AdvisorOne’s Best Comments: Goldfarb, Fiduciary, Referrals

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1. The Curious Case of Alan Goldfarb, and Why All Advisors Should Care: Investment Advisor Editor-at-Large Bob Clark wrote his weekly blog on June 12 off an interview with Alan Goldfarb, the former CFP Board chair who was asked to resign last year.

Comment by Ron Rhoades

Submitted on 6/12/2013 at 17:48

Bob, an excellent article on a confusing case. Due to the confidentiality of CFP Board disciplinary proceedings, we are never likely to obtain a full knowledge of the facts, even in summary form, as they were presented at the CFP Board hearing. Accepting Alan Goldfarb’s statements as both true and complete (which I do, for he has long been a man of honor and a leader of the profession), I remain perplexed about two aspects of the CFP Board’s ruling to (1) find that a violation occurred; and (2) impose the draconian penalty of a public sanction.

FIRST, there does not appear to be any explanation of the term “salary” on the CFP Board’s web site. I receive a salary from my fee-only investment advisory firm; can I use the term “salary”? Or, since all compensation DERIVES from either fee compensation (i.e., paid directly by the client) or commission-based compensation, should all advisors describe themselves as either “fee-only” or “fee-and-commission” or “commission-and-fee” or “commission-only” on the CFP Board’s web site? In other words, who – if anyone – is permitted to utilize the term “salary”? Given such, is the misunderstanding that occurred not the fault of Mr. Goldfarb, but rather the fault of the CFP Board? And … would not others have been caught in the trap of this ambiguity – and what happened to their cases?

SECOND, why a public sanction for such the alleged seemingly minor transgression – if it was a transgression at all? It seems that other disclosures provided by Alan Goldfarb and his firm corrected any misunderstanding any client or potential client would possess – if indeed there was any violation at all, and if indeed any client or potential client was confused by the language found on the CFP Board’s web site. Alan Goldfarb was apparently thorough and prompt in his reply to the CFP Board. Moreover, Alan Goldfarb very publicly resigned his CFP Board Chairmanship in order to preserve the reputation of the CFP Board while this investigation was pending. In other words, there does not appear to be any harm to Alan Goldfarb’s clients, nor to the public. And Mr. Goldfarb, by his very public resignation last year, already burdened himself with public discussion of the situation. Are the CFP Board’s disciplinary guidelines, as to sanctions imposed for the alleged offense, so uncompromisingly rigid that a public sanction was warranted (even assuming, again, that a transgression of the CFP Board’s rules even occurred)? You characterize the case as “curious.” I would go further, and say that the CFP Board’s decision in this matter poses a grave concern.

At the minimum, and without reference to any particular case before it (now or in the past), the CFP Board should adequately and prominently define for its Certificants the term “salary” and specify the circumstances in which it can be utilized (and when it cannot). Even then, any retrospective application of such an explanation appears unjust and a denial of due process – not only for Alan Goldfarb, but also for any other persons trapped by the ambiguity which has been so created by the CFP Board.

2. The Curious Case of Alan Goldfarb, and Why All Advisors Should Care

Comment by Anonymous (Mary Malgoire)