Registered Rep: What's the biggest problem among the advisors whose cases you hear?
Edward Mora: What we've seen in the last couple of years is a big increase in bankruptcy cases. We think it's due mostly to the economy. Is there anything that a certificant can do to avoid that? Maybe yes, maybe no. Each one of these situations are very unique.
RR: A bankruptcy filing doesn't reflect very well on a financial advisor's abilities.
EM: Sometimes it's really completely unavoidable, maybe a medical type bankruptcy. Fundamentally, we expect CFP certificants to be able to handle their own finances effectively if they're going to be advising others. A lot of times it relates to certificants that might have branched into real estate-type investments that went under and sort of pulled them under. It's rare that it's a business bankruptcy, like the practice going under. It's mostly personal.
RR: How many cases that your commission hears involve financial harm to advisors' clients?
EM: I would say that at least half the cases relate to clients being directly harmed, and the other half could be related to rule violations that were more behind the scenes or did not necessarily result in client harm.
RR: How does the commission learn about misbehavior?
EM: Oftentimes investigations begin with actions that were taken by other regulators. There is a subset where the client submits a grievance directly to the CFP board. But a majority do originate from other regulatory actions.
RR: May consumers presume that someone with a CFP is more ethical than those that lack the mark?
EM: I can't say the CFP certificants are any more or any less ethical than the advisor population. But what I can say is that the vast majority of CFP certificants are ethical in principal. I think the fact that we do vigorously enforce these rules, that we do have three levels of public discipline and we put them out in press releases, I think that does have a significant deterrent for CFP certificants.
RR: Can you point to any successes in ethics enforcement?
EM: I consider it a great success that we actually enforce our rules to begin with. It's something that really differentiates us from most other designation marks. Not only does it benefit the public, but I know our certificants appreciate the vigilance we show in upholding the credibility of the marks.
