Planner Integrity

(This commentary is a response to the CFP Board and NAPFA regarding disclosure to clients of commissions and other associated fees)

Rule 402 and CFP's. The following is very lengthy but I decided long ago that ethics was supposed to mean something (actually ethics and knowledge and the two biggest financial mistakes I have ever made in my life. Neither one is worth anything if the public pays only lip service to ethics and doesn't have a clue to the knowledge necessary to help them). Anyway, the CFP Board is mired in a big dispute about whether or not the amount of commissions on a sale should be provided in writing to the investor. It is being driven by fee only planners- most who act illegally. I will be posting this commentary for discussion at a bulletin board next week. Be forewarned- its 5 pages long. But it's the truth.

Rule 402 amendments, Fraud, Americanism

"Integrity means avoiding any communication that is deceptive, full of guile or beneath the dignity of people. A lie is any communication with intent to deceive. Whether we communicate with words or behavior, if we have integrity, our intent cannot be to deceive."

I have watched with bemused detachment the squabbling amongst the various entities over what is or is not proper disclosure to the consumer. But, save for some miscellaneous and minimal commentary, what has been missed from the discussion is the fraud and breach of fiduciary duty by the CFP Board (and others) in its continued attempt to validate illegal CFP's- principally those officers and directors at the Board level.

I will set the factual concise history over more than 10 years that is necessary to prove that the activity by the various organizations is little more than a conspiracy by the major leaders to support illegal activity by various members through a rationalization that not only contradicts CFP standards and the base line elements of integrity, but demeans the responsibility that is being requested of all Americans- certainly in view of 9/11.

Fact 1- I am the ONLY fully licensed and legal fee certified financial planner to offer comprehsevise services in all of California (includes NAPFA and CPA PFS agents et al). The only one. I have a background that will meet or exceed any other planner in the U.S.- and certainly by including the Analyst license in CA- it certainly would exceed the background of any other CFP in CA. This is not meant as either arrogance nor ego- it is merely a statement of fact that anyone can verify. The point to this comment, however, is to simply establish that I have the background to disarm much of the commentary that fee only planners rail on about on the lack of disclosure regarding commissions- or the use of commissions at all. On the contrary, fee only planners in the majority of states around the country- and certainly in California- have specifically avoided the disclosure that they do not have the legal right to practice- even market- fee only financial planning. And through this dispensation of (illegal and incompetent) advice on various issues and products, the bulk of fee only planners are responsible for a double dipping of fees PLUS commissions to unsuspecting consumers.

These are not idle comments nor something that has been dreamed up in the last few months as a reaction to the adjustments to Rule 402.I have been involved with the legality of fees and commissions as well as the competency of entities offering one or both for over 15 years. I have taught courses for CFP, securities, real estate and insurance licensing as well continuing education courses for same as well as the California State Bar and CPA society. The courses have included all subject matter but I also reference courses in Ethics. It seems, certainly before 9/11, that there was an unquestionable rationale by many that if you could get away with something, so much the better. But, I submit, the recent atrocities have forced a reevaluation of responsibility- or have they?

FACT 2: Back in the early 90's, I broached the subject of the mandatory special state insurance licensing with fee only planners- the bulk of whom were members of NAPFA. Numerous readers may, at this point, indicate their disdain of the fact that there are requirements to be tested, licensed and under the control of state insurance licensing departments. So what? I may not like it either. I had to take the test more than once. I have to pay high fees to maintain the license. Again, so what? This is and was always a known law that had merit. Even forget the merit- it was the law! There are similar laws enacted in 32 states as reported by FPA a few months ago. For those of you outside of California who have licensing requirements, I am unfamiliar with the context or complexity of the material. But I can state for the record that there is not a CFP by training that has even a remote chance of passing the Life and Disability Insurance Analyst exam in this state. The breadth and depth of the material is far beyond the limited treatise offered by CFP training. Period. Like it or not, that's the way it is. Despite that the intensity of the material will unquestionably limit the number of fee only planners, including all the CA fee only CFP's and CPA PFS's, etc., it is still the law. As for other state's laws, it's also the law. Easy or hard, if you want to preach the element of integrity, you cannot lie to consumers, other CFP's, the state, etc. regarding a legal ability to practice. If one has integrity, the compliance with all federal and state laws should take precedence in dealing with consumers. Further, literally all the mandatory ethics requirements of any planning organization, in one form or another, assures the public of the highest standards. How can standards be high- or anything else- when the very officers and directors are doing whatever possible to avoid compliance to laws? Because they don't like them??? If officers, directors and numerous members are consciously deceiving the public as to the law, nevermind competency, is somebody simply suggesting that the exposure of commissions is the overriding concern for public disclosure??? Think I am making this up? Read on.

These fee only planners rejected anything to do with commissions from inception of my discussions. They clearly stated that commissions were inherently bad, all agents (essentially) stupid- at least incompetent- and all insurance companies corrupt. Readers at my site note my disdain for stupidity, incompetency and lying- but it is not certainly just commissionable agents. Yes, since I have researched the entire spectrum of planning and I do focus heavily on the fee side. But to suggest that commissions are always wrong, I suggest you read the posting by Nigel Taylor at his site. I do not agree with all of Nigel's statements (nor he with me), but his points on how commissions may be properly applied are direct and clear. Further he indicates how the disclosure "suggestions" by the Board, as initially submitted, were confusing and fraught with error. I also submitted comments about commissions and fee only planning years ago to the Board (no reply). The point being is that the initial amendments by the combined officers and directors (illegal fee only planners?) reflect a poorly researched and even less knowledgeable understanding of real life planning scenarios. Further, having had several conversations with Nigel over a period of years, I do not have to worry about his integrity or being lied to. On the other side, I know full well that the fee planners are either incompetent or liars since they have continuously furnished written documentation (as well as oral statements) that are completely false in an effort to rationalize their illegal activity. And the concern at this point is whether or not certain commissions should be disclosed???? Here are some more facts to back it up.

FACT 3: One member of the NAPFA who I interviewed early in the 1990's said that they knew they were violating state law but had decided that if they got caught, they would simply get the law changed. That's ethics? That's integrity? That's legal? Does it even make sense? But that also represents the full disclosure of literally all fee only members- a requirement to inform consumers that you are not legal in the state to perform the functions that are advertised. Isn't that what part of 402 is all about? (I will provide the name of the CFP under testimony.)

FACT 4: In 1995, 35 fee only planners lied on their ethics course since none were licensed to practice fee planning. Half said they didn't know the law- that represents absolute incompetency. A quarter said they had an exemption- a lie. A quarter said they didn't like the law- if they are unethical, why are they being allowed to practice?

I further pursued such violations. NAPFA said they had received an exemption from compliance to the law. (No joke- I have it in writing from two officers) It took me six months to pursue the issue and they finally admitted there was nothing. Does anyone see how ludicrous this was? Officers of the most "prominent" organization in the U.S. promoting full disclosure on comprehensive fee only financial planning asserted that a state licensing agency had given 50+ NAPFA agents the state knew nothing about- and who had never held a license with the state in the first place- a full exemption in direct contravention to state law? An officer (and one of Worst's Best Planners) also sent a totally a false report to these 35 members stating that this state law gave Investment Advisers a separate exemption from the law anyway. Not a chance. Even under such a misguided perception, wouldn't you expect one of these most "gifted" and "capable" planners would have at least used a finger to dial state and validate the statements before submitting then to posterity? (Everything stated throughout is validated by written documentation unless otherwise indicated.) Everybody seems to be impressed with NAPFA's and other fee only planner's ethics and integrity?? And competency? Certainly legality! Their statements were not misguided- just totally fabricated and completely unresearched.

MORE FACTS: But it gets worse. Pursuant to a meeting I called through the State Department of Insurance that included the IAFP, CFP Board, College for Financial Planning, ICFP, CPA Society, and NAPFA. Only the CFP Board, ICFP and CPA Society attended. NAPFA not only did not show up, they did not even bother to respond to the State's request. Integrity? But what sad was that Bob Goss, the then president of the Board, presented completely false statements about CFP competency to State regulators in an attempt to procure an exemption from State law for illegal CFP's doing fee work. I will testify to this statement in any forum, but it is unnecessary. The state told the Board to clean up its act by getting illegal planners to obey a law that was always clear (letter at my site, www.efmoody.com). The kicker is that Goss repeated the same false statements regarding CFP competency to a journalist that was published nationally in August 1997. A California analyst (not me) wrote the Board requiring validation of Goss's statement, "The material covered on the [CFP] exam meets or exceeds that covered in the insurance analyst's exam." She noted, "Having passed both, I can assure you that you are incorrect. On what did you base such an authoritative comment?" As stated, and as I am the only current CFP and Analyst in CA, Goss's statement contained not one shred of truth. No CFP by training has a remote chance of passing the state's Analyst exam. It is far beyond CFP training. Not even close. The reason for the intensity of state licensing is to assure that fee only licensees must have the requisite knowledge to charge a fee for this most difficult work. Such knowledge also flies in the face of the Board's acknowledged statement that a CFP is "competent and trustworthy, one on whom you can depend for professional advice and services." Competency in CA is defined by the law (and literally all other states) not some superfluous dictate on a web site. No CFP without the appropriate license is deemed competent to either perform fee insurance advice- even to market such activity. Trustworthiness mandates, at a minimum, that the planner is at least legal. Yet such unlicenced planners continue to dispense sophomoric and ILLEGAL advice with impunity from officers and directors of these "valued" organizations. This is full disclosure to the public?? I also find it a double standard that the CFP guidelines state I cannot lie to state regulators- yet Board members can do so with impunity and with the active acceptance by the other members, officers and directors? As for the CPA entities- they indicated they didn't even know about the law (and so many people put their trust in CPA's. How comfortable.) Here's more.

As part of this continued effort to get the Board to adhere to the very standards it proclaimed, I directly requested the Board to review the illegal activities of many agents. But attorney Deforest Young said in a telephone conversation that the Board would not enforce ethical violations since it would be immediately engaged in lawsuits by the aggrieved CFP's. An absolutely true statement and befits a rational business reduction to liability. But it's not integrity if the Board does not disclose to the consuming public that their marketing has been, and will continue to be, false. The public puts its trust in the Board's (and yokel journalists who perpetuate the sham) clear inference that the Board will, and does, enforce ethics. The facts are direct from the attorney- the Board "will NOT enforce an ethical violation unless preceded by a legal one". If you need verification of that fact, take a look at any statistical CFP suspensions, revocations and the like. It is only in rare instances that an individual has not already been found guilty in a court, arbitration proceedings, SEC, etc. CFP's can effectively do whatever they want with complete impunity. The Board won't like that statement, but as validation, I ask any of the readers to check how many Board officers and directors are legal. Remember, any CA CFP that even offers fee financial planning is acting in violation of the law. The Board has elected officers with direct knowledge of the individuals' lack of license. That's integrity?? That's full disclosure?? That's who you want telling you what is right and wrong? Also recognize that the Board does not and cannot give absolution to CFP officers and directors who are acting illegally. CFP ethics and integrity comes first. So how about if no one ever gets caught and convicted? Have no ethics and integrity limits been violated?

In early 2001, I broached the issue again with DeDe Pahl. Her reply, April 2001, was that "as a private non profit organization, we are extremely cautious about bringing actions against our certificants unless some other governmental body has come to a final conclusion on a particular case." That's effectively the same as CFP spokesmouth Nogami who said that "I don't know if it's up to us to interpret ... state law." What does anyone need to have happen- be hit with a brick? The letter to the Board could not have been more clear- www.efmoody.com/ethics/cdi.html.

Yes, the Board can present its disdain for the law- but remember this. We are known for having the highest ethics and integrity. And certainly if we are violating the law, we have to disclose that to the consumer, right? Remember all this stuff about full disclosure? Remember the rules about "conflicts of interest". Don't you think that acting illegally to produce a personal economic gain isn't a conflict??

Yet, I pretty much gave up on this since the element of integrity, truth and honesty was a wasted effort to all fee planners whether they be CFP's, NAPFA members, CPA PFS, FPA, you mama, etc. I knew that nil integrity and even less guts wasn't going to get me anyplace.

In fact, I was cautioned by shark Johnson not to ever say anything about the illegal planners I submitted to the state since, unless and until they were found guilty by the Board, and irrespective of their own statements that they were in violation, I might be brought before the Board for effectively committing possible libel against the CFP's in question. So what did they end up doing? They invited said CFP to become an officer. Good ol boys club? Protecting their own? Perhaps- but it is an absolute perpetration of deceit at the highest level. It sure ain't disclosure. And it sure isn't integrity. An ICFP Director told CFP's in a quarterly meeting to lie. The ethics chair was in attendance and said and did nothing. This is what you want? This is what we are supposed to believe in and mirror our conduct after?

But after 9/11, I think everyone has to refocus on what is right and wrong- and whether there is a responsibility to act for the benefit of others. President Bush wants citizens to, for example, become members of neighborhood "crime busters". To be vigilant and inform the police of any- even possible- misgivings. But CFP's shouldn't. Why not? Because unless and until someone has already been found guilty in a court of law, no wrongs have been committed. I could rape you, your dog, you goldfish and no wrong has been perpetrated. I could send Anthrax and kill hundreds- still no wrong that is actionable in any sense under the Board's position of wrong and ethics. Forget honesty, truth, and most other requirements in the ethics course. It's only for show.

Actually, bin Laden could become a CFP since there have been only accusations about his conduct. Should the U.S. have not gotten involved unless and until a separate organization that has guts and integrity came forward to do the job and formally find and convict various terrorists? Isn't bombing Al Quada wrong? At least premature? Too strong? Well why is everyone sitting back and letting the officers and directors, acting illegally, direct anything at the Board level in an effort to rationalize and validate the wrongful activity? Or are the bulk of CFP's neither caring or hoping that the double standard will cover them for any actionable activity they might commit in the future?.

But I am tired of this. Anyone can fly the American flag as a gesture for the people who died. But waving the flag as a symbol of freedom, patriotism, citizenry, duty and responsibility where these officers, directors, et al, have designed a double standard that is an acceptable rationale because it is the best for them, their family, their company either personally, professionally and/or financially. It's called moral egoism or situational ethics- whatever is good for you is acceptable irrespective of the consequences on others.

Many of you may find this commentary too narrowly defined (or self serving on my part. It isn't- I just needed to explain the history of effort.) But CFP's- as well as most other planners- have solemnly agreed to the highest integrity and ethics. Does this mean anything? I am not so sure. I have been lied to and sworn at by Board officers, backballed from organizations at the hands of these illegal planners, watched Worst magazine extol endless virtues on entities that straight out lied (actually most publications have violated journalistic integrity. Further, Worst was advised of this deception years ago.) Is that what CFP's want? Is that what the public expects and demands? President Bush suggests the public join in to, now, truly become a part of the responsibility that freedom and liberty requires. But, according to our private, non profit Board, that would not be in our best interests since people should not get involved until there is a concrete verdict entered by some other responsible party. Or is there a double standard regarding just a single state law that the Board, in all its inherent integrity, has decided that need not be applied to CFP's that want to lie?

Sure some type of full disclosure of commissions may be mandated in some form. But have you ever thought about this. I cannot charge a fee AND a commission to a client because that is illegal- called "double dipping". But a fee only planner can offer incompetent and illegal advice and then refer to a commissionable agent. It's definitely a form of double dipping because the client gets hammered twice. But the Board has conveniently submerged this element- and it certainly won't be examined by the yet to come NAPFA reply- so the public will never see full disclosure for what impacts the PUBLIC. Isn't it the ultimate costs to the client that are the point to this exercise ALONG WITH the disclosure as to whether or not the CFPs (et al) have the legal right to offer the services marketed? Or is this nothing more than a grand scale subterfuge? I submit that it is

Why are we paying any attention to liars and frauds? If no one stands up, that's exactly what this entire effort will end up doing- validating planners who lie. Of course, as everyone knows, if the standards were actively enforced, there would be a significant loss of the "best" planners. Officers, directors, not only of the Board but CPA's PFS's, FPA members and so on that offer such fee only unlicenced services would be unilaterally suspended for fraud and deceit. That sure wouldn't help the marketing of CFP's. Because of this negative publicity, I doubt that any enforcement will ever happen. I do not believe that there are enough CFP's nationally that have, or want to, adhere to the increased responsibilities that Americans should have and are now being asked to reach. You cannot agree with our president (or to basic integrity) regarding personal duty to our country while at the same time diminishing the process when and where it suits you. Perhaps if the influence of all this was initiated by Joe and Suzy Six Pack who worked at a grain elevator in North Dakota, the issue would be moot. But we are being effectively asked to comment about the necessity of full disclosure where the essence is nothing more than a testament to the continued validity of people who are frauds. I have stood up for years in a reflection of what I believe integrity and American responsibility should be. I am not perfect, I make mistakes. But I do not lie about integrity or my ethics. Period. And I don't want to have to work with. entities who profess even higher ethics and duty who have lied from the inception of their planning activities.

This tainted effort will mean that the entire activity of disclosure was nothing more than a farce with the true intent never for the client- but an excuse to violate the integrity as both CFP's (et al) and as Americans who now must stand up and be counted.

If you let this attempt go without addressing the real problem, then the Board wins, illegal activity as they may be. I expect that to happen because not enough people, no matter what ethical standards they say they adhere to, have enough guts, even after 9/11, to do the right thing and stand up for what the laws and responsibilities are meant to be. Certainly I don't like all the laws- but I either abide by them or try to get them fixed. The days of accepting the activities of the likes of Clinton and Condit are, hopefully, dwindling. Our president has asked for the people who believe in freedom and responsibility to become pillars to others. He is asking for a conscious effort for Americans to take responsibility.

Because of the past and current activity by the Board et al, it is my firm belief that double standards are the nature of these organizations(s) with specific reference to the officers, directors, employees and attorneys who covet their paycheck far more than the edicts they require members to (supposedly) adhere to.

You can be a CFP or you can be an American. But I submit you can't be both.

"We are not honorable because we act ethically. We act ethically because we are honorable."- Aristotle