The sad case of a Phoenix advisor sentenced to 3-1/2 years in prison for borrowing from elderly clients and then filing for bankruptcy protection only highlights the importance of protecting and promoting the right credentials -- and educating the public on what exactly those are.
[caption id="attachment_11180" align="alignright" width="216"] Jay Perry, a/k/a J. Kevin Perry, a/k/a Jay K. Perry . . . "estate planner."[/caption]
Jay Perry billed himself as an estate planner and, reportedly, a financial planner as well.
He used those buzzwords to get the ear of several senior citizens looking for help. Instead, he looted their retirement assets by about $1 million before the scheme fell apart.
Now he's been sentenced to 44 months on fraud charges while his clients wait for their money.
And as far as anyone can tell, he's never been rebuked by the SEC, FINRA, the FPA, NAPFA or any state or national bar association, because he was never a member in the first place.
Perry was claiming 11 years of professional experience in estate planning back in 2008, which would have made him about 22 when he started.
Hard to get a good sense of what his early entailed, but at some point he started claiming to be "a Master Certified Estate Planner with the American Academy of Certified Estate Planners in Lafayette, Indiana."
It's a real credential. Unfortunately, the AACEP happens to be run out of Las Vegas, not Indiana.
Maybe he was thinking of the National Institute of Certified Estate Planners, now in Kokomo.
Either way, both groups take any "conduct involving dishonesty, fraud, deceit or misrepresentation" extremely seriously, so even if Perry was once a member he wouldn't have lasted long.
It turns out he begged his elderly clients to cash in annuity contracts and then give him the money to "invest" in his own real estate ventures.
Trading a source of guaranteed current cash flow for a speculative opportunity is bad enough when your clients are 60 to 100 years old. Triggering what I can only imagine were steep surrender fees to unwind the annuity contracts only makes the situation worse.
But then, Perry simply failed to make the regular payments he promised, leaving his clients worse off than they were when they met him.
When the scheme started to unravel, he stopped making payments on the property -- according to his marketing materials, "millions of dollars of commercial and residential real estate" -- and clandestinely filed for bankruptcy.
The investments were structured as loans, so the clients ended up holding worthless notes right when the market was crashing.
Let's hope they get their money back.
"Estate planning" made trivial
It's not really clear what kind of estate planning Perry actually promised or performed. His original website simply noted that he was "trained and experienced in all areas" of the field, talked about his high-touch service ethic and then dived straight into his hot-shot investment expertise.
Did he draw up wills and set up trusts for his clients? Did he enhance their philanthropic and dynastic activities, support their postmortem wishes? Did he have taxes on his mind when he got them to liquidate their annuities all at once?
Again, it's hard to say. He wasn't a lawyer or an accountant. His registration doesn't come up in the FINRA or SEC advisor databases, or on the membership lists of various planning organizations.
If all he promised was some form of "estate planning," then criminal court was really his clients' only recourse because there's no other way to get estate planners -- no matter how broadly interpreted -- to make good on their professional lapses.
The AACEP only promises to strip its marks from members who screw up. I'm not sure what they do if someone claims their certification without living up to the training or character requirements. Maybe they'll tell us.
But it's a sticky issue for financial planners and any other group of people trying to make their particular designation the gold standard for a particular type of service.
You can lay down rules for people who want to use a designation to follow, provided that there's an actual incentive for them to want your mark in the first place.
Furthermore, you've got to find a way to communicate why your mark matters. Otherwise, it's hard for the typical investor to tell the difference between one type of planner and another, and they'll happily go with a copycat you don't control.
I see the accredited estate planner, certified estate planner, master certified estate planner and chartered trust & estate planner designations on the market right now. That's a lot of flavors of "estate planner."
Until the industry can come together around what all those flavors mean and how they fit together, people like Perry can slip around the edges and make trouble for years before being brought down.
And until the industry can educate the public about exactly what marks to look for, people like Perry will find too many victims.