The Certified Financial Planner Board of Standards is taking a drubbing over its decision in early March to remove from its consumer-facing website, letsmakeaplan.org, any information on how advisors are compensated — a move the board says is designed to emphasize “fiduciary” and not “fees.”
The CFP Board told certificants in an early March email that it decided to get rid of the comp information as the board readies for the June 30 enforcement date of its revised Code of Ethics and Standards of Conduct. This coincides with the effective date of the Securities and Exchange Commission’s Regulation Best Interest.
Noting that the board is and always has been “compensation and business model neutral,” the email said that “to effectively integrate CFP Board’s revised Code of Ethics and Standards of Conduct — including the expanded application of the fiduciary duty,” its board of directors re-evaluated the handling of compensation representation information, including the “Find a CFP Professional” search tool on the website.
“Consumers should prioritize their search for a financial advisor, first and foremost, based on who will act as a fiduciary, not how that advisor is compensated,” Kevin Keller, CFP Board CEO, told me in a mid-March interview. “It’s like any other professional service — the first step is about understanding the value of the service being provided.”
The CFP Board found that only 7% of all searches on the “Find Tool” requested compensation method information, “contrary to the perception that compensation is a primary filter of the tool,” the email stated.
In the new Code of Ethics and Standards of Conduct, CFPs “are required to describe to clients how they are compensated before or at the time of engagement,” the CFP Board wrote in its email.
The three compensation method categories previously provided — Commission-Only, Commission and Fee, and Fee-Only — were broad enough to capture the various compensation methods that financial planners use today, but not very specific or helpful to consumers, the CFP Board said.
The best way for consumers to pick their advisor, the email continued, “is to have a conversation with their prospective advisor.”
In June 2019, the board of directors voted to remove the compensation method field from the LMAP search tool, and on March 2, the CFP Board notified CFPs that it will be taking the action to remove the comp information prior to June 30.
“With our updated Code of Ethics and Standards of Conduct, the appropriate F-word consumers should consider is ‘Fiduciary,’ not “Fees,” CFP Board told certificants.
Committee Cries Foul
But the Committee for the Fiduciary Standard shot back in a March 6 letter to the CFP Board that the certifying body gave “no advance notice” of its decision to remove information about a CFP’s compensation method, nor was there any comment period.
“There was no outreach undertaken to CFP professionals, including those in past leadership positions within the CFP Board (who often participated in earlier decisions regarding the disclosures of method of compensation, and issues surrounding verification of those disclosures and the value of the accuracy of such disclosures in various disciplinary proceedings,” the committee wrote. “Any change of this magnitude should only be undertaken following consultation with all stakeholders, including consumers, Certified Financial Planners, and leaders of the profession.”
The committee also balked at the CFP Board’s claim that the fee information wasn’t “specific or helpful” to consumers. “This is untrue,” the committee retorted. “The CFP Board itself has taken great measures to delineate who may call themselves a ‘fee-only planner.’”
The term “fee-only” is, in fact, defined within the CFP Board’s Code of Ethics and Standards of Conduct, the committee said.
“Largely as a result of the profound growth of fee-only financial planners, the consumer media’s advice to those who seek to engage financial planners, and the continued movement of the profession from its product sales roots to compensation paid directly by the client, many consumers today look for fee-only CFP,” it said.