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.”
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