Just about everyone now knows what a CFP (Certified Financial Planner) is…and does.

Yet you may not know about NAPFA…the National Association of Personal Financial Advisers.

Within the CFP ranks are advisers who earn money from commissions — selling financial products and services, and those who earn fee income in their service to clients….with some drawing from both sources.

In any event, they are obligated to disclose any and all income sources to their clients.

I always thought of NAPFA as the Greenpeace of the advisory corps, as they disavowed any income other than fee income from clients…placing them on a supposedly higher ethical plane than those whose judgment might be tempered by injudicious sources of compensation.

So it was with both surprise and sadness that I learned that the SEC has charged James Putman, and an employee of his firm, Wealth Management, LLC in Appleton, Wisconsin– a NAPFA member– with taking nearly $1.25 million in kickbacks related to certain investments they made for clients.

Incredibly, Putman had earlier served as past president of the 2,000 plus member organization….which had long served as a watchdog and scold to the more freewheeling corps of financial advisers.

It gets worse.

The SEC has recently charged Matthew Weitzman, an Armonk N.Y. investment adviser (and NAPFA) member with stealing $6 million in client funds for personal use.

The victims include both terminally ill and mentally-impaired clients.

Another NAPFA member, Julie Jarvis, from Columbus, Ohio,  was charged by the SEC with stealing money from elderly clients and using it to buy property in the Caribbean.

NAPFA had long boasted that they had raised the bar higher, to burnish their own credentials.  It’s members are required to log in twice as many hours of continuing education, and sign a fiduciary oath.   No doubt they are in damage control mode now, and no organization should be held responsible for an errant member.

I soon learned that ethics was an extremely malleable concept in the CFP fraternity.

I remember clearly the required ethics class where the instructor related the story of how he disclosed to his client that his commission on a recent variable annuity purchase was well in excess of $50,000.

In the funhouse mirror world of the SEC, full disclosure trumps any number of sins of omission or commission.

Just so long as you disclose the compensation, you are free to plunder without restraint or remorse.

And you are under no obligation to inform the client that there are high quality variable annuities with lower costs…and absolutely no commissions.

If this watered down mea culpa disclosure is offered as a benign case lesson in financial ethics, you begin to comprehend the magnitude of the ethical gap as the profession stands today.

The elderly especially, and the financially unsophisticated are always and forever at risk.

Because they are too trusting and credulous.

Posted: 06|23|09 at 6:35 am. Filed under: financial services providers, scams and scandals.
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