It’s time for transparency at the CFP Board

In making peace with Rick Kahler, the Certified Financial Planner Board of Standards Inc. may have quieted one outspoken critic but fired up other planners who were quick to accuse the board of playing favorites.

In this case, the planners are right. From start to finish, it looks like the board has accommodated Mr. Kahler at every turn, which validates the criticism it has received over the past two years concerning its compensation models.

Mr. Kahler was one of thousands of CFPs who were describing themselves as “fee-only planners” but were flagged by the organization because of an affiliation with businesses that earn commissions. In those cases, the board insisted they describe themselves as “commission-and-fee” planners. Most CFPs prefer to call themselves fee-only planners be-cause they believe it gives them a marketing advantage with the public.

BACK AND FORTH

Mr. Kahler, a well-known planner and personality on social media, balked, claiming his interests in a family-owned real estate firm were incidental to his advisory business and that it should not disqualify him from keeping his fee-only status. In July, the CFP Board ordered him to stop identifying himself as a fee-only planner by Aug. 1, but then, when Mr. Kahler threatened legal action, said it would provide “guidance” on how he should characterize his compensation.

Last month, the board and Mr. Kahler came to an understanding: He would keep his fee-only status by turning over his half-interest in the real estate firm to his wife, who would place it in a trust. He agreed that he would not take any compensation from the firm nor refer clients to it.

The CFP Board was immediately criticized. First, some planners questioned how the board could accept that Mr. Kahler had relinquished all ties to the real estate firm simply by transferring ownership to his wife. Second, and more importantly, they blasted the board for giving Mr. Kahler considerations that it doesn’t seem to be giving other planners.

It is time for the CFP Board to end this nonsense. It cannot have one set of rules for VIPs and another set for everyone else. It must clarify not only its standards, but the exceptions to those standards, and establish a transparent protocol for planners to follow when they disagree with the board’s judgments.