In the biggest ethics scandal since it was founded in 1985, CFP Board of Standards Inc. Chairman Alan Goldfarb abruptly resigned in a Halloween Eve letter after becoming the subject of an ethics probe into whether he had violated the CFP Board’s standards for professional conduct. Two members of the board’s Disciplinary and Ethics Commission (DEC), which investigates allegations of CFP wrongdoing, resigned at the same time as Goldfarb.

With a mission “to benefit the public by granting the CFP certification and upholding it as the recognized standard of excellence for personal financial planning,” the CFP Board oversees the CFP mark held by
63,000 designees.

Broad allegations that members of its board of directors and other committees had violated the CFP Board’s standards of professional conduct spurred the board to investigate the trio. Because the board was investigating volunteers who had been responsible for enforcing the very rules they were suddenly accused of breaking, the board appointed a special committee comprised of its public directors with no ties to the financial services industry to conduct the inquiry.

The special committee retained outside counsel to investigate and report its findings. The counsel found enough merit to the allegations against the three to refer the matter to the DEC.

CFP Board policy prohibits commenting on disciplinary matters under investigation. However, CEO Kevin Keller made an exception to that policy after Goldfarb was quoted in the press saying the allegations claim he mischaracterized fee and commission compensation as salary from a broker-dealer where he is a principal.

Goldfarb says the compensation was salary and he did not commit any violation. He is a limited partner in Weaver and Tidwell Financial Advisors, a registered investment advisory firm in Dallas that does business as Weaver Wealth Management. He is also a broker with, and an owner of, Weaver Tidwell Capital LLC.

A spokeswoman for Goldfarb at Weaver told FA that the alleged ethics violation was the way his compensation was described on the Financial Planning Association’s Web site. Under Goldfarb’s listing on the FPA site in the section “How Planner Charges,” it says “salary.”

Keller shot back with his own public statement refuting Goldfarb:  “Alan Goldfarb’s description of the alleged violation that is being referred for further proceedings under our disciplinary rules and procedures is not correct.”

What’s really going on? We may never know all the details. But the public sparring by Goldfarb and Keller makes it clear that the CFP Board suspects that what Goldfarb had reported as “salary” from his broker-dealer was actually fees and commissions.

Assuming the probe led the CFP Board to check for similar disclosure discrepancies beyond its board of directors, the two DEC members could possibly have had similar disclosure issues that led them to resign.

The CFP Board did not disclose the names of those two DEC members. However, the board’s Web site recently displayed the names of seven members of the DEC, while earlier it listed nine members. Absent from the latest version are Christina Florence, CFP, of Lane Florence LLC in Folsom, Calif., and Mary McFadden Hastings, CFP, of Wells Fargo Advisors, Waltham, Mass. Florence and Hastings did not return calls and e-mails for comment on whether they resigned from the DEC.

A CFP Board investigation has five possible outcomes: dismissal of the allegations; a private letter of admonition; a public letter of admonition; suspension of the right to use the CFP mark; or revocation of the right to use the mark.

Goldfarb and the two DEC members are affiliated with broker-dealers, and the CFP Board has recently been the subject of several reports in the consumer and trade press about its ability to embrace a fiduciary standard when many CFP designees are affiliated with a broker-dealer and compensated by commissions.
—Andrew Gluck