The debate over what constitutes a "fee-only" adviser has reached fever pitch and risks spinning out of control, according to one industry executive.
“Everybody just has to step back and lower the temperature,” Mark Tibergien, chief executive of Pershing Advisor Solutions LLC, said at an InvestmentNews adviser workshop in Chicago. “Professionals don't like to be scolded or called out as a sinner.”
Last week the CFP Board replaced the listing “fee-only” with “none provided” in the compensation method of CFP profiles on its website and asked advisers to review the board's definition of "fee-only" before restoring that aspect of their profile. The CFP Board has been mired in controversy regarding misrepresentation of how some CFPs generate revenue.
The approach the CFP Board of Standards has taken in the debate has moved the discussion away from the central issue of clients' knowing how their adviser is paid and could lead to some oddball conclusions about what constitutes a conflict, Mr. Tibergien said.
“It seems to me that people have been dinged because of being affiliated with a firm, as opposed to the reality of their business,” he said. “The real issue is whether there is fee transparency and whether advisers are free of conflict.”
By being "evangelical about the issue," the CFP Board could turn the debate in a strange direction,” he added.
For instance, an adviser managing a large foundation who is paid a fee based on assets under management could be in conflict with the foundation's overall mission of giving away money to charities, which would reduce the amount of assets being managed, Mr. Tibergien said. That would not be a productive direction for the industry to go.
James Twining, founder of Financial Plan Inc. and a CFP professional, said his firm's “fee-only” designation was called into question because it has an insurance agency affiliate. The firm's compliance attorney told him that the firm is "fee-only" and Mr. Twining said he will seek to approach the issue by donating any commissions it gets from that affiliate to charity.
He has attempted to send his clients to other insurance companies when they need long-term-care or life insurance, but hasn't been able to find one that he trusts to make good decisions for his clients.