CFP Board pulls 'fee-only' designation as choice

Mark holders can change description back on website

Sep 20, 2013 @ 6:14 pm

By Mark Schoeff Jr.

The Certified Financial Planner Board of Standards Inc. this week removed “fee-only” as a compensation description for investment advisers listed on its website and is telling advisers who had used that label to review the organization's definition before restoring it to their profiles.

Recently, the group has been mired in controversies involving CFP mark holders who it said misrepresented how they earn revenue. On Thursday, it changed fee-only to “none provided” on the compensation method portion of its “find a CFP Professional” tool — a move that affected thousands of the approximately 68,000 CFPs.

Late Friday, the CFP Board sent an e-mail to 8,000 CFPs who selected fee-only as their compensation method. The CFP Board said the removal is temporary. It asked those who had been affected to review the organization's definition of “fee-only” and restore it if it fits their practice.

The e-mail pointed out that advisers who are registered representatives, dually registered or work for an insurance firm cannot use the fee-only description.

“This is the right step by the CFP Board,” said James Osborne, president of Bason Asset Management, who changed his description back to fee-only. “They've done a pretty good job of buttoning it up.”

In a statement, the CFP Board said that it removed the fee-only term from its website because it recently became aware that CFPs employed by or affiliated with brokerages were using it inappropriately. Financial Planning first reported the wirehouse situation.

“The public has a right to know the type of compensation a CFP professional receives, and to understand that compensation, there must be clear definitions of the various compensation models,” CFP Board chief executive Kevin Keller said in a statement.

Earlier Friday, Mr. Osborne criticized the CFP Board for changing his compensation description without notifying him.

“It's a pretty short-sighted move by the board,” he said. “It doesn't seem to accomplish much other than to upset people who are fee-only.”

Like Mr. Osborne, Lon Jefferies, a financial adviser at Net Worth Advisory Group, reset his compensation to fee-only.

“I understand the CFP Board is there to represent our best interests,” Mr. Jefferies said. “Changing my profile without my permission is not doing so.”

The fee-only designation is important to many advisers, who say that it signifies that they act in their clients' best interests.

“Fee-only is the reason I'm in the industry,” Mr. Jefferies said. “It's a significant differentiator between me and other financial advisers.”

George Papadopoulos, owner of an eponymous advisory firm, expressed a similar sentiment.

“It is defining for my business and myself,” he said. “That's who I am as a financial planner.”

According to CFP Board, fee-only advisers derive compensation only from charging fees to a client. If the adviser is affiliated with a financial firm that charges a commission — even if the adviser doesn't charge his or her clients a commission — the adviser's compensation is deemed to be “commission and fee.”

The distinction between “fee-only” and “commission and fee” has been at the heart of recent enforcement cases, including one against a former CFP Board chairman, Alan Goldfarb. In another action, the CFP Board is being sued by the Camarda Wealth Advisory Group. Jeffrey Camarda and his wife, Kimberly Camarda, are disputing that they misrepresented their compensation as “fee-only.”

The definition of “fee-only” used by CFP certificants differs from the definition used by the National Association of Personal Financial Advisors. That organization allows its members to own up to a 2% stake in a financial services company, which means they can be affiliated with a firm that charges commissions and still call themselves fee-only.

Some advisers are not upset by the commotion.

The compensation method listed on the CFP profile for Brad Glickman, an adviser with Bernard R. Wolfe & Associates, was one of the many that read “none provided” Friday. He wasn't particularly concerned.

“We don't get clients through the CFP profiles,” Mr. Glickman said. “Our clients come through referrals.”

Bert Livingston, owner of an eponymous advisory firm, has doubts about the fee-only definition. On the CFP cite, he is listed as “commission and fee.”

“I truly believe it's not definable,” Mr. Livingston said of the term fee-only. “It will collapse of its own weight. What they're trying to do is exclude competition.”

But one adviser supports the CFP Board's attempt to make compensation descriptions more precise.

“I know they're trying to do the right thing,” said Carolyn McClanahan, founder of Life Planning Partners Inc. “Overall, it's a move in the right direction. The term fee-based needs to go away.”

Mr. Papadopoulos is yearning for a solution.

“I hope everybody gets on the same page and agrees with what fee-only is — and sticks with it,” he said.

Liz Skinner contributed to this report.

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