Financial advisers rallied around Ron Rhoades following the surprise announcement on Monday that he would not assume the role of chairman for the powerful National Association of Personal Financial Advisors.
An ardent fiduciary advocate, Mr. Rhoades sent a letter to media outlets indicating he'd decided to turn down the job at the organization for fee-only advisers after realizing he and his firm ScholarFi Inc., had committed a violation by failing to file registration papers in a timely fashion with Florida's division of securities.
Mr. Rhoades is chief compliance officer and president of ScholarFi.
In his letter to the media, he took full responsibility for the filing violation. “The mistake made was mine, and mine alone," he wrote. "I accept full responsibility for my personal mistake and all consequences that may flow therefrom, including the decision by NAPFA to move on without me serving as chair in the coming year.”
Advisers expressed disappointment that Mr. Rhoades would not get the job, flocking to Twitter to post their support of the adviser — who himself averages 1,000 posts a month on the microblogging site under the handle @140Limited. His posts have included harsh criticism of the
Financial Industry Regulatory Authority Inc. and the broker-dealer model.
“Even with today's news, there is nobody in our profession that I respect more than @140Limited,” tweeted Sunit Bhalla, principal at OakTree Financial Planning LLC, a fee-only practice.
The sentiment was retweeted by Michael Kitces, research director at Pinnacle Advisory Group, and George Papadopoulos, a fee-only adviser at an eponymous firm. Mr. Kitces posted that he was “very sad” about the news.
“A shame [in my opinion] that we value paperwork over real leadership,” Tony Novak, an accountant, posted on Twitter.
NAPFA member Thomas J. Duffy, an adviser at Jersey Shore Financial Advisors LLC, also stated that he was disappointed that Mr. Rhoades won't serve as the organization's chairman, arguing that the infraction was minor.
“It's not like he's the only one who's ever missed a filing deadline,” he said. “It's like filing a car registration a little late, and that's how people will take it.”
Specifically, Mr. Rhoades's firm was first formed last September as a state-registered firm in New York. It took 11 clients from Florida, which exceeds the de minimis five-client threshold for registration in the Sunshine State.
Though Mr. Rhoades considered in late summer of 2011 whether to register in Florida, he says, he incorrectly believed that he could wait until the first quarter of this year to register with the state. The registration paperwork was submitted to the state in February 2012, but Mr. Rhoades didn't become aware of the mistake until late May. He was slated to become NAPFA's 2012-13 chairman on Sept. 1.
It's not known whether there will be any penalties for Mr. Rhoades' infraction, said Cindi R. Hill, owner of Hill Compliance Advisors. She is now overseeing compliance at ScholarFi.
There's a cautionary tale in this round of developments, Ms. Hill said, especially for advisers who think they can do it everything at their firms.
“I think many RIAs try to do the role and know everything about compliance, and it's not easy; it's important for people to get assistance with that,” Ms. Hill said. “It's easy to run afoul without knowingly doing so.”
