Chris Beard not only carries the Certified Financial Planner designation, he also has been chair of the CFP Board's Disciplinary and Ethics Commission since early this year. It's a role he takes very seriously. "To become a CFP, you have to agree to the fiduciary process," he explains. "The CFP Board standards state clearly that planners must always act in the utmost best interest of the clients."
He adds, "Our job on the board is to safeguard the CFP profession because our role is to be the gold standard in financial planning."
Those serving on the CFP Board of Directors, DEC or various advisory councils do so voluntarily, but Beard acknowledges that his work there is also an asset for his business. "I don't have a plaque on the wall, but we have a capabilities presentation that we show to new clients, and that outlines my service there. We also shared my appointment to the DEC with clients in a press release." The response was very positive, he says. "People said things like, 'Wow! That's a wonderful thing that you're doing.' I also hear the word 'trust' a lot, which is comforting."
Beard, an advisor at Bank of Travelers Rest, got involved with the CFP Board of Standards out of a desire to serve his profession, he says. He began working in the advisory business in 1995 with Interstate/Johnson Lane, a regional broker-dealer with some 1,400 employees. Wachovia Bank bought the broker-dealer in 1997, but when First Union later acquired it, Beard found himself suddenly one of 96,000 employees. "I felt my clients needed a more consistent setting, so in 2002, I left and joined Gateway Wealth Strategies, the financial services arm of Travelers Rest, " he says. Travelers Rest, a privately owned bank, has nine branches and approximately $500 million in assets and is the oldest financial institution in South Carolina's Greenville County.
By the time he moved to the smaller bank, he was already a CFP. "After losing a client once at Wachovia to a competitor who could meet the client's need for a full-service CFP, I started training to become a CFP myself, and was certified in 1999."
No Slippery Slope
CFP Board staff opens about 1,500 investigations. Of those, approximately 150 come before the DEC. One case that Beard assisted on involved a CFP who was engaging in behavior, on his own time, that "did not reflect well on the profession," which ultimately led to a disciplinary action by the DEC. Beard was later invited to join the DEC, eventually becoming chair of that body.
"We see cases of misrepresentation, such as planners referring to a variable annuity as a kind of Roth IRA to the client. We also see advisors who are as interested in benefiting themselves as much as they are in benefiting the client." The proper approach, says Beard, is to explain to the client exactly what it is you're trying to do, to be transparent, put the client first and accurately detail the scope of engagement - all compensation and any possible conflict of interest.
It's not automatically wrong for a CFP to profit from an action on behalf of a client, but the client should know in advance how the planner will benefit - and how much.
Of course, certain things are simply taboo. A relatively common and serious FINRA violation, for example, is signing the client's signature or initials on a document, which a busy advisor may do. Also common: implying something to a client that is untrue or borrowing funds from a client. Another violation brought before the DEC: failure to disclose outside business activities. "For example," says Beard, "even though it's a volunteer activity on my part, I have to publicly list my CFP Board membership."
Beard insists that there really are no "gray areas" or "slippery slopes" in CFP behavior. "If you thoroughly document what you do, if you're transparent and if you work in a manner where you put your client's interests first, you don't have a problem," he says.
The CFP Board is not a governmental regulatory body, however, it does enforce its standards. Consequently, it has the power to dismiss a case, to dismiss a case "with caution," to issue a private or public censure of a CFP and ultimately to revoke an advisor's CFP certification.
It's in the Details
Like most CFPs, Beard charges for his work as a financial planner. With the cost of working out a financial plan ranging from $500 to $3,000, it tends to winnow out people who have less than $50,000 to $100,000 to invest. "We don't have a minimum asset amount," Beard says, "but it's when you have significant assets that planning starts to make sense."
As for charging for the planning work, he says, "We believe charging for planning is a must. It's not just the level of detail that you must research. If you're not charging, then there's a risk of cutting corners."
He adds, "The goal of a financial plan should be to move a client forward in their financial lives successfully, not to demonstrate why the client should buy a particular financial product."
Beard says his typical client is not a younger or middle-aged worker building up a retirement savings fund. Rather, it's someone who is 61 and getting more concerned with impending retirement and with the distribution phase of planning. Many of them are customers of the bank.
The first step in the planning process, according to Beard, is "understanding the client's family tree." That is, finding out about a client's children and grandchildren, and whether parents are still living, and what all the needs are. "It's more than just financial," he says. "We need to know if there are special needs in the family. Also, if there are relationships with churches or schools, and also what the quality-of-life desires are of the client."
"We spend a fair amount of our time with clients on budgeting and understanding their net worth," he says. He also needs to know at what point employment is no longer a requirement, and becomes more of a way to spend one's time.
Some 25 to 30 percent of Beard's business is employer retirement plans, so he spends a significant amount of time speaking to employees about their plans and options. Over time, employees in those plans come to him for more detailed advice about their retirement plans. "You have to make it clear when they are shifting from being an employee to having a financial planning relationship with you," he says. "For example, if a client wants to retire with some specific income, and you say, 'Well, you're only saving 4 percent of your income, and you need to start saving 8 percent,' that's basic information. But if a client says, 'My wife makes X, and I make Y. Tell me how we can save enough to retire,' then that's a financial planning relationship."
Name: Chris Beard
Bank: Bank of Travelers Rest
Location: Greenville, S.C.
TPM: Raymond James
2011 production: $380,000
2010 production: $350,000
2011 AUM: $50 million
2010 AUM: $42 million