Re: FINANCIAL PORN, MEDIA FAILURE TO QUESTION IT

(advocate comment: CFP is a correspondence course designation, probably the more common one held by persons who are paid by commission sales of investment or insurance products. I consider it the "belly=button" of designations, in that nearly everyone has one, (including myself, so I might even know some of what I speak). Investment consumers should look for a CFA designation (which I do NOT have) if they wish top level professionals, who are generally not practicing product salespeople on a commission. CFP's record of following the "best interests" of customers is quite debatable. I would think that the average mutual fund customer of the average CFP, for one example, would likely find that their mutual fund purchase was facilitated at the highest choice of compensation to the seller, even if this were to cause poorer investment performance for their customer. This, by definition does not meet the promise of putting the client interest first, and it occurs in approximately four out of five sales, according to mutual fund industry sales stats)
Now to the post=========================================================================
Case Study : Opportunity for improving the FPSC complaint process
Who is the FPSC? :The Financial Planning Standards Council (FPSC) is a not-for-profit organization -it states it is constructed to ensuring the financial planning needs of Canadians are well served. They develop, promote and enforce professional standards in financial planning through CFP® certification, and raise awareness of the importance of financial planning . FPSC has received ISO 17024 accreditation from the Standards Council of Canada for its role as the certifying body for the CFP®certification program in Canada. FPSC licenses the CERTIFIED FINANCIAL PLANNER® marks in Canada. These individuals are licensed to use the registered marks: CFP®, CERTIFIED FINANCIAL PLANNER® and CFP (with flame logo)®. CFP®, CERTIFIED FINANCIAL PLANNER® and CFP (with flame logo)® are trademarks owned outside the U.S. by Financial Planning Standards Board Ltd. Financial Planning Standards Council is the marks licensing authority for the CFP Marks in Canada, through agreement with FPSB. CFP holders pay annual fees to the FPSC which is the primary revenue source. Unlike, say engineers , FPSC is not enabled by any provincial legislation. The certification does not come from any Government Agency. Except for Quebec, financial planners are not regulated by financial regulators.
The CFP has been described by some as the gold standard of advice giving so it's critically important that its enforcement and sanctioning practices are beyond reproach. The FPSC has a number of written standards and a Code of Ethics . Enforcement is what gives these standards meaning and credibility. FPSC states that it addresses all concerns that come to its attention promptly, and thoroughly investigates all allegations of misconduct although published statistics show little enforcement activity.
Where CFP holders have been found to have breached the FPSC's professional standards , FPSC can impose disciplinary actions ranging from a letter of admonishment to permanent revocation of the right to use the CFP marks. FPSC claims to make its final disciplinary actions public. The FPSC cannot however prevent a disciplined individual from continuing to provide advice; the individual just can't claim to be a CFP . Because financial advisers often hold more than one credential, FPSC assert that they work closely with other accrediting, licensing and law enforcement agencies and organizations when they deem appropriate.
The FPSC complaint process:Financial consumers can lodge complaints with FPSC. The process is described at https://www.fpsc.ca/how-lodge-complaint-fpsc All complaints are forwarded to FPSC’s Standards Enforcement for an initial assessment to determine if there is a potential violation of the Standards of Professional Responsibility. Upon receipt of your complaint, FPSC will confirm that it has been received. At this point the complaint will be forwarded to their investigations department for follow up. As every situation is different, FPSC maintain that the time required to reach a decision will vary from case to case. There are no target time standards provided or published performance metrics on cycle time .
During this assessment, they may contact the complainant for further information or clarification. If it is determined that no breach of the Standards of Professional Responsibility has occurred or that a case could not possibly be made, the complainant will be informed of this, and the file will be closed. If it is determined that there is a possible breach of the Standards of Professional Responsibility, both parties will be informed and the complaint will be referred to a disciplinary Hearing Panel. Either the CFP holder or FPSC (represented by Policy Enforcement) may appeal the ruling of the disciplinary Hearing Panel if they believe that there has been a significant and material error interpreting a provision of the
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Standards of Professional Responsibility or the facts. Appeal Panels are composed of three members of the FPSC Enforcement Policy Committee one of whom serves as Chair. No member of the disciplinary Hearing Panel can participate on the Appeal Panel. The Appeal Panel’s decision is final and there is no further right of appeal.
This Case Study examines how these assertions play out in practice.
Background : In this specific case, a complaint was made concerning the deficient supervisory role of a CFP holder and conflicts-of-interest. The conflict arose because the CFP was in the process of purchasing the Book of Business from the person he was supervising. The complaint was deferred because the complaint was also the subject of civil litigation . It was reactivated when the legal case was settled to the satisfaction of the complainant.
The complainant maintained that the CFP holder failed in his supervisory duties over an advisor (already under “close supervision “ constraints) under his cognizance. The clients were elderly, living on fixed income and had been sold risky mutual funds on a DSC basis. There were also serious issues regarding the administration of their accounts. It was argued that if the CFP holder had acted responsibly and in a timely manner, investment losses would have been minimal. After several months, the complainant received a letter stating that an investigation had not yielded any basis for proceeding and the file was closed. Material facts were ignored , the core of the complaint was not addressed ; instead the complainant was advised as to what the role of a Client should be. The complainant was offered no opportunity for rebuttal or appeal of the report investigation findings and was told the file was closed..The letter made no reference to the CFP's FPSC professional standards of conduct/Code of Ethics or regulatory obligations .The letter also seems to ignore, a CFP's responsibility to work with “integrity, objectivity, competence, fairness, professionalism and diligence”.
The complainant disagreed and stated her objections in writing pointing to very specific deficiencies and errors in the investigation report. CFP management were dismissive and the complainant raised the issues with the FPSC Board Chairman. After a short while, the complainant was advised that the board had concluded that the complaint had been properly dealt with in accordance with FPSC rules and procedures. Not a single issue that had been raised was addressed-the complaint was not contacted. Still unsatisfied, the complainant asked for a detailed review by an independent party. The complainant was referred to a Fairness Commissioner. Only the email address was provided ( no name was given to her ) with no definition of who this was and exactly what powers the position had. It turned out that this position was filled by a former Director of FPSC who was an employee of Investors Group, an industry participant that manufactures , markets and sells mutual funds. We were told via email that the Fairness Commissioner is independent of the enforcement staff , is not a paid staff person and does not report to the FPSC president. It is also not obvious that the person is a trained complaint investigator or has relevant experience – the complex complaint review task must apparently be performed while the “Fairness Commissioner” is employed full time . At that point, the complainant gave up and ceased communications with FPSC.
As an aside, the complainant was told in writing by the FPSC Enforcement Counsel “Please note the Fairness Commissioner has no purview to re-investigate a complaint.” Yet oddly, she discovered online in the FPSC 2011 Annual Report that the role of Fairness Commissioner is to provide an objective, third-party assessment of the complaint, and to act to reach a fair, impartial solution .Although not binding, the recommended solution shall be given due consideration and weight by both FPSC and the
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complainant. The role of the Fairness Commissioner was created upon recommendation by the Standards Council of Canada. The website actually states that: “FPSC provides access to a Fairness Commissioner, like an ombudsperson, so that there is opportunity for a third-party review of an FPSC decision. ”
Elements of a robust complaint process: These include but are not limited to clarity , accessibility, communication, fairness , timeliness , feedback and appeals. Here's how the FPSC process stacks up:
Clarity : There is no complaint handling brochure explaining the the process end-to-end. A reasonably good model for this would be the one in use by IIROC.
Accessibility: The complaint process is not well publicized . It took some time for the complainant to figure out that there is a complainant handling body for CFP's . The FPSC needs to better promote its enforcement and complaint handling activity.
Communication : There was little communication during the investigation. The complainant had to make numerous inquiries as to the ongoing status of the complaint.
Fairness: The testimony of the CFP holder was taken at face value while the allegations of the complainant were ignored or given lower credence.
Timeliness: From the time of complaint to receipt of the rejection letter, the elapsed time was nearly 18 months. Only by constantly following up was the complainant able to determine status and progress.
Feedback letter: The rejection letter sidestepped key issues raised, ignored evidence, attempted to blame the client and closed the file officially without any opportunity provided for rebuttal or appeal being offered. It was not an objective, in-depth investigation into wrongdoing.
Appeals: The appeal process is farcical. No reasonable person should be subjected to such a conflict-of - interest regime. Again, the complainants specific issues were ignored by the Board. The complainant reacted to this : “"With respect to your request to re-open the investigation, I have reviewed the file and am satisfied that the appropriate procedures were followed and the appropriate conclusion was reached." at the end of your letter you state " I trust this has addressed your concerns." Since you failed to address any of the concerns raised, I am dumbfounded that you could conclude this. You did not provide a single response to any of the information, concerns or factual errors we pointed out. I find this lack of response to the issues raised to be both insulting and dismissive. In effect, by putting forth no intelligent dialogue, you appear to be sweeping it all under the rug, hoping I will just go away. There is something seriously flawed in the FPSC investigation practices in play.”
RECOMMENDATIONS
This case provides multiple opportunities for the FPSC to improve its enforcement processes:
1. Adopt ISO 10002 or equivalent as the standard for complaint handling .
2. The FPSC Board should seriously consider diverting an amount of its marketing dollars and
channel it into enforcing the FPSC standards and Code of Conduct in order to provide a more credible and professional service to the public.
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3. Introduce an bi-annual independent audit of compliance with complaint handling rules and an annual complainant satisfaction survey.
4. Clarify CFP obligations when acting in a supervisory capacity & any whistle blower obligations.
5. Clarify the role of the Fairness Commissioner , make this person independent of the industry and of FPSC and have it fall under the auspices of the Board of Directors.
6. Prepare a plain language brochure on the complaint process to be given to clients at first meeting and at the time a complaint is filed. The complaint intake protocols must be robust to ensure the integrity of the system. This includes understanding the complainant issue, being able to offer a language of choice, assist in formulating their issue and if appropriate referring them to other areas (privacy, human rights) .The IIROC brochure is a good benchmark.
7. Reassess the rule that blocks an investigation from proceeding if there is civil litigation. It could very well be that other clients are being victimized while the investigation is in suspension.
8. In addition to the search capability for CFP's in good standing, provide a search tool for disciplinary cases back at least 15 years.The IIROC approach is a good benchmark.
9. Publicly and prominently disclose on the FPSC website comprehensive statistics of current and historical enforcement/investigation activity .The Annual report should include as a minimum, a narrative overview of the year's enforcement operations, key operational and comprehensive complaint statistics, a discussion of key issues and trends, the major causes and sources of complaints and the steps taken to prevent recurrence.
10. Hearing proceedings should be made public. The IIROC approach is a good benchmark.
11. Require that a substantive response letter must be presented in a manner that is fair, clear ,not misleading to clients and directly addresses the complaint(s). It should include a clear statement of the complaint(s), the files and records used as evidence, the applicable standards applied , the investigative process followed, the rationale for the decision to accept/reject the complaint , the decision and what steps the complainant can take if unsatisfied with the response.
12. Incorporate the special needs of seniors, the handicapped and immigrants be a consideration in redesigning the complaint handling process.
Canadians are dependent on more than 17,500 CFP holders in Canada for their financial well being. .As the organization that sets and enforces all the CFP professional standards of competency, practice and ethics,it is imperative that if the FPSC wants to acquire the trust financial consumers need to have in CFP holders ,that a robust , trusted and transparent complaint handling process be defined , implemented and communicated .We hope that the FPSC will give these recommendations due consideration.
Kenmar Associates research team November, 2012