Ron Rhoades' announcement late Monday that he is resigning from his chairman-elect position at the National Association of Personal Financial Advisors (NAPFA) took many by surprise in the world of fee-based advisors, especially in view of Rhoades' growing public profile as an outspoken proponent of the fiduciary standard.
In a self-punishing mea culpa that he sent to reporters, Rhoades (left) said he was stepping down from the NAPFA chairmanship and board after discerning over the past several weeks that he had committed a violation as president and chief compliance officer of ScholarFi, his Alfred, N.Y., firm. At the time of his firm's formation in September 2011, Rhoades said ScholarFi accepted a total of 11 clients from Florida, which exceeded the threshold of five, and he mistakenly believed he could wait until the first quarter of 2012 to register.
However, Knut Rostad, founder and president of the Institute for the Fiduciary Standard, said that Rhoades' departure is unlikely to have a negative effect on the conversation about fiduciary duty.
"I think he has been very much present in the conversation for many years, and that's not going to change," Rostad said in a phone interview. "Ron's significant contributions over many years preceded his involvement with NAPFA. Ron walked the walk in how he handled this. He didn't have to tell the whole world what happened, but he chose to. It's clear that he took this extremely seriously. He put the interests of NAPFA first, and I think that speaks hugely about Ron."
Rostad said that he encouraged Rhoades to participate when Rostad led the Committee for the Fiduciary Standard in 2009-'10.
Susan John to Remain as NAPFA Chairwoman While Awaiting Special Election
Rhoades was scheduled to replace NAPFA Chairwoman Susan John on Sept. 1. John will now remain in her post into September until the board holds a special election to fill the vacated chairmanship.
"While my mistake was unintentional, the violation of compliance regulations is nevertheless material in nature," Rhoades wrote in his announcement. "The mistake made was mine, and mine alone. I accept full responsibility for my personal mistake, and all consequences that may flow therefrom, including the decision by NAPFA to move on without me serving as chair in the coming year."
This is the second time in 2012 that NAPFA's pristine reputation has been tarnished. In May, the Securities and Exchange Commission charged former NAPFA Chairman Mark Spangler, who served in the late 1990s, with defrauding clients by secretly funneling approximately $47.7 million of their money into two risky startup companies that Spangler co-founded.
