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A Disappointing Move by the CFP Board

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Its “Find a CFP Professional” Search Function Ends Transparency On the Method of the Advisor’s Compensation

This article by Ron A. Rhoades, JD, CFP® originally appeared on the Scholarly Financial Planner Blog

Mark Schoeff, Jr. of InvestmentNews reported on March 3, 2020:

The Certified Financial Planner Board of Standards Inc. has removed descriptions of how advisers are compensated from the profiles of CFP certificants on a website designed to help consumers select an adviser, the organization said in an email sent Monday to CFPs.

The CFP Board scrubbed from the Find Your CFP Professional search function on its letsmakeaplan.org website references to how CFPs are paid.

“The three compensation method categories previously provided by the search tool – Commission-only, Commission and Fee and Fee-Only – were broad enough to capture the various compensation methods financial planners use today, but not very specific or helpful to consumers,” the CFP Board said in a letter to certificants Monday. “We believe the best way for consumers to select their financial advisor is to have a conversation with their prospective advisor.”

Wow.

Not helpful to consumers? – I DISAGREE.

Best way to select a financial advisor is to have a conversation? – I DISAGREE. Screening of financial advisors is a prerequisite, and – the fact of the matter is – many, many consumers screen for fee-only financial planners.

I am absolutely astonished that the CFP Board undertook this move. Consumers should be equipped with basic information of how financial advisors they search for are compensated. There can be a huge distinction between commissioned-based advisors and fee-only advisors, in terms of how the fiduciary duty of loyalty to a client is best observed. And increasingly consumers are aware that special – and often troubling – conflicts arise for those who hold out as commission-and-fee advisors.

Many financial advisors today, including CFPs, call themselves “fiduciaries” but still possess conflicts of interest that are often not properly managed. Consumers should search for CFPs who eschew, rather than simply disclose, conflicts of interest.

In an era of calls for increased transparency in financial services, it is hard to understand how and why this decision was reached. The CFP Board’s “Find a CFP Professional” web site for consumers no longer should be viewed by consumers as a worthwhile trek.

You can read the rest of the article on Scholarly Financial Planner Blog

Dan Moisand

 

Dan Moisand is a nationally recognized fiduciary fee-only financial planner, an Institute Real Fiduciary™ Advisor and Chair-elect of the CFP Board.

The Institute has enshrined the ‘Moisand Rule’ on fiduciary practices. It is basic and is more important today than ever: “You have to avoid conflicts. If I avoid a conflict, I don’t worry about it.”

Watch the video of Moisand speaking here.

Bob Veres

 

Bob Veres is a long term observer of financial planning. His Newsletter, “Inside information” Is a staple of leading planners. In the May edition he writes about fiduciary and the Institute.

"But a much bigger point is that the fiduciary standard—as Knut Rostad of the Institute for the Fiduciary Standard has pointed out—has been determined by the Supreme Court (1963 ruling) to be at the very heart of the Investment Advisers Act of 1940. It is the foundation of what it means to be an RIA registered with the SEC instead of a tipster or a tout."

- Bob Veres, Parting Thoughts ... The SEC's Own Compliance Culture