After drawing unwanted attention when some of its members were recently accused of fraud, the National Association of Personal Financial Advisors is wrestling with ways to ensure that members abide by the organization's ethical standards.
The public image of NAPFA, the Arlington Heights, Ill.-based membership group of fee-only advisors that has long held itself out as a beacon of ethics and probity, got a black eye this spring when three of its members were charged by the Securities and Exchange Commission with cheating clients. In April, the agency charged Julie Jarvis, a planner with Crossroads Financial Planning Inc. in Columbus, Ohio, with stealing more than $2 million from two elderly clients and using the money to buy property in Ohio and the Caribbean.
In May, the SEC charged former NAPFA president James Putman, the founder, majority owner and CEO of Wealth Management LLC in Appleton, Wis., and Simone Fevola, Wealth Management's former president and chief investment officer, with each accepting $1.24 million in undisclosed payments in a kickback scheme involving unregistered investment pools they managed. Putman was NAPFA president in 1996 and '97.
And in June, the SEC charged Matthew Weitzman, a co-founder and principal of AFW Wealth Advisors in Purchase, N.Y., and Natick, Mass., with stealing more than $6 million in client funds for personal use, including funds from terminally ill and mentally impaired clients.
"Our members are angry about it, and so are we," says Diahann Lassus, NAPFA's national chair. "We're all asking the question, 'Is there something we can do differently?' "
"I think it puts a stain on the organization, although it's probably only temporary because we'll deal with it quickly," adds Lassus, who is also president of Lassus Wherley, a wealth management firm in New Providence, N.J., and Bonita Springs, Fla. "But anytime you hold yourselves to a higher standard and some of your members are found lacking, people pay attention to that."
The plight of NAPFA's wayward members got a national stage after a couple of articles this spring by New York Times writer Ron Lieber, a Weitzman client whose account wasn't affected. The online reader comments following one of his articles are enough to make any advisor cringe. "The added value of most financial planners is negative," one reader remarked.
"How do you know when your financial planner is lying? Is his mouth moving?" wrote another.
And perhaps most cutting of all: "You're better off with Suze Orman. She's free, and funny."
A small, very unscientific sampling of NAPFA members found that at least some advisors don't believe the organization should be blamed for a few bad apples. "I don't feel the organization is at fault," says Faye Doria, a planner with Financial Guidance Associates in Dover, N.H., who counted Putman and Weitzman among her professional acquaintances. "I think it's unfortunate some people didn't follow the rules, but it's just inevitable that it's going to happen."
Pat Collins, a principal at Greenspring Wealth Management in Towson, Md., says the timing couldn't be worse, given the hit the entire financial services sector has taken to its reputation during the past couple of years. "We're now lumped in there with other organizations who maybe aren't as ethical, and now we have to dig our way out," he says.