Do the CFP Board and SEC Really Support Fiduciaries?

As a Certified Financial Planner and registered investment advisor, I’m bound by law to act as a fiduciary to my clients. Yet the CFP Board and SEC, overseers of the standards that guide fiduciary responsibility, aren’t always serving the investors they are intended to protect.

Merriam Webster’s dictionary defines a fiduciary as “a person or entity responsible for acting in the best interests of others — typically an investment client, a company's shareholders or a beneficiary.”

Every advisor should put their clients’ interests first. I don’t buy the argument that small investors would be squeezed out if all advisors and brokers were forced to be fiduciaries. It would be a good thing if nobody could sell products with 10% commissions.

However, to say one is a fiduciary doesn’t mean you act as such. Clients may easily be lulled into a false sense of security if they hear their advisor say, “as a fiduciary, I must always put your interests ahead of mine,” particularly when their advisor isn’t actually held to this standard. If fiduciary standards aren’t enforced, and they typically aren’t, it’s the client who loses. This also results in the financial advisory profession being viewed by the public as a sales vocation, rather than a true profession.

Two examples of so-called fiduciary duty fulfilled

Several years ago, I wrote about a case where a CFP, claiming to be a fiduciary, sold an annuity to his client, double dipping by taking both commission and annual ongoing fees. The client was paying — between the commission, the planner’s fees, and the ongoing annuity costs — about 5.29% a year. Because of the fees and false information that the client and I documented, the insurance company and broker dealer quickly (and without an attorney or complaint filed) generously settled.

The consumer didn’t want others to be duped by this so-called fiduciary, so he made sure his settlement allowed him to file complaints with regulators and the CFP Board against this advisor. None found any wrongdoing. But Kevin Keller, now the CEO of the CFP Board, claimed that since that case, standards were stronger and a different outcome would have been likely had it been a more recent case. He invited me to be part of a panel on disciplinary hearings and to write about the CFP Board’s disciplinary process. Though I agreed to keep facts (like names) confidential, the CFP Board also demanded the right to approve the entire piece, including my opinion of the process. That was unacceptable to The Wall Street Journal and didn’t strike me as a sincere effort in being transparent.

I wrote about the issue in The Wall Street Journal, which titled the piece Is the Fiduciary Standard a Joke? and Keller responded with a piece Why Our Fiduciary Standard is No Joke.