On Fairness

NPT-ANvsCD1210 01

The resignation of my longtime friend Alan Goldfarb as Chair of the Board of Directors at CFP Board of Standards last week created quite a stir within the financial planning community. CFP Board sent a press release announcing Alan's resignation and that CFP Board had initiated an investigation into allegations of a potential violation of Standards of Professional Conduct. CFP Board also announced that two members of its Disciplinary and Ethics Commission also resigned pending an investigation into potential ethical violations. There is nothing to indicate that the Goldfarb case is in any way connected to the resignations of the other two volunteers - or that the two Disciplinary and Ethics panel resignations are connected, either.

I will not comment on the pending cases. CFP Board has a robust and well designed process to adjudicate potential ethical violations by leaders and volunteers. I know because it was developed during my tenure on the same disciplinary panel and adopted when I served as a member of the Board of Directors of CFP Board. At the time we recognized that investigations of members of the Board of Directors and the Disciplinary and Ethics Commission went beyond the standard processes used by the Disciplinary and Ethics Commission.  There were just too many conflicts of interest involved to ask Disciplinary and Ethics Commission members to sit in judgement of a fellow volunteer with whom they have an ongoing working relationship. But, we also recognized that all CFP® professionals must be subject to the same rules, if not the same processes. 

I think it is unfortunate that Alan and the two Disciplinary and Ethics Commission members resigned. These resignations forced CFP Board to announce investigations and hearings that should have proceeded confidentially as they do for all other  professionals. None of these individuals has yet to be found guilty of an ethical violation. They have not yet had a hearing and the charges against each may ultimately be dismissed or end in private censure. That is the outcome in a substantial number of cases. In such circumstances, only the CFP® professional is aware of CFP Board's decision. There is no public announcement and certainly no nationwide email blast by CFP Board and half a dozen media outlets. If the process found that a violation required more serious discipline (a Letter of Admonition, Suspension or Revocation) that would be the appropriate time for CFP Board to announce  sanctions as well as a summary of the circumstances involved. They could also outline the process used to reach judgement. That is when any guilty parties could and should resign.

I view the decision to resign by my friend and former colleague on the Board of Professional Review as well-intentioned but misguided. He sought to preserve the integrity of the organization to which he has devoted countless hours as an unpaid volunteer, but his actions had the opposite effect and created doubts regarding the very organization he wanted to protect. When Alan Goldfarb went public, he forced CFP Board to make a public statement, as well. Alan could and should have continued to serve as Chair while the disciplinary process went forward in the same way that congressmen and presidents remain in office while an ethics allegation is reviewed. In this post-Watergate era we as a society  demand complete transparency - we want to know everything and expect that nothing should be private. This runs counter to our individual liberties under our Constitution. The public's right to know must not supercede  the individual's right to privacy. What we suffer today is a voyeuristic obsession with scandals and paparazzi lurking to capture our very human faults and failings. This  inevitably reduces the willingness of men and women to assume these highly visible roles whether in the political sphere (Do we really need to know our candidates preference in underwear?) or in leadership positions at our professional organizations. 

Make no mistake, there is good news here for the profession. CFP Board's actions demonstrate an unwavering committment to high ethical standards for all CFP® professionals. No "good ol' boy" network and no cronyism. The standards apply to all. However, one of the seven Principles that guide the Standards of Professional Conduct is Fairness. In this case we are not treating the folks involved the same as we treat other CFP® professionals suspected of a potential violation. These are good people who devoted untold hours to serving the financial planning community. They deserve better from us than a rush to judgement and public humiliation. Let us all withhold judgement until all parties can have their respective days in court. If there are indeed ethical violations there will be ample time then to ogle the car wreck.

© PennyTree Advisers, LLC 2018