Journal of Financial Planning; March 2012
Rick Adkins, CFP®, ChFC, CLU, is president and CEO of The Arkansas Financial Group Inc. in Little Rock, Arkansas. He served as the 2003 chair of the Board of Governors of Certified Financial Planner Board of Standards. Contact Adkins at RickA@ARfinancial.com.
I care about the ongoing development of financial planning as a profession. I believe the public benefits from the existence of professionals who are ethical and competent as they seek to understand and advise clients with respect to financial decisions and behavior. And although I appreciate any high-quality advertising and promotion of our profession, I believe the ultimate promotion of our profession will be our own behavior, both personal and professional.
I have observed with interest the various conversations surrounding last November’s New York Times article “How a Financial Pro Lost His House,” about the housing woes of Carl Richards, CFP®. The comments following articles and blogs on the subject have generally fallen into two camps: those who don’t seem to know Carl personally have resembled Nero turning his thumb down on a gladiator in the arena—no punishment is severe enough; and those who know Carl personally have defended his actions because of their relationship and history with him. I don’t think I’ve met Carl, but I appreciate his drawings, which convey complex concepts in a simple, understandable manner.
What is the penalty for a CFP® certificant exercising poor judgment in his or her personal or financial life? What difference does or should personal behavior make in our professional lives? Because Carl is a CFP certificant, to what standard is he held? The Code of Ethics of CFP Board is based on broad principles that describe the ideal characteristics of the professional behavior of certificants: integrity, objectivity, competence, fairness, confidentiality, diligence, and … professionalism. It seems to be this last principle that has some relevance in this case, defined in the CFP Board Code as:
Principle 6—Professionalism: Act in a manner that demonstrates exemplary professional conduct. Professionalism requires behaving with dignity and courtesy to clients, fellow professionals, and others in business-related activities. Certificants cooperate with fellow certificants to enhance and maintain the profession’s public image and improve the quality of services.
I say “seems” because the “enhance and maintain the profession’s public image” appears to be predicated on our cooperation with fellow certificants. I’m presuming this implies that we’re all in this together, and it is our collective behavior that enhances and maintains. In addition to the principles, the Code also contains Rules of Conduct that “establish the high standards expected of certificants and describe the level of professionalism required of certificants.” Here are four rules for your consideration:
1.4 A certificant shall at all times place the interest of the client ahead of his or her own. When the certificant provides financial planning or material elements of financial planning, the certificant owes to the client the duty of care of a fiduciary as defined by CFP Board.
2.2 A certificant shall disclose to a prospective client or client the following information:
c. Any information about the certificant or the certificant’s employer that could reasonably be expected to materially affect the client’s decision to engage the certificant that the client might reasonably want to know in establishing the scope and nature of the relationship, including but not limited to information about the certificant’s areas of expertise.
4.4 A certificant shall exercise reasonable and prudent professional judgment in providing professional services to clients.
6.5 A certificant shall not engage in conduct which reflects adversely on his or her integrity or fitness as a certificant, upon the CFP® marks, or upon the profession.
I ask you to think about your own behavior, personal and professional, present and past, as you consider the implications of these rules. Starting at the end and working backward, Rule 6.5 prohibits engaging “in conduct which reflects adversely on his or her integrity or fitness.” Here are a few questions to answer personally:
- When have I failed to keep my word, failed to honor agreements or covenants, stretched the truth, or otherwise been less than perfect with respect to integrity?
- When has my personal behavior, particularly in private, been such that I would be embarrassed for that behavior to become public knowledge because it might call into question my fitness as a professional?
Rule 4.4 addresses judgment. It’s hard to imagine that someone who persistently exercises poor personal judgment has any basis for exercising great professional judgment for dependably dispensing outstanding advice to clients regarding those same behaviors. It is too tempting to subconsciously justify my own bad behavior by telling clients their bad behavior is okay. With regard to Rule 4.4, here are a couple of questions for your consideration:
- When have I made personal financial decisions or engaged in ongoing personal financial behavior that I preach against to my clients?
- Do I demonstrate that I really value financial planning by engaging professionals to help me to objectively examine my own financial behavior and move me toward meeting my own financial goals?
Rule 2.2.c. has the potential to make all of us uncomfortable, if taken to an extreme. It gets to the heart of, what does a client have a right to know about someone with whom they will be sharing intimate information about their life and behavior? I suspect that if you asked 10 certificants, you might get 10 different answers. I also suspect that there would be much greater consistency in the answers provided by 10 different clients. They generally want to know if I will take care of them, exercise sound judgment, give sound advice, and practice what I preach. They would generally be concerned if my personal behavior was vastly different from what I espouse. Here are a couple of questions for a bit more self-evaluation:
- What is there in my past I would prefer to hide rather than disclose about myself that a client or prospective client might reasonably want to know?
- Where should I draw the line between what a client might want to know and what a client deserves to know?
Now, I’m going to complicate things a bit. (Up until now, you’ve answered these questions applying your own default measuring standard.) On a 1-to-10 scale, with a 1 being total self-interest and a 10 being total client interest, where do you fall? Unless your answer is tilted toward 10, Rule 1.4 raises the specter of a tougher measuring stick—the fiduciary standard. If each of your answers were to begin with, “As a fiduciary,” how would your answers change?
I pose these questions to help you if you are obsessed with evaluating Carl’s behavior, because I’m reminded of this teaching from the bible:
Why do you notice the little piece of dust in your friend’s eye, but you don’t notice the big piece of wood in your own eye? How can you say to your friend, “Let me take that little piece of dust out of your eye?” Look at yourself! … First, take the wood out of your own eye. Then you will see clearly to take the dust out of your friend’s eye.
I can tell you that I have many things in my past about which I’m not proud. I have not been nor am I now perfect. None of us are. Yet, although I’ve felt compelled at times to uncomfortably reveal personal flaws to clients, I’ve never been courageous enough to have those personal shortcomings revealed in the New York Times!
A common refrain I’ve heard from many certificants who have served on disciplinary panels has been, “There, but for the grace of God, go I.” While it is critical that we remain vigilant as a profession to evaluate each other’s behavior as we self-regulate the profession, it is more important that we each constantly examine our own behavior, and as flawed human beings, try to learn from our mistakes, grow as professionals, and better serve our clients with that hard-earned knowledge.