In an impressive piece of reporting, Financial Planning’s Ann Marsh was recently surfing the FPA’s website (FPAnet.com), and discovered that the option of “salary” had been removed from the “find a planner” page, leaving consumers with only three choices: “fee-only,” “commission only” and “combination fee/commission.” She wrote about it on Sept. 5 in “FPA Changes Compensation Disclosure.”
Astute readers will have recognized the now missing “salary” option as the one that now ex-chairman of the CFP Board Alan Goldfarb first chose to describe his compensation, before changing it to “fee-only:” and running afoul of the Board’s ethics committee for owning a 1% stake in his RIA’s affiliated broker-dealer.
You may also remember that one of Goldfarb’s defenses was that the FPA’s questionnaire offered no choice that fully described his compensation; he simply chose the “most accurate” option. Which raises the second question: Did the FPA change its website in response to Goldfarb’s seemingly reasonable comments? And if so, does the change actually solve the problem for other planners?
Inspired by Ms. Marsh’s intrepid reportage, I talked to FPA president Mike Branham to find out why the change. “The CFP Board made the decision to change their site, and we wanted to be congruent with them,” he told me. “That’s where the disclosure conversation took place. But there needs to be a larger conversation on compensation structure definitions, and we are willing and interested to be part of that conversation.”
So now I’m surfing the CFP Board’s website (I know, right?), and sure enough, there’s no “salary” option under “find a CFP professional” either. But there is an explanation. It seems on August 7th, the Board issued a release, and hosted a webinar (which you can see on YouTube), which explains the thinking behind the change.
It says, in part: “A CFP® professional is required to describe his/her compensation in a manner that allows clients and prospective clients to understand how they will pay the CFP® professional and any related party. Except in very limited circumstances, salary does not provide an accurate and understandable description of the compensation arrangement being offered by a CFP® professional because it does not describe how the client will pay the CFP® professional and any related party. Therefore, CFP Board will remove ‘Salary’ from its ‘Find a CFP® Professional’ search engine, effective Friday, August 16, 2013.”