A group of fee-only advisory professionals and fiduciary experts is urging the CFP Board to immediately reverse an action it made last week to remove practitioners’ compensation methods on the board’s public-facing website, which included “fee-only, commission-and-fee, commission-only.” The group said it had “grave concerns” about the changes.
“The relevance of the CFP Board, to consumers, has been substantially diminished,” read a letter from the Committee for the Fiduciary Standard, a group of fiduciary advocates led by fee-only advisor Patti Houlihan. “The CFP Board is not ‘leading’ the profession but rather dragging it down into the mire.”
The letter begins by lauding many of the CFP Board’s recent actions to elevate the financial planning profession, including increasing the number of certificants, raising awareness among consumers and promulgating a fiduciary standard.
But the committee argued there was no advance notice of the removal of compensation information and no opportunity to comment on such a change.
The board, which grants the coveted Certified Financial Planner's credential to advisors who undergo a lengthy education process and examination, has grappled with controversy in the past over disclosures about its advisors' disciplinary records and business models.
In a statement sent last week, the CFP Board noted that the board of directors had voted to remove the compensation method search tool from the site in June 2019 and asserted that only 7% of searches on the "Find Tool" requested information about how planners are compensated. The board argued that it had always been compensation and business-model neutral, and asserted that with its new conduct standards, "the appropriate 'F' word is 'fiduciary,' not 'fees.'"
But the committee argues that a fee-only model is even higher than a fiduciary standard, as these professionals vow to not accept third-party compensation. “They choose to avoid, rather than disclose and then manage, conflicts of interest,” the letter said.
In a letter to CFP professionals last week, the CFP Board asserted that the three compensation method categories in the search tool were “broad enough” to describe the compensation categories that financial planners use but were not specific enough to help clients understand the advisors’ business.
“We believe the best way for consumers to select their financial advisor is to have a conversation with the prospective advisor,” the board’s letter read.
While the committee acknowledges that having this conversation is helpful, it means a consumer would have to meet with multiple advisors to find a fee-only advisor, who are in the minority. And that would expose the prospect to “trust-based sales techniques.”
The committee also argues that contrary to what the CFP Board says, consumers often want to limit their search for a potential advisor to those who operate in a fee-only model.
“Again, to say that the term ‘fee-only’ and its disclosure as a method of compensation to consumers is ‘not very specific or helpful to consumers’ is clearly an incorrect statement,” the committee said in its letter.
The CFP Board declined to comment.