May 21 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)