CFP Board: Fiduciary Hypocrites

The Certified Financial Planner Board of Standards made a recent announcement that it has created a Standards Resource Commission to help CFP certificants meet the Board’s new Code of Ethics and Standards of Conduct.

Before the newly formed commission begins its work, it should insist that the CFP Board adopt generally accepted fiduciary best practices for association boards. Otherwise, the work of the commission will just become additional ways and means for the CFP Board to abuse its power.

The CFP Board is a parasite. Consider the following from Wikipedia:

Parasites increase their own fitness by exploiting hosts for resources necessary for their survival, in particular by feeding on them and by using intermediate (secondary) hosts to assist in their transmission from one definitive (primary) host to another. 

No organization has sucked more life out of financial planners than the CFP Board. To be clear, I’m referring to the conduct of the senior staff and directors as opposed to the dedicated faculty and volunteers that provide invaluable support for CFP candidates and certificants.

Consider the CFP Board’s recent conduct, and why members of the commission and CFP stakeholders (including the Financial Planning Association and the National Association of Personal Financial Advisors) should be alarmed:

1. Publicly the CFP Board has advocated for fiduciary standards while at the same time it has intentionally interfered with the efforts of outside organizations attempting to develop fiduciary standards for financial planners.
2. Associated with the above interference, there’s overwhelming evidence that senior staff and at least one director engaged in self-dealing, collusion and undisclosed conflicts of interests.
3. There also is a preponderance of evidence to demonstrate that the staff has buried formal ethics complaints of “friends” while orchestrating kangaroo courts for “enemies.” Ten years ago, the Board’s CEO convinced the directors that his staff, not the independent Disciplinary and Ethics Commission, should be overseeing the disciplinary process. In response to the change, five members of the DEC resigned in protest. “The CEO of the CFP Board has given staff unfettered control of the DEC process,” one of the departing members said at the time. “In doing so, he has done profound violence to the integrity of the whole disciplinary and ethics review process.”

What needs to be done?

Since the CFP Board is imposing a fiduciary standard on certificants, the Board should demonstrate that it also is going to abide by fiduciary best practices. A fundamental principle of leadership is that you don’t ask those you serve to do something you’re not willing to do yourself.

To restore confidence and trust, the members of the commission and CFP stakeholders should insist that the Board immediately adopt the following fiduciary and governance best practices:

1. Open elections: The board of directors needs to be reconstituted. CFP stakeholders should be electing directors, not the staff and sitting directors that are in collusion with the staff. This backroom mentality helps to explain why there is rampant self-dealing and flagrant abuse of the disciplinary process.
2. Publish minutes: There’s only one reason for a not-for-profit board to go dark (not to publish its minutes) — when it’s involved in unethical or illegal activity.
3. Independent, outside legal counsel: The board’s in-house attorneys are representing the interests of the staff, not the directors and certainly not the interests of CFP stakeholders. Today if a CFP stakeholder has evidence that either the staff or the directors are involved in unethical or illegal acts, there is no recourse. A properly functioning and ethical board of directors has an ombudsman process, and immediately investigates even a hint of wrongdoing by directors or staff.
4. Independent peer reviews: The oversight and enforcement of standards should be restored to the DEC and taken completely out of the hands of the staff.
5. Free speech: The staff requires directors to sign confidentiality agreements. In addition, directors are not permitted to speak to the media unless accompanied by a senior staff member. This is censorship and is unacceptable in a fiduciary community.
6. Transparency: There is a familiar saying — sunlight is the best disinfectant.

Central to good board governance is that directors lead, and staff follow. The opposite has occurred at the CFP Board, which is why it has de-evolved into a parasite.

If nothing is done to cleanse the Board, the work of the new commission will unfortunately create new opportunities for the CFP Board to abuse financial planners. In the continued absence of moral and ethical leadership, the work of the commission — indeed, the value of the CFP mark — will waste away.

Don Trone, L5, is the CEO and co-founder of 3ethos, which has developed the new body of research in behavioral governance. He was the principal founder and CEO of fi360, and the founder and president of the Foundation for Fiduciary Studies.