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The CFP Board to Enhance Scrutiny of Advisor Records

The CFP Board to Enhance Scrutiny of Advisor Records

The CFP Board said it would increase the frequency of how often it checks advisors for regulatory infractions, following revelations it failed to note the marks on public facing sites touting the credentials of thousands.

The CFP Board said it was committed to better vetting the regulatory records of the financial advisors it vouches for on public-facing websites.

This comes following a Wall Street Journal article that outed the CFP Board for listing "thousands" of advisors as having unblemished regulatory records, when in fact they do. The lack of a process for vetting advisors for regulatory infractions led the group to hire an independent task force to review its enforcement program. That task force delivered its findings to the Board on Nov. 6, recommending the CFP Board revamp its governance structure, increase the frequency of independently vetting the advisors who hold the designation, and making public disciplinary actions the board takes against some advisors. 

On Wednesday the CFP Board gave its preliminary report, agreeing to some, but not all, of the task force's recommendations.

The Board says it will no longer rely solely on a CFP certificant’s self-disclosure and instead will increase the frequency of its background checks, as it told Wealth Management in July. But, it argued, it was still better for government regulators to scrutinize and flag advisor infractions. 

“The CFP Board has always had an enforcement problem; relying on people to self-report has always been an issue … It was only a matter of time for these issues to come to light,” said Tim Welsh, president of Nexus Strategy, a consulting firm for registered investment advisors.

Kevin Keller, CEO of CFP Board, explained that “many professional organizations and established professionals rely on self-disclosure” and self-reporting “remains important,” as some government reporting entities have gaps in information for finance professionals.

But the report identified several issues, one of them being the board’s governance structure. The board doesn’t include members with prior financial services regulatory experience, as directors are typically senior members of the financial planning profession, the board noted.

“An effective enforcement program incorporates investigative processes, evidentiary standards, procedural and due process protections, and motion, trial and appellate practices that are the province of trained attorneys and experienced enforcement officials. These areas of expertise are not typically found in the portfolio of a CFP certificant or other financial professional,” stated the task force.

“Populating the Board of Directors with [this level of experience] would provide competency and perspective that is necessary for the CFP Board to fulfill the enforcement duties it has assumed,” it continued.

Welsh questioned the CFP Board's stated mission to take on those enforcement duties to begin with. “They don’t have the regulatory power to fine people … all they can do is say ‘you know what, we’re taking your marks away.”

Instead, Welsh recommended that the board stick to telling the public what it actually does, which is to provide a curriculum to finance professionals, followed by the certification award that can help consumers identify which professionals are knowledgeable in financial planning.

Keller said Wednesday that the board has hired consultants to work on its governance structure. Susan John, chair of the board, said the committee plans to enforce its new Code of Conduct for CFP professionals, which went into effect in October. In 2020, it’s slated to review the costs associated with its upgraded goals and how it can fund them. The board also said it plans to increase the promotion of its consumer websites, and, which provide information to the public with links to FINRA's Broker Check and the SEC's IAPD information.

The CFP board manages the certification of more than 85,000 CFP professionals with thousands of renewals every month, according to John. The task force it hired included Denise Voigt Crawford, the chair; Mercer Bullard, the reporter; and members Michael Huggs, Richard Salmen and Nancy Smith.

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