NEW YORK (Reuters) - A group that develops standards for financial planners publicly admonished its former chairman on Tuesday for ethics violations related to how he characterized his fees.
The Certified Financial Planner Board of Standards said that Alan Goldfarb, a Texas-based planner, misrepresented his compensation as “fee-only” when, in fact, he worked for and “partly” owned a firm whose advisers were permitted to collect commissions and ongoing 12b-1 fees for marketing mutual funds.
Goldfarb also misrepresented his compensation as a “salary” on an online financial planner database, the board said.
A public admonishment is the most lenient disciplinary action the CFP Board publicly discloses. It also can permanently or temporarily prohibit advisers who pass its certification requirements from using the CFP designation.
Goldfarb abruptly resigned as CFP Board chairman last year. He also has since quit as director of advisory services at Weaver Wealth Management in Dallas and now runs Financial Strategies Group in that city.
The CFP Board’s plan to bring an action against Goldfarb was reported earlier by Reuters. The censure followed an investigation by a special disciplinary and ethics commission set up by the Board to assess allegations against Goldfarb and some other planners active in the group.
The term “fee only” can be used only if an adviser collects fees exclusively from clients, according to the CFP Board’s ethics code. Fee-only advisers say they are aligned more closely with clients because their pay rises or falls with the value of clients’ portfolios and they don’t make money by selling products. Stockbrokers are more conflicted, they say, because they are compensated by their firms with commissions and fees related to product sales.
Goldfarb said he thinks it would have been more appropriate for the CFP Board to sanction him privately.
In its Tuesday announcement, the CFP Board announced censures against 25 other certified planners for a myriad of behaviors including filing for bankruptcy and giving unsuitable advice.
The CFP Board has beefed up its enforcement program in recent years, and now conducts webinars to help advisers avoid infractions of its ethics code. The next webinar, scheduled for July 31, is titled, “How to Avoid Misleading Compensation Disclosures.”
Reporting by Jed Horowitz and Suzanne Barlyn; Editing by Richard Chang