Suspension costs Rice use of CFP certification marks for three years
By Judy Peterson
jpeterson@community-newspapers.com
Posted: 03/05/2012 07:31:06 PM PST
Updated: 03/05/2012 07:31:07 PM PST
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Los Gatos Mayor Steve Rice, who is a financial adviser, has been disciplined by the Certified Financial Planner Board of Standards, with his right to use the CFP “mark” suspended for three years. The CFP is an independent group with standards it says are a “critical consumer protection.”
“The CFP is not a license,” Rice said. “It’s a professional designation. The suspension does not affect the five different securities licenses I hold or the insurance license I hold.”
The allegations that caused the suspension were brought by Pacific Grove resident Marge Brigadier, Martin Harding of San Jose and another individual whose name is not known to the Weekly-Times.
Brigadier says she and her late husband John started working with Rice around 1999. “One of the first things he said to us was that we didn’t have enough life insurance. That’s the one good thing he did for us because my husband died suddenly a year later at age 53.”
Following John Brigadier’s death, Marge Brigadier says Rice sold her five more life insurance policies–two for herself, one in each of her daughter’s names and another naming her son-in-law. “I didn’t need what he sold me. He presented it as a good investment,” Brigadier said.
The premiums on the five policies totaled more than $133,000 per year, but Brigadier says she thought she’d be paying the premiums for only five years. The payments came from her investment portfolio, which Brigadier thought was balanced
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with both risky and conservative investments. But that portfolio tanked with the onset of the great recession. “In 2008 I lost $150,000 in one month alone,” Brigadier said.
At that point Brigadier sought advice elsewhere. “Another adviser found out I’d run out of money to pay for the policies and said that by the time I was 80 all my money would be gone,” Brigadier said. “Rice told me I could stop paying on them in five years, but I couldn’t stop paying.”
Rice says Brigadier’s allegations are a vendetta aimed at dragging his name through the mud. “This is all about personal destruction,” he said. “This doesn’t affect what I do for the town or what I do for my clients.”
He admits he made mistakes. One of the reasons for the suspension, for instance, says Rice failed to “perform an adequate analysis of the three clients’ ability to pay the premiums for the insurance policies he recommended.”
Without revealing clients’ personal information, Rice used a hypothetical example of a person who’s worth $100 million and is buying life insurance. “The CFP even agreed with me that it would be insulting to do a cash flow analysis on a person with that kind of money. But their guidelines are very black and white.”
The mayor went on to say, “I want to make it very clear there were no ethical, regulatory or legal breaches that were found, even by the CFP. It was a judgment call on a checklist of procedures that they have. By not following their checklist, that’s where I went afoul.”
Harding, however, says his experience with Rice is “very similar” to Brigadier’s. “He’s a glorified insurance salesman who was after commissions,” Harding said. “He used my cash to pay insurance premiums, which I told him not to do. We got very little financial planning. It was a disaster. His ethics are suspect.”
As a side issue, Brigadier’s daughter once worked for Rice. Although he says the daughter quit when he wouldn’t promote her, Brigadier counters with “he hired a woman who made my daughter’s life hell.”
Brigadier also contacted the state insurance commissioner’s office who referred her to the CFP.
Rice maintains that investigations by the Park Avenue Securities Compliance Department, which he was affiliated with, the California Department of Insurance and the Financial Industry Regulatory Authority found no wrongdoing on his part.
“I have been in the business for 31 years and these complaints were all filed within a couple of months of each other. Other than this I have had no complaints over my entire 31-year career,” Rice said. He also said he has notified his existing and any potential clients about the CFP suspension.
Brigadier, meantime, says she has surrendered her insurance policies.
text of CFP findings against los gatos mayor steve rice
Stephen M. Rice (Los Gatos): In November 2011, following a hearing before CFP board’s appeals committee, CFP board issued an order affirming the disciplinary and ethics commission’s (“commission”) decision to suspend Mr. Rice’s right to use the CFP® certification marks for three years. The commission found that, while in a financial planning relationship with three clients, Mr. Rice failed to: 1) provide a written plan to one client pursuant to the terms of the financial planning agreement; 2) properly present his insurance recommendations and ensure that the recommendations met the three clients’ expectations with respect to their ability to “premium offset” in five years; 3) perform adequate investigation and analysis of the insurance needs of the three clients prior to recommending that they purchase insurance policies; and 4) perform adequate cash flow analysis regarding the three clients’ ability to pay the premiums for the insurance policies he recommended. As a result of its findings, the commission determined that Mr. Rice’s conduct violated rules 201, 202, 606(b), 607 and 703 of the Code of Ethics and Professional Responsibility and Financial Planning Practice Standards 300-1 and 400-3, providing grounds for discipline under Articles 3(a) and 3(b) of CFP board’s disciplinary rules and procedures (“disciplinary rules”). The appeals committee affirmed the commission’s findings of fact, rule violations and issuance of a three-year suspension, in accordance with Article 4.3 of the disciplinary rules, of Mr. Rice’s right to use the CFP® certification marks. Mr. Rice’s suspension is effective from Nov. 22, 2011, until Nov. 22, 2014.
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