U.S. financial planning board to spot-check use of 'fee only' term

Wed May 21, 2014 5:23pm EDT

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May 21 (Reuters) - An organization that certifies and develops standards for financial planners is conducting spot checks of advisers it lists on its websites to make sure they are not misidentifying themselves as "fee only."

The Certified Financial Planner Board of Standards (CFP Board), in a notice sent to its 70,000 planners on Wednesday, said it would review sources of compensation for advisers who market themselves as "fee only."

Advisers who are "fee only" charge customers for financial planning services and are able to market themselves as impartial in the recommendations they make to customers. Other advisers make money through commissions charged on sales and performance of financial products and investments.

The CFP Board will compare compensation that advisers enter on its websites to public sources such as regulatory filings and the firms' own web pages, it said.

Not all advisers who use the "fee only" label will be subject to the review. The CFP Board will conduct a random sampling and choose other advisers based on their possible risk of misusing the term.

The CFP Board is stepping up its review after changing its policy about "fee only" marketing in September 2013. That is when it notified more than 8,000 planners, who had listed themselves as fee-only CFPs, that they could not use the designation if they worked for brokerage firms that also sell products and services on commission. [ID: L2N0HM28Y]

It directed planners, at the time, to make the adjustments on its two websites, www.cfp.net and www.letsmakeaplan.org.

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 broker.

The organization will act on the results of its new reviews on a case-by-case basis, said V. Raymond Ferrara, chair of the CFP Board, in an interview. Sanctions for misusing the term could include everything from a public admonishment to the revocation of the CFP certification.

The board "could have done a better job" when it rolled out its online tools to help the public find certified financial planners, Ferrara said. "In the past, we relied on (advisers') good common sense to enter that information correctly." (Reporting by Suzanne Barlyn; Additional reporting by Jed Horowitz; Editing by Linda Stern and Cynthia Osterman)

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