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Well-intentioned attempts to protect consumers backfire?
By Rick Kahler CFP® http://www.KahlerFinancial.com
Integrity. Trustworthiness.
A commitment to clients’ best interests. These are all essential qualities for any advisor you entrust with your financial affairs.
One clue to financial planners’ trustworthiness is the certifications they hold. Designations such as CFP® (Certified Financial Planner) and Chartered Financial Consultant (ChFC) require adhering to certain professional standards and codes of ethics.
The organizations that maintain these standards safeguard the integrity of their professional designations and especially the well-being of consumers who seek out their members’ services. Yet sometimes, their well-intentioned attempts to protect consumers can backfire.
New Rules
The CFP® Board recently adopted new rules meant to prevent financial planners from calling themselves “fee-only” while still receiving commissions by selling financial products through separate companies. Now, CFP®s and members of their families can no longer own an interest in financial service companies that earn commissions if they wish to brand themselves as “fee only.”
This would be good, except the Board has cast its net so wide that it is catching the dolphins along with the sharks. It defines “financial service company” too broadly, including real estate firms, mortgage companies, and property management companies. It also illogically focuses on what clients could pay and what the planner could receive, rather than what clients do pay and what the planner does receive.
Example:
I have a minority interest in and occasionally receive dividends from a real estate brokerage and a property management firm. While I do maintain a license as a real estate broker, I am not active in the business. Because I could potentially receive a commission for selling real estate and because I do receive dividends, I’ve been told by a representative of the CFP® Board that I can no longer call myself “fee only” and must advertise myself as a “fee and commission” financial planner.
This would dishonestly insinuate I sell mutual funds, life insurance, or annuities. “Fee-only,” which to consumers means I sell no financial products, is much more accurate.
Disgruntled Calls Growing
I’ve received calls from other CFP®s affected in similar ways by the new rules.
Example:
One is a young fee-only planner who does not sell any financial products or own a portion of any company that does. Yet, he recently married a woman who owns a minority interest in her family’s property casualty insurance company. She holds an insurance license but does not work in the business. Because she, a “related party,” could legally receive commissions, her husband can no longer hold himself out as a “fee-only” CFP® and must list himself as a “fee and commission” planner.
Is the CFP-BOD, and the CFP® mark, in Jeopardy? [VOTE]
If a financial planner’s clients pay only fees and do not purchase financial products like mutual funds, insurance, and annuities from a related company, the CFP® Board needs to designate the planner as “fee only.” The same applies to planners who maintain financial services licenses (as those in Illinois must if they give insurance advice) but do not receive commissions. The CFP® Board should not consider companies that offer services unrelated to financial planning, such as selling and managing real estate or originating mortgages, as financial services companies.
I understand and fully support the CFP® Board’s intent to stop those who were abusing the brand of “fee only.” Yet the Board’s rules in their present form will only devalue the CFP® designation.
Assessment
It appears the only way I can continue to honestly advertise my practice as “fee-only” is to terminate as a CFP®. What’s most important for me is to be seen as a fiduciary planner, working with integrity in the best interest of my clients. I won’t dishonestly brand myself as a “fee and commission” planner to keep my CFP® designation.
Conclusion
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Filed under: Breaking News, Career Development, CMP Program | Tagged: certified financial planner, CFP Board, Chartered Financial Consultant, ChFC, Rick Kahler CFP® |
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Chartered Financial Consultant (ChFC)
Rick – This is an insurance agent designation. Insurance agents work for a company. They are not fiduciaries under current agency law. In fact, they do not work for the client, but their sponsoring firm. They do earn commissions. They do not need a college degree.
And, prior to about 2008, a college degree was not needed for the CFP designation. So, while it may be the best designation in the industry; it’s kinda-sorta like graduating top of your class; while in DUI school.
Even the simple definition of fiduciary is in question with the SEC, FINRA, CFP-BOD, NAPFA, etc [cheese].
https://medicalexecutivepost.com/2009/03/01/an-interview-with-bennett-aikin-aif%c2%ae/
Am I correct, or not?
Winston
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Fiduciary
Winston – A financial advisor who is a fiduciary is legally bound and authorized to put the client’s interests above his or her own at all times.
The Investment Advisors Act of 1940 and the laws of most states contain anti-fraud provisions that require financial advisors to act as fiduciaries in working with their clients.
However, following the 2008 financial crisis, there has been substantial debate regarding the fiduciary standard and to which advisors it should apply. In July of 2010, The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated increased consumer protection measures (including enhanced disclosures) and authorized the SEC to extend the fiduciary duty to include brokers rather than only advisors, as prescribed in the 1940 Act.
However, as of June 2013, the SEC has yet to extend the fiduciary duty to all brokers and advisors, regardless of their designation.
And, brush up on your Latin: Caveat Emptor
Stuart
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More CFP Bull-Stuff
The CFP Board is giving no sign of backing down on several controversial issues, despite a barrage of hostile fire from the advisors it regulates.
http://www.fa-mag.com/news/cfp-board-seems-to-love-hostile-fire-15892.html
So, is it time to de-regulate the Board?
Craig
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CFP Board Declines to Answer Deposition Questions in Planners’ Lawsuit
According to Ann Marsh, two Florida planners have asked the court to sanction the CFP Board.
http://www.financial-planning.com/news/Board-Declines-to-Answer-Deposition-Questions-in-Planners-Lawsuit-2687935-1.html?utm_campaign=daily-jan%2016%202014&utm_medium=email&utm_source=newsletter
The organization calls the suit “without merit” and declined to answer dozens of questions in the first deposition.
Emily
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CFP-BOD Smelly?
In the past, the CFP-Board faced criticism for promising consumers that all CFP holders are fiduciaries — even though many CFPs, especially those who work for big firms and are not RIAs, and are only required legally to uphold a lesser suitability standard.
Yet, it was uncovered last year that the board was allowing advisors to call their practices fee-only even if they worked for large firms that generate revenue through commissions, such as wirehouses, insurance companies and independent broker-dealers.
The board has since put a halt to those violations and offered an amnesty to most rule-breakers.
Amnesty? Still smells bad to me …. they just gout caught!
Dexter
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APFA Faces Member Loss After Fee-Only Rule Change
A newly announced NAPFA rule change may put the group in peril of losing members.
http://www.financial-planning.com/news/regulatory_compliance/NAPFA-Follows-CFP-Board-on-Fee-Only-Rule-Faces-Membership-Loss-2689645-1.html?utm_campaign=daily-jun%2027%202014&utm_medium=email&utm_source=newsletter&ET=financialplanning%3Ae2777098%3A86235a%3A&st=email
An interesting article by Ann Marsh featuring Rick Kahler CFP™, a frequent contributor to this ME-P.
Hope R. Hetico RN MHA
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George Chell – RIP
I was in a cab, returning to our ship after a day of touring Belfast, Ireland, when I received a text from my father: “George Chell passed away this morning.” George was my long-time friend, mentor, and former business partner. He was 92.
Fundamentally, the profession of financial planning comes down to helping foster clients’ well-being. The work we do is not just about investment returns, wealth building, or estate planning. It is about supporting clients in creating and enjoying the lives they want to live. Both professionally and personally, George Chell lived that philosophy.
I last saw George this past October, when he drove himself to my office and we went to lunch. We ended our lunch the way we always have done for the past 33 years, playing Liar’s Poker to see who would pay the tab.
In 1983 George and I became the first South Dakotans to earn the CFP® (Certified Financial Planner) designation. We formed Financial Planning Consultants, a partnership that would certainly be viewed as improbable today, as George was 100% commission and I was fee-only. The one thing that bound us was our passion for personal financial planning and desire to do the right thing for clients.
George leaves me with a lot of memories that span our 33 years of friendship. Anyone that knew him for more than a few minutes could attest to his uncanny wit and impeccable timing. All of us that knew him well have a plethora of stories to tell. One of the stories that encapsulates George’s spontaneous wit was when he was dining with a friend who ordered fish with a slice of lemon. George asked, “Why the lemon?” His friend said, “It gets rid of the fishy taste.” George looked at the waiter and said, “What do you have I can put on my steak to get rid of the meaty taste?”
George always had a joke. One of his most famous was: I was driving by Calvary Lutheran Church this morning and I noticed the sign in front of the church, where they often post announcements and service times, had this in block letters, “Have you sinned today?” Then I noticed what someone had written below that, in red lipstick. “If not, call FiFi LaRue, 343-……”
If anyone could have made it big as a professional speaker and trainer, George certainly could have. But as good as he was in that arena, his passion was helping others, both professionally and personally.
George taught me a lot about financial planning when the profession was in its embryonic years of development. The two of us made annual treks to what is now the FPA Retreat. The first Retreat we attended was the third one, held at the University of California in Santa Cruz. I’ve kept the tradition alive, having attended my 27th.
He also taught me a lot about life. George introduced the principles of the 12-Step program to me long before I knew what “The Program” was. Eventually, and due in part to George’s sometimes subtle and sometimes not-so-subtle influence, I came to understand the generational influences of alcoholism in families and to discover the support of the Al-Anon Adult Children of Alcoholics program.
Even in his final hours, struggling to let go of life, George maintained his infectious humor. I was told he would occasionally open his eyes, look around, and with the slightest hint of a smile say, “Am I in heaven yet?”
Thank you, George, for your many gifts. Your legacy of humor and integrity will live on in all those lives you touched, including mine.
Rick Kahler CFP®
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CFP Board Backs Off Threat to Investigate Planner Rick Kahler
According to ANN MARSH, the CFP Board pledged not to punish this widely followed advisor and ME-P contributor while they try to resolve fee-only compensation issue.
http://www.financial-planning.com/news/regulatory_compliance/CFP-Board-Backs-Off-Threat-to-Investigate-Planner-Rick-Kahler-2689980-1.html?utm_campaign=daily-jul%2031%202014&utm_medium=email&utm_source=newsletter&ET=financialplanning%3Ae2881093%3A86235a%3A&st=email
Yet, the decision draws accusations of ‘arbitrary’ treatment.
Hope Hetico RN MHA
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CFP Board Loses Second Chairman in 3 Years
The CFP Board has lost another top official.
http://www.financial-planning.com/news/regulatory_compliance/CFP-Board-Loses-Second-Chairman-in-3-Years-2692530-1.html?utm_campaign=%7Bdate%28%27MMM%20d%20yyyy%27%29%29%7D-daily&utm_medium=email&utm_source=newsletter&ET=financialplanning%3Ae4187405%3A86235a%3A&st=email
The CFP Board has been caught up in a series of conflicts over the last few years.
In late 2012, it pressured then-sitting chairman Alan Goldfarb to step down from the board over his use of the term fee-only. Shortly after Goldfarb’s departure, married planners Jeffrey and Kimberly Camarda, of Fleming Island, Fla., followed through on a threat to sue. The board and the Camardas remain locked in an ongoing legal battle, which also centers on the couple’s use of the fee-only term.
Several key figures have also left the board over the same period. Rex Staples left his job as director of investigations, a position the board had created for him, shortly after Goldfarb stepped down and news of the Camardas’ lawsuit emerged. And Michael Shaw, one of board CEO Kevin Keller’s closest longtime associates, left his position as the board’s director of legal affairs last year.
“If the CFP Board is really so certain it will prevail in its lawsuit, why does it seem like all the leadership associated with the case is fleeing the organization?”
Braxton
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CFP Board Lawsuit Points to Systemic Abuse by Nonprofits, Experts Say
As long as a nonprofit group stays “on the right side of the line — even though either you or I would say what they are doing is wrong — it’s still protected by ‘judgment,'” or a right to broad discretion in decision-making.
http://www.financial-planning.com/news/regulatory_compliance/cfp-board-lawsuit-points-to-systemic-abuse-by-nonprofits-experts-say-2693669-1.html?utm_campaign=Jul%2030%202015-am_retirement_scan&utm_medium=email&utm_source=newsletter&ET=financialplanning%3Ae4847648%3A86235a%3A&st=email
Fred
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