The CFP Board announced in an unsigned email to certificants this week that the group’s consumer search engine will no longer allow investors to search for registered investment advisors based on the compensation method advisors use.
Instead of allowing consumers to continue to search for a financial professional based on his or her use of commissions, commissions and fees, or fee-only compensation as has been the case for several years, the CFP Board said it is instead providing questions that consumers should ask on its “Findaplanner.org” website.
Fee-only registered investment advisors were quick to criticize the CFP Board for its decision, which many advisors said they had no idea was coming. Outspoken fiduciary advocate and RIA Michael Kitces, who helms XY Planning Network, immediately took to Twitter to express concern: “It gets even harder for @CFPBoard to advocate for moral high ground of higher fiduciary standards and being the ‘gold standard’ when it’s not even willing to support basic transparency for consumers around advisor compensation and instead forces consumers to dig to figure it out.”
According to the announcement, obtained by Financial Planning magazine, the organization wrote: “CFP Board is pleased to share with you some updates to our Public Awareness Campaign website, letsmakeaplan.org. This website is designed for consumers and features the “Find Your CFP® Professional” search tool . . . Today, we have updated that tool to remove information about compensation method.
“The three compensation method categories previously provided by the search tool— Commission-Only, Commission and Fee, and Fee-Only—were broad enough to capture the various compensation methods financial planners use today, but not very specific or helpful to consumers,” the announcement continued. “We believe the best way for consumers to select their financial advisor is to have a conversation with their prospective advisor.”
The CFP Board has not provided a comment, but its public relations firm said the group is working on a statement.
“I obviously have no idea what went into the discussion about this change and I’m sure it was made with good intentions; however, to me it seems to be a significant and disappointing step backwards, especially given all of the losses we’ve seen in the regularity fiduciary battle,” Harold Evensky said in an email reply.
Evensky is a CFP, a former chairman of the CFP Board and current Chairman of Evensky & Katz / Foldes Financial Wealth Management, Coral Gables, Fla. Unlike many fee-only financial planners, he has often argued that his form of compensation doesn't make him superior to planners who take commissions. However, he has always argued that consumers have every right to expect transparency and full disclosure.
In his e-mail, he added: “The explanation [laid out by the CFP Board] . . . does not sound very credible. While I agree that there might be some confusion between Commission Only and Commission and Fee that would benefit from conversation, it’s nonsense to suggest that there is confusion about Fee Only.”
According to the CFP Board’s letter, instead of choosing an advisor based on how she or he is paid, investors should instead dig into a list of questions it has included on its letsmakeaplan.org website.