Four months after a controversy blew up over how to categorize investment advisers, based on how they are paid, formal talks among the groups at the heart of the debate haven't yet begun.
Over the summer, differences between the Certified Financial Planner Board of Standards Inc. rule on fee-only compensation and the membership criteria for fee-only planners belonging to the National Association of Personal Financial Advisors became apparent.
“There needs to be a larger dialogue about compensation definitions that positions the profession for the future,” said Geoffrey Brown, chief executive of NAPFA. “There still is a lack of clarity.”
The incoming leader of the Financial Planning Association said that as the standard-setting body of the planning profession, the CFP Board must begin the conversation.
“This is the right time to engage in an open and constructive dialogue,” said Janet Stanzak, FPA president-elect. “After the first of the year, we're hopeful the CFP Board will take the lead and start the dialogue.”
In a November interview, CFP Board chief executive Kevin Keller said that the organization “is fully engaged on the issue” but that the compensation definition rule “can only be changed by an elaborate process of proposal, notice, comment and subsequent adoption by the board.”
The issue has taken on a higher profile following CFP Board enforcement cases revolving around compensation.
In August, the CFP Board temporarily removed the fee-only description from the profiles of 8,000 CFPs on its website. The organization told them to review its fee-only definition and reset the label, if it fit the advisers' practice.
The FPA website continues to have advisers in its search tool from
Ameriprise Financial Inc.,
Bank of America Merrill Lynch, Morgan Stanley,
PNC Financial Services Group Inc. and
Raymond James Financial Inc. who list themselves as fee-only, which would violate CFP Board rules.
The FPA is planning to send a notice soon to the planners on its website telling them to review their compensation descriptions.
“If they're unclear on how they should be listed, we'll point them toward [the] CFP Board for clarification,” said Ms. Stanzak, who is a principal at Financial Empowerment.
Under CFP Board rules, advisers can call themselves fee-only only if their revenue derives solely from fees that they charge clients and they aren't affiliated with a financial firm that could charge commissions.
That differs from NAPFA's membership criteria, which allows advisers to own up to a 2% stake in a financial firm and still call themselves fee-only. The group comprises nearly 2,500 advisers and, as of late last year, started requiring new members to have the CFP mark.
Fewer than 5% of NAPFA members violate the CFP Board's definition, Mr. Brown said.
The group has no plans to change its membership guidelines or to remove members who violate the CFP Board's fee-only rule.
“I don't know that that would be justified under the circumstances,” Mr. Brown said. “They're still members in good standing under NAPFA's membership standard.”
Michael Kitces, a partner and director of research at Pinnacle Advisory Group, would like to see NAPFA take a stronger stand in the fee-only debate.
“It's difficult for me to understand how they can gently ignore this and sweep it under the rug when it adversely affects their membership,” said Mr. Kitces, who publishes the Nerd's Eye View blog.
