"Fee-Only" Follow-Up: Getting What You Want in a Financial Advisor

Financial journalists and industry watchers have long been vocal in their support of the "Fee-Only" business model as a means for consumers to ensure receiving objective financial advice. As a result of this positive publicity and of education efforts by NAPFA, the National Association of Personal Financial Advisors, the word is spreading. Discerning consumers are becoming aware that there is an alternative to conflict-laden, commission-based and fee-based financial "advice".

It comes as no surprise, then, that many financial advisors are now misrepresenting themselves (whether out of ignorance or out of something even less savory) as being "Fee-Only". As I discussed in October's Wealth Management blog post on How to Find a Real Fee-Only Financial Advisor, the CFP Board has cracked down on CFP® certificants found guilty of misleading the public in this way. The following is an excerpt from a letter the CFP Board sent to all of us:

The "fee only" description is appropriate only when
the CFP® professional and any related parties
receive, or are entitled to receive, only fees for
providing professional activities. As a general rule,
if you are a registered representative of a
broker/dealer, are dually-registered, or are an
employee of an insurance firm, your compensation
may not be described as "fee only."

CFP® professionals are responsible for disclosing
their compensation consistent with our
compensation disclosure rules and definitions.
Should it come to our attention, subsequent to the
opportunity to fully understand and comply with our
rules, that a CFP® professional is misrepresenting
their compensation, the matter will be referred to
our enforcement process.

This is a step in the right direction for the industry and consumers alike. However, in the time that has passed since the Wall St. Journal broke the news that at the very least 11% of all certified financial planners were misrepresenting themselves as "Fee-Only" (on the CFP Board's own website no less), it has become abundantly clear that the brokers and firms involved feel no responsibility to make amends by disclosing this faux pas to clients.

And who knows how many non-CFP®-licensed financial advisors are falsely representing themselves as being "Fee-Only" to prospective clients. Talk is obviously cheap in this profession. Once you've done your homework as a prospective consumer of financial advisory services, get it in writing that your advisor is Fee-Only, and that he/she acknowledges a fiduciary obligation to you.

About the Author

Paul Winter, MBA, CFA, CFP® is a Fee-Only financial advisor and fiduciary in Salt Lake City, UT. His independent wealth management firm, Five Seasons Financial Planning, provides professional portfolio management and objective financial planning services to individuals and families, and to their related entities including trusts, estates, charitable organizations, and small businesses.

Contact Paul