CFP Board head of enforcement leaves in midst of compensation-definition disputes

The head of the legal and enforcement arm of the Certified Financial Planner Board of Standards Inc. has left the organization while it is embroiled in disputes over compensation descriptions for its mark holders, raising questions about its next steps on the issue.
Michael Shaw, CFP Board managing director of professional standards and legal, departed on Dec. 12, according to a statement from the board. The board would not say whether Mr. Shaw left of his own volition or was forced out, and it did not name his replacement.
“My gut feeling is that the CFP Board is going to use [Mr. Shaw’s departure] as an opportunity to adjust its strategy a little,” said Michael Kitces, a partner and director of research at Pinnacle Advisory Group and publisher of the Nerd’s Eye View blog. “But I don’t know whether that is just wishful thinking by someone who’s been critical of prior CFP Board strategies.”
Dan Moisand, principal at Moisand Fitzgerald Tamayo, called Mr. Shaw a “consummate professional” when he worked with him in the past. But the recent enforcement controversies have taken a toll on the organization.
“Things appear not to have gone that smoothly, so I’m not surprised some change has been made,” Mr. Moisand said.
CFP Board Chairman Ray Ferrara declined to comment, referring all personnel matters to CFP Board chief executive Kevin Keller. The CFP Board did not make Mr. Keller available for an interview.
The board has appointed John Loesch as director of investigations, filling a position previously held by Rex Staples, the first person to serve in that capacity, who left the board in 2013. Mr. Loesch will oversee probes into CFPs who are alleged to have violated the group’s ethical standards.
The moves were first reported by Financial Planning magazine.
The changes come as the CFP Board deals with controversies surrounding its definition of fee-only planners. It is currently involved in a costly lawsuit filed by two married Florida financial planners after the board brought a case against them for improperly using the fee-only label.
And a CFP Board chairman, Alan Goldfarb, resigned in November 2012 following allegations of a misleading compensation description.
The board also is reviewing the fee-only status of the planners listed on its website, and recently came to terms in a high-profile situation involving Rick Kahler, a South Dakota financial planner.
Paul Auslander, director of financial planning at ProVise Management Group and president of the Financial Planning Association of Florida, has been the subject of a CFP Board investigation of his compensation description.
“It’s certainly not a picnic over there,” he said. “[The] CFP Board is what amounts to the regulator for financial planning because there is no government regulator. If they’re doing their job correctly, they’re going to make some enemies or else they’re simply ‘yes’ people.”
The board defends its fee-only definition, which requires planners to call their compensation commission-and-fee if they are affiliated with a firm that charges commissions, even if they only charge their clients fees. Skeptics say that the fee-only description, which is coveted as a sign of fiduciary status, is too restrictive.
Investment advisers who have worked with the CFP Board don’t anticipate that CFPs currently involved in compensation questions will notice a change with Mr. Shaw leaving the scene.
“If a case is going through the normal [disciplinary] process, his departure should have no effect,” Mr. Moisand said.
Mr. Auslander agreed. “My guess is that it wouldn’t change anything,” he said. “They have a process and they hold to it. It’s not person-specific.”
Mr. Shaw’s exit creates a void in the top rungs of the CFP Board’s leadership. He joined the organization is August 2007 and was part of the staff that moved from its Denver location to its current headquarters in Washington.
“His accomplishments furthered [the] CFP Board’s strong reputation for holding CFP professionals to the highest standards of ethical and professional responsibility,” the board said in a statement.
Mr. Auslander said Mr. Shaw “had a really good grasp of the financial planning profession. I enjoyed working with him.”
But the CFP Board has been under a lot of strain lately because of the closed-door nature of its compensation-definition guidance for mark holders.
Mr. Shaw was hired shortly after Kevin Keller was brought on as the organization’s chief executive. Though Mr. Keller was reportedly loyal to Mr. Shaw, Mr. Kitces does not see Mr. Shaw’s exit as a sign for Mr. Keller’s future.
“Kevin, by and large, is doing a very good job running the CFP Board as an organization,” he said.
The CFP Board sets and enforces the educational and ethical standards for certified financial planners. There are approximately 70,000 CFPs in the United States.

Related Topics: Certified Financial Planner Board Of Standards Inc. (CFP Board)