Friday, March 16, 2012

Financial Planner’s Finances Go Awry

John E. Matheny, a financial planner with $35 million in assets under management, filed for Chapter 7 bankruptcy following a divorce, unexpected surgery and the crash of the Florida real estate market, in which he was heavily invested. His bankruptcy led the Certified Financial Planner Board’s Disciplinary and Ethics Commission to suspend his right to use the CFP certification marks.
In a recent article on by Miriam Rozen, Matheny stated that he was not discouraged by his bankruptcy and that it would make him a better, more empathetic financial planner. “…I can understand a lot more about people not wanting leverage and debt anymore,” he averred.
Edward Mora, who served on CFP’s Board’s Disciplinary and Ethics committee for five years, says financial planners who file for bankruptcy may indeed receive valuable and cautionary lessons from their insolvency that ultimately they could teach clients. “If they are up front when clients ask them about the bankruptcies, it could be a story of redemption. I can see it being very useful as a learning experience,” he opined.
The article goes on to say that some leaders in the financial-planning profession maintain that the client-advising abilities of some planners who have filed for bankruptcy may actually improve once they emerge from their personal financial woes. This is definitely a consideration since the CFP Board states that the number of its members who filed for bankruptcy increased to 48 last year from 28 cases in 2010, and up from eight in 2009.
Based on current regulations, a financial planner who declares bankruptcy and reports it to the CFP Board, as required, activates an automatic disciplinary investigation. Investigators from the CFP Disciplinary and Ethics Commission will determine if circumstances made the bankruptcy filing impossible to avoid or if the bankruptcy indicates that the planner is unfit to manage clients’ finances. Depending on its findings, the CFP Board may issue a formal admonition or suspend or revoke a member’s certification.
However, with bankruptcies becoming more common, the CFP board is considering whether to replace the current disciplinary approach to cases involving a single bankruptcy with a policy that would require financial planners to only disclose a bankruptcy filing publicly. The rule change would mean the CFP Board will no longer investigate a member just because they identify on a certification application or certification renewal application that they have filed a single bankruptcy.
In the same article, Michael Shaw, a managing director for the CFP Board who supervises both the professional standards and legal departments, said that “[People] are either very much in favor of the notion that, if you are a CFP professional, you should never file a bankruptcy or that a bankruptcy is something a client doesn’t need to know about, that just because you filed a bankruptcy doesn’t mean you wouldn’t do a good job for your clients.”
With his bankruptcy court case completed but his certification suspension still pending, Matheny works helping a group of financial planners at Invest Financial Corp. He avers that he gives people the same level of care and advice as he did previously, but does not hold himself out as a certified financial planner. He maintains, “’I don’t think that bankruptcy has a negative impact on the quality of the advising that I will be doing as a financial planner.’”
Your overwhelming debt is a serious matter that you need to deal with now. Filing for Chapter 7 or Chapter 13 personal bankruptcy is complicated. You need a knowledgeable and experienced bankruptcy attorney from Macey Bankruptcy Law at your side to guide you through every step. Log onto or call toll-free 800-260-1402 for your free initial consultation.

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