More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
Maybe I’m just getting old, but it sure seems to me that much of the “news” we see these days is spun more than ever. When a public figure who enjoys the support of a particular reporter or news outlet does something “questionable,” the story often focuses on how someone else they don’t like had a hand in it. Or they run story about a historical figure in a similar position who did something even dumber. Or they simply ignore the story altogether and run a picture of their man or woman talking to a group of school children. Despite my growing sensitivity to how our news is being managed, I have to admit to being impressed with a recent bit of clever spin applied by the CFP Board.
The occasion for this favorable impression was a “Message from the CEO,” released Oct. 15, with the CEO in question being Kevin Keller of the CFP Board. Not surprisingly, Mr. Keller was addressing the recent controversy over the Board’s enforcement of when and how CFPs can apply the descriptor “fee-only.” His Message included a recap of a recently released “Disclosure Guide,” a recent webinar to review its fee-only rules and a “Notice” mailed to CFPs “encouraging” them to “carefully review the accuracy of their compensation disclosures.”
Mr. Keller went on to point out that the “Board’s current standards were developed through a long and deliberate process,” and that the Board "must remain committed to the goal of providing the public with clear and transparent information about how clients pay for the services they receive from CFPs.”
Nothing particularly controversial here, at least if you ignore comments by some of the CFPs that I’ve talked to about the “clarity” of the Board’s compensation disclosure “training.” Or the reference to “how clients pay for services,” when the Board’s standards focus on how CFPs get paid. But here’s the good part as Mr. Keller went on to describe the current situation:
“As many of you may know, our compensation disclosure rules and definitions have been the subject of recent articles and commentaries… …Some have suggested that our rules and definitions are too strict; others say that we are not enforcing our rules aggressively enough; and still others say that we are too aggressive in our enforcement.”
Note the impressive spin here? If “some” say the Board is “too aggressive,” while others say it’s not “aggressive enough,” that sure sounds as if the Board has found the middle ground, doesn’t it? Even better, despite the critics who say the Board’s rules and definitions are “too strict,” gosh darn it, Mr. Keller and the Board are sticking to their mission to protect the public. Nicely done, Mr. Keller.
The problem here, of course, is that while Kevin Keller and the Board may imply that the response by CFPs to its handling of the fee-only issue has been equally pro and con, there is scant evidence of such a balance. The planners I talk to, while admittedly a small and vocal bunch, seem universally aghast at the Board’s handling of the situation, although specific concerns vary widely. A brief survey of comments posted to recent stories on the topic on industry websites reveals much of the same: a glaring lack of support for the Board’s position.
In fact, the only comment that I’ve seen or heard in favor of the Board was posted by P Potts to my Oct. 9 blog about the Camarda’s lawsuit over the Board’s fee-only enforcement efforts, which read in part: “I am not certain that $5,000 [the amount of annual revenue from the Camarda’s insurance agency] is ‘trivial’ because in many instances that amount qualifies as grand theft. Nevertheless, it is admitted that there were some jointly serviced clients… …Laws and rules tend to be complex, hence the need for lawyers, and as they say, ‘ignorance of the law is no excuse.’”
Yet, even P Potts goes on to acknowledge that the Camardas’ complaint “portrays an organization [the CFP Board] that is derelict to the people who are paying the fee to use the trademark, an organization that knowingly and willfully violates its own policy. All in all, the fact that the CFPBOS could take actions that could allow them to be accused of such behavior casts them in a less than stellar light.”
What’s more, I’ve noticed that the Board has yet to release any polling data of how CFPs view its current enforcement efforts, as it was quick to do in support of its 2011 dues increase to finance its “public awareness campaign.”
Nor has it conducted open forums around the country to allow CFPs to voice their opinions on the subject, as former Board chair Harold Evensky did back in the ‘90s, in support of his CFP-Lite initiative. Of course, a groundswell of CFP opposition killed CFP-Lite. And based on the indicators so far, I suspect the Board’s current handling of fee-only disclosure would suffer a similar fate.