The CFP Board unilaterally changed thousands of its certificants’ profiles on its website by removing the term “fee-only” and swapping it with “none provided.”
The organization abruptly made the changes last Thursday on its Find a CFP Practitioner search tool hours after Financial Planning reported that the board had been allowing 486 CFP holders from the four wirehouses to call themselves fee-only on its website – in open violation of the board’s own rules for use of the term.
After reviewing her altered profile, Delia Fernandez, a fee-only planner and NAPFA member in Los Alamitos, Calif., says, “It's difficult to believe that they would do this to their own members. I’m not a wirehouse employee, so why punish me because of their own internal dilemma with the wirehouse people?”
Former NAPFA board member Paula Hogan of Milwaukee says: “I did not ‘not provide’ compensation information.”
And Cypress, Calif., planner Sandra Field adds: "I am livid that the CFP would change my wording to ‘none provided,’ which is a lie. I did provide them with the title on how I am compensated and it is, proudly, ‘fee only’.”
The CFP Board declined to discuss the unexpected and unannounced move. In response to queries emailed to CFP Board Chief Executive Kevin Keller and spokesman Dan Drummond, Drummond replied, “We will have no comment at this time.”
The revelation about the wirehouse advisors came in the midst of ongoing controversy following the board’s decision to sanction three former board officials—including its former chairman, Alan Goldfarb—for compensation disclosure violations. Questions were raised about whether the board is practicing a double standard by punishing some of its CFP holders for alleged compensation disclosure violations while allowing hundreds of others at the wirehouses—and hundreds more at insurance companies and banks—to commit them without repercussions.
“There is no double standard for enforcement,” Keller said earlier this week. “We expect all of our CFP professionals to adhere to our rules and our ethical standards.”
The board forbids planners to call themselves fee-only if they have associations with any “related parties” that take commission income, including employers. Wirehouses make substantial revenues from commissions. Prior to yesterday’s changes, many other advisors in insurance companies and banks were also openly using the term on the board’s site.
The board does not audit its members; only complaints alleging violations are investigated, according to Drummond. However, the board bylaws permit it to launch investigations upon the receipt of information about violations.
Of the four wirehouses, Bank of America Merrill Lynch, Morgan Stanley, UBS Securities and Wells Fargo Advisors, none would comment about the profiles of its advisors. A Morgan Stanley representative did say that the firm’s clients benefit by having the option of choosing services that are fee-based or priced by transaction. “We strive for clear and accurate communication with the investing public about our services, and will continue to work with all interested parties toward that end,” the spokesman says.
Wirehouse advisors make up about 10,000 to 12,000 of the 68,000 CFPs in the country, according to Keller. One of them, Merrill Lynch broker Jeffrey Slothower of New York, was asked via email if he was aware he was using the term fee-only in violation of the terms of his CFP certificate.
“That doesn't really apply to me at a wirehouse,” Slothower emailed back. Yet a few days after the email exchange, Slothower switched the compensation description on his CFP Board profile to “commission and fee.”
“Looks to me like they are realizing that many of their critics have valid concerns that need to be addressed,” says Tina Florence, one of two former members of the board’s disciplinary and ethics commission who resigned their positions at the same time Goldfarb did last year after the board began to investigate them over compensation disclosure violations. “I believe at some level CFP leaders recognize that important errors in judgment have been made.”
The board privately sanctioned Florence over one sentence describing her compensation on her website, she says, after spending months vetting her before inviting her to serve as a volunteer. It also sanctioned another unnamed former member of the disciplinary commission.
The board’s investigation and sanction process can last for months. Those who settle with the board in order to receive private sanctions may have to pay fees of $1,500 to convene settlement hearings into their cases, according to Florence.
A broader issued emerged at the board after multiple current and former disciplinary commission members said the CFP Board launched investigations last year into three of its officials in order to avert a lawsuit two planners in Florida threatened to file.
“We were sacrificed,” Florence says.
In 2011, the board told husband-and-wife planners Jeffrey and Kimberly Camarda of Fleming Island, Fla., that it planned a public sanction because they called their investment management firm fee-only while they owned a separate insurance agency. The Camardas did file suit in U.S. District Court in Washington, D.C., where the board is based, in June.
Upon learning of the board’s abrupt decision to change the profiles, a spokesman for the Camardas, Donald Hannaford, said they couldn’t speculate about the motivations behind the board’s actions.
“We have always contended that the board's position was wrong, and we have been forced to bring a federal court lawsuit to right this wrong,” Hannaford emailed. “We do feel certain that our case is shining a spotlight on an unreasonable, outdated and ambiguous ‘rule’ and a set of procedures … that [are] devoid of any semblance of procedural or substantive due process, and seems to have been very selectively applied.”
This article originally appeared in Financial Planning.
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