CFP Board chairman resigns amid ethics probe

Alan Goldfarb steps down; faces charges he violated standards of professional conduct

Nov 2, 2012 @ 12:38 pm

By Mark Schoeff Jr.

The sudden resignation on Friday of the chairman of the board of the organization that grants the credential for financial planning amid allegations that he violated the group's ethics rules has investment advisers scratching their heads.

Alan Goldfarb, chairman of the board of directors of the Certified Financial Planner Board of Standards Inc., stepped down effective immediately, according to a CFP Board announcement. Two members of the CFP Board's Disciplinary and Ethics Commission also resigned. Their names were not released.

The CFP Board did not provide any details about the allegations against Mr. Goldfarb, saying that the results of disciplinary proceedings would be released later if they result in a public sanction.

That process doesn't satisfy some advisers.

“It's astonishing these guys won't come forward and tell us what happened and what they're doing about it,” said Ric Edelman, chief executive of Edelman Financial Inc. “The CFP holds itself up as the gold standard in the industry but they can't keep their own house in order.”

The silence is likely to foment speculation.

“This doesn't sound like a paperwork issue,” Mr. Edelman said. “Something big happened, and it's amazing they won't tell us what it is.”

In an email to InvestmentNews, Mr. Goldfarb, director of wealth management at Fort Worth, Texas-based Weaver Wealth Management, maintained his innocence.

“I wanted to personally let you know that the resignation was to maintain the integrity of the Board,” Mr. Goldfarb wrote. “I did not commit any violation and I expect I will be cleared of any wrongdoing after I go through the appropriate disciplinary process that ironically I helped develop.”

He did not elaborate on the allegations but did provide some background.

“I can't discuss much since the process is confidential, but I can say that the alleged violation concerns representing my compensation as 'salary' (which it is) as opposed to 'fee and commission' since I am also the principal of an M&A-based broker-dealer.”

Kevin Keller, CFP Board chief executive, disputed Mr. Goldfarb's assessment of the complaint.

“Alan Goldfarb's description of the alleged violation that is being referred for further proceedings under our Disciplinary Rules and Procedures is not correct,” Mr. Keller said in a statement to InvestmentNews.

The CFP Board recently formed a special committee to investigate claims that Mr. Goldfarb and the others had violated the organization's standards of professional conduct.

“The committee found sufficient merit in the allegations against Mr. Goldfarb and the two members of the DEC to refer them for further proceedings under CFP Board's disciplinary rules and procedures,” the CFP Board said in a statement. “When presented with the committee's findings, they decided to resign from their positions.”

CFP Board officials say that they are following the organization's standard procedure in not providing information about ongoing investigations.

“We can say that they do not involve alleged violations of criminal or civil laws,” Mr. Keller said in a separate statement. “CFP Board takes all allegations of violations of our Standards of Professional Conduct very seriously. The Board's strong response…demonstrates our unwavering commitment to upholding the integrity of the CFP certification in the eys of the public and to rigorously enforcing our standards as to all CFP professionals.”

The charges against Mr. Goldfarb are awkward at best for the CFP Board — not only because he is chairman, but also because he has been deeply involved in setting the organization's ethics policy. He was co-author of the standards and disciplinary rules and is the former chairman of the Board of Professional Review and the Appeals Committee.

In an Oct. 30 letter to the CFP board of directors, Mr. Goldfarb noted that he has worked as a CFP for “almost 35 years without any disciplinary history.”

“I am certain this was a misunderstanding, and I welcome the opportunity to engage in good faith the CFP Board's enforcement process, consistent with the disciplinary rules and procedures,” Mr. Goldfarb wrote. “As chair of CFP Board's board of directors, it is my responsibility to put the interest of the organization ahead of my own. I believe that under the circumstances, it is best for the organization that I resign pending the outcome of the process as both chair and a member of the board of directors, effective immediately.”

Sheryl Garrett, founder of The Garrett Planning Network Inc. and a former member of the CFP Board's disciplinary commission, supported Mr. Goldfarb's move.

“it only seems appropriate for him to resign, and then challenge the allegation, and let the organization go on,” she said. “I look at hat as a sign of leadership from [Mr. Goldfarb].”

The CFP Board recently has put a strong emphasis on enforcing ethical standards. In August, the organization approved new sanctions guidelines.

In addition, the group hired its first director of investigations this year.

The quick action against Mr. Goldfarb calls to mind the swift resignation of Ron Rhoades as the incoming chairman of the National Association of Personal Financial Advisors earlier this year over an ethics allegation. In a tweet on Friday, Mr. Rhoades wrote: "Re: CFP Board, Please don't jump to conclusions. I have seen Alan Goldfarb work tirelessly over many years to advance the profession."

Both the CFP Board and NAPF are leading opponents of legislation that would establish a self-regulatory organization for investment advisers.

The bill's backers say that an SRO is needed to better monitor the advice sector. In the past, SRO supporters have pounced on any ethical stumbles by members of adviser advocacy groups, arguing that such missteps prove that adviser oversight must be strengthened.

John Hauserman, president of RetirementQuest Wealth Management, pointed out that the CFP Board has been pushing for increased oversight of advisers.

“The handling of these allegations speaks most highly of the board, who, after all, is willing to point the finger at their own,” Mr. Hauserman wrote in an email.

Michael Kitces, a partner at Pinnacle Advisory Group, also is willing to give the CFP Board the benefit of the doubt.

“It appears they handled it in as appropriate a manner as they could, given the unfortunate circumstances,” Mr. Kitces said.

Nancy Kistner, CFP Board's 2012 chair elect, was elected to fill the rest of Mr. Goldfarb's term this year and serve until the end of 2013.

(Andrew Osterland contributed reporting to this story)


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