The Certified Financial Planner Board of Standards Inc. is quietly trying to calm the waters that have been roiled over the last two years by controversy over how advisers holding the CFP designation define themselves.
The organization is currently reviewing compensation descriptions on the profiles of CFPs listed on a search tool on its website. Although pay-label disputes have generated a lot of attention, their resolutions can occur under the radar.
A close observer of the CFP Board's difficulties over pay descriptions, Michael Kitces, a partner and director of research at Pinnacle Advisory Group, criticized CFP Board for not being consistent in the way it's handling compensation descriptions.
“They're granting amnesty in some cases and might be granting private censures or private warnings in others,” Mr. Kitces said.
On Tuesday, the CFP Board and one of its most vocal opponents over pay labels, Rick Kahler,
reached an agreement to review his situation. The board sent Mr. Kahler, president of the Kahler Financial Group, a letter on July 22 telling him to stop identifying himself as a “fee-only” planner by Aug. 1.
The board said Mr. Kahler's 50% ownership of a family real estate business makes him a “commission-and-fee” planner under CFP rules. But on Tuesday, the board said it would hold off on sanctioning him while it works with him on “guidance” about his situation.
In fact, there have been few mile markers on the CFP Board's
road to fixing compensation descriptions on its website. If it finds inaccurate information, it may initiate an investigation.
“Consistent with maintaining the privacy rights of our CFP professionals, we don't release information concerning investigations,” the board said in a statement last week. “Should an investigation result in a public disciplinary action, we would, consistent with our rules, make that public.”
Since June 2012, however, only one disciplinary action of the 99 announced by the CFP Board involved a compensation description. Alan Goldfarb, a former CFP Board chairman, was admonished for improperly calling himself “fee only.” He
resigned from the board in November 2012 over the matter.
Mr. Goldfarb doesn't begrudge the leeway given to Mr. Kahler so far, but wishes that had been the CFP Board's approach from the start.
“I'm not sure why they wouldn't have all along provided more guidance,” said Mr. Goldfarb, managing director of the Financial Strategies Group. “In fairness, everyone should be treated the same way. I don't think they have been in these cases.”
Mr. Goldfarb continues to maintain his innocence. He says he only charged his clients fees and the CFP Board's pay-description rules are murky.
“Until they're defined, to have any enforcement action would be premature,” Mr. Goldfarb said. “It's not how your clients pay you. If it was that simple, it wouldn't be an issue.”
Further complicating the matter is a
lawsuit involving Jeffrey and Kimberly Camarda, Florida planners who are suing the CFP Board over disciplinary action regarding their compensation description. The case, which is still in the discovery stage, could continue for months.
The CFP Board has adamantly stood behind its fee-only definition, which requires that a planner only assess fees and not be affiliated with any firm that charges commissions. If there is such an affiliation, the planner must be called commission-and-fee. Most advisers consider fee-only status as a marketing advantage among investors.
The CFP Board is using “risk-based” prioritization and random sampling to compare compensation descriptions on its website with regulatory filings and firm websites.
The review follows a move by the board last year to temporarily remove the “fee-only” description from the profiles of 8,000 planners after it found that wirehouse representatives and others were claiming fee-only status instead of “commission and fee.”
The board told those who had “fee-only” descriptions to review the board's rules and reset their definitions. About 3,500 CFP certificants reclaimed “fee only,” while about 1,000 changed to “commission and fee.”
Resolving discrepancies likely will continue to be done quietly on a piecemeal basis.
One adviser whose compensation description has been in question for some time said he is working with the CFP Board to resolve the matter.
“I did finally get some clarity around the issue from the CFP Board and feel like the guidance I received makes a lot of sense and is fair,” the adviser wrote in an e-mail. He asked that neither he nor his firm be identified.
That is the approach most advisers likely will take, Mr. Kites said.
“A lot of advisers would rather settle this privately,” he said. “Most people don't want [a compensation dispute] out there in the first place.”
