This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Certified Financial Planners Reveal How They are Paid

By Hal M. Bundrick

NEW YORK (MainStreet) ¿ How your financial advisor is paid shouldn't be a mystery. And if that advisor is a Certified Financial Planner, it won't be. At least, that's the goal set by the board of Certified Financial Planners as it works to define the compensation structure of the investment advisor industry ¿ and guide its membership to full fee disclosure.

Just over three weeks ago the board removed the "fee only" designation as a compensation method in its "Find a CFP Professional" search engine. The temporary move was made to allow certificants time to review the validity of their claim as a fee only advisor before reclaiming the compensation method. CFP certificants can choose from "Commission and Fee," "Commission Only," "Fee-only" or "Salary."

The backlash from brokers, registered representatives and insurance agents who cannot claim the "fee only" compensation method was swift and boisterous. After wrestling with the issue since, Kevin R. Keller, CEO of the CFP board of directors has issued a statement to its membership on the matter.

Must Read: Here's How Millionaires Get Financial Advice

"We temporarily removed ¿ for two business days ¿ the "fee-only" compensation field from our "Find a CFP Professional" search tool and added a link in the search tool to our compensation definitions," Keller says in the statement. "We then communicated directly with the CFP professionals who previously selected "fee-only" and asked them to update their profile after reviewing our rules and definitions. We took this action to protect consumers from potential misinformation on our website."

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."

Keller says the CFP Board has devoted "significant effort" to providing certificants with guidance in understanding and complying with the compensation disclosure standards.

"We must remain committed to the goal of providing the public with clear and transparent information about how clients pay for the services they receive from CFP professionals," Keller says in the statement to CFPs. "I am sure you would agree that the public needs financial advice now more than ever and that lack of trust in the financial services industry is a huge barrier to the public seeking the advice they need. A significant factor in creating the mistrust is inadequate disclosure of potential incentives to provide conflicted advice."

Advisors holding the CFP certification must adhere to the CFP Board's Standards of Professional Conduct regarding fee disclosure. "CFP Board is business and compensation model neutral," Keller says. "We believe that CFP professionals can provide ethical services under any compensation arrangement. They just need to fully disclose those compensation arrangements to their clients in terms the client can easily understand. We believe that our definition of "fee-only" is a clear, common sense and plain-English explanation of this compensation method."

--Written by Hal M. Bundrick for MainStreet

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.19 -1.04%
FB $118.06 0.54%
GOOG $695.70 0.48%
TSLA $222.56 -4.20%
YHOO $36.00 -0.03%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs