By Hal M. Bundruck
NEW YORK (MainStreet) ¿ If you claim you are a "fee only" financial planner, you are going to have to prove it. The Board of Standards for Certified Financial Planners this weekend made that message loud and clear, by initially removing the "fee only" designation as a compensation method in its "Find a CFP Professional" search engine. In an email to certificants, the board instructed members to assess the validity of their claim as a fee only advisor before reclaiming the compensation method. CFP holders can choose from "Commission and Fee," "Commission Only," "Fee-only" or "Salary."
The fee only option is not available to brokers, registered representatives or insurance company agents that may receive commissions or fees, even if they choose not to. According to the CFP compensation disclosure standards a CFP professional "may describe his or her practice as 'fee-only' if and only if, all of the certificant's compensation from all of his or her client work comes exclusively from the clients in the form of fixed, flat, hourly, percentage or performance-based fees."
The CFP Board is taking a firm stance on the matter, applying the fee-only standard to include "related parties."
"For example, a CFP professional may work for an investment advisor that charges only fees for the CFP professional's professional activities," the CFP compensation guidance states. "However, if a related party receives commissions, the definition of "fee-only" is not satisfied, and the CFP professional may not describe his or her compensation as 'fee-only.'"The organization issued an email Friday to all CFP certificants that claimed fee-only services, notifying them that they had to reconsider their compensation structure before re-stating their practice as "fee-only" on the CFP search engine. From initial social network feedback, Certified Financial Planners expressed surprise by the Board's sudden move.