Patrick Lach contributes to game-changing Wall Street Journal investigation

5th August 2019

By Steven Krolak

(NEW ALBANY, Ind.)–How do you know that your financial planner is competent?

One way is to make sure the planner has been certified by the Certified Financial Planner Board of Standards, Inc. (CFP Board), which grants and upholds this designation for nearly 85,000 professionals in the U.S.

Now an article in the Wall Street Journal has exposed deficiencies in the enforcement of certifications by the CFP Board, sending shockwaves through the profession.

The front-page article by Jason Zweig and Andrea Fuller criticizes the CFP Board for relying solely on self-disclosure when vetting planners for certification. According to the authors, more than 6,300 certified financial planners out of more than 72,000 listed have regulatory transgressions in their record that they did not disclose to the organization, and that remain hidden from unsuspecting consumers.

The authors zero in on, a directory of planners operated by the CFP Board that is popular with consumers.

In researching for the article, the authors found issues ranging from consumer complaints and misconduct to fines and felonies. These issues had been logged with the Financial Industry Regulatory Authority (FINRA), but not to the CFP Board, which relies on self-reporting.

Patrick Lach, assistant professor of finance at IU Southeast and a certified financial planner himself, was one of the prominent experts sourced by the authors and quoted in the article.

The issue is important because, as Lach observed, consumers must be able to trust in the competence and integrity of their financial advisor, since the relationship demands so much transparency–and hence vulnerability–on the part of the consumer.

“They’re often sharing things that even their best friends don’t know about,” Lach was quoted as saying. This may well include debts, bankruptcies or transgressions that the consumer is ashamed or uncomfortable about.

Just one day after the article appeared, the CFP Board created a special task force to review its enforcement and disclosure policies. The CFP Board also vowed to review public records through FINRA instead of relying on self-disclosure.

Lach is pleased that he was able to contribute to a story that has created concrete changes in the financial planning sector.

“It was a huge honor to have Jason Zweig ask for my input regarding the findings of such a major project,” Lach said of his role in the story. “Also, this gives IU Southest great exposure to the international business world–for example, the article was tweeted four times by The Wall Street Journal’s primary Twitter account, which has more than 16 million followers.”

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