Certification board limits pay descriptions of U.S. brokers
NEW YORK, Sept 26
NEW YORK, Sept 26 (Reuters) - Stockbrokers who market themselves as fee-only certified financial planners have been told to modify the way they describe their jobs.
The Certified Financial Planner Board of Standards has notified more than 8,000 planners, who list themselves as fee-only CFPs, that they cannot use the designation if they work for brokerage firms that also sells products and services on commission.
In an email sent last Friday to advisers who list themselves as fee-based, the CFP Board - which grants the CFP designation to about 68,000 advisers who meet its standards - gave them the weekend to make the adjustments on its two websites, www.cfp.net and www.letsmakeaplan.org.
"(If) it comes to our attention subsequent to the opportunity to fully understand and comply with our rules that a CFP professional is misrepresenting his or her compensation, the matter will be referred to our enforcement process," the board said in a news release about the emails.
The most severe disciplinary step at the Board is revocation of the CFP certification, which most advisers imprint on their business cards.
In the world of financial planning, fee-only advisers often promote themselves as more aligned with their clients' needs than those who also receive commissions from their firms for selling stocks, bonds and other products. Fee-only advisers often receive a percentage of assets, meaning compensation ebbs and flows with advances or declines in clients' investments.
They also must adhere to fiduciary standards that require them to put client interests ahead of their own. Commission-based brokers merely have to show that a product is suitable for a client, regardless of whether it is more remunerative than another to the brokers.
The issue came to a head last November when the CFP Board's chairman, Alan Goldfarb, was forced to step down because he listed himself as fee-only when he held a 1 percent stake in a broker firm that allowed commissions. Goldfarb and several other CFP members said at the time that the Board had never clearly spelled out its definitions for describing compensation.
The Board's "Find a CFP Professional" website tools list advisers by location as a default, but the public also can search by adviser specialty, language, asset requirements and compensation. The compensation choices are fee-only, commission only or commission and fee. A fourth choice, salary, which also had been used for a time by Goldfarb, has been removed.
"(The) CFP Board believes the public should have a common-sense, plain understanding of what fee-only means," it wrote in the news release.
But several financial advisers at brokerage firms said the new policy is irrational because they have elected not to receive commissions, despite the potential to do so.
Brokerage firms are divided on whether the CFP designation leads to higher profits. But representatives at large firms, known as wirehouses, said they continue to encourage advisers to become CFPs and endorse the new policy.
"We agree with the CFP that wirehouse advisers should designate (themselves as) fee + commission," a Merrill Lynch spokeswoman wrote in an email.
Merrill, the world's second biggest broker with more than 14,000 advisers, has about 2,900 who are CFPs.
A spokeswoman at Morgan Stanley, the world's biggest retail broker-dealer with more than 16,000 financial advisers, would not disclose how many of them are CFPs. She said the firm reminded them last week of the actions necessary to comply with CFP requirements.
A CFP Board spokesman said a "steady flow" of advisers have updated their profiles to conform with the compensation requirements since receiving the email. He did not have specific numbers on how many of the more than 8,000 planners who self-described as fee-only have made the changes.
A quick search for fee-only advisers in two cities - White Plains, New York, and Scranton, PA - on the CFP Board's two websites yielded no findings on Thursday. Most chose "fees and commissions" or did not designate their compensation.