pay him fees through his own RIA.

At a higher level, though, the real issue in the Goldfarb case is that such a strict interpretation of what does and doesn't constitute "fee only" could cause even many large and well-known RIAs to "fail" the test, and renders the definition of "salary" almost moot, and is a problematic reminder of how opaque the CFP Board's adjudication process can sometimes be due to its privacy obligations as a private entity. In addition, taking such an extreme position regarding "fee only" will arguably result in so many financial planners being classified as receiving both commissions and fees - regardless of whether the commissions constitute 0.1% or 99.9% of total compensation - as to render the disclosure relatively useless as a consumer protection. Furthermore, the Goldfarb result also leaves us unclear about where to draw the lines on what constitutes "trivial" or immaterial compensation conflicts, related parties, overlapping ownership of holding company subsidiaries, and complex real-world arrangements that could unwittingly render advisors on the wrong side of the line.

In the end, a strict interpretation of the Goldfarb conclusions about what constitutes "salary" and "fee only" could mean that thousands of current CFP certificants are not complying properly with the rules, and that many need to update their information immediately! But perhaps ultimately, the best outcome for this whole situation is to hope that it can serve as a catalyst for better clarification on the rules for compensation, and an improvement in the transparency of CFP Board's enforcement process to allow clearer *(and better?) precedents to be set for the future.

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Choosing advanced education as a financial advisor has become increasingly complex over the years, as the proliferation of designations has led not only to a confusion amongst consumers about which are credible and which are not, but has similarly led to uncertainty and frustration amongst advisors trying to identify which programs will add genuine knowledge and educational value and are worth pursuing.

In this guest post, retirement income professor and researcher Wade Pfau shares his perspective on three of the leading most prominent and rigorous retirement income designations - the Certified Retirement Counselor (CRC), the Retirement Income Certified Professional (RICP), and the Retirement Management Analyst (RMA) - as someone who has studied this body of knowledge extensively, and in fact has helped to design curriculum and teach content for several of the programs.

If you're trying to decide whether to pursue advanced education in the specialty of retirement income - and struggling to determine which designation in particular to choose - this should be helpful to you as a starting point for making a decision about which curriculum, program, and sponsoring organization is the best fit for you.Read More...

Almost four months ago, the SEC released its Request For Information to assess the costs and benefits of a potential uniform fiduciary standard for brokers and investment advisers. This week, the deadline for the comment period ends, and the SEC will begin to evaluate comments and come to a decision about whether to move forward with a fiduciary rule, to back away from it, or to simply partially "harmonize" the rules between brokers and investment advisers without fully imposing a uniform standard.

Ultimately, the SEC's cost-benefit analysis study will just be one of many steps in the progression towards a potential uniform fiduciary standard, but it is a critically important one, as the SEC's recent struggles in having its rules challenged have made it clear that the SEC is unlikely to proceed on the fiduciary issue unless it can get comfortable with the results of its economic analysis. This is especially true as the SEC tries to sort through thorny issues, including the fact that Section 913 of Dodd-Frank mandates that any uniform fiduciary standard must be at least as stringent as the Investment Advisers Act of 1940, but that the receipt commissions alone should not automatically run afoul of whatever the future rule will be.

While several "big hitter" organizations have already weighed in, it's crucial for all advisors who have an opinion on the matter to submit their own comments, whether just to generally support the implementation of a uniform fiduciary standard, or to more specifically offer up detailed comments on their own perspective and personal experiences on the issues, or any quantitative or qualitative information and data they have to share. Accordingly, for those who haven't already submitted a comment letter, now's the time - comments can be sent via email or using the SEC's online form through July 5th!

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