Are we stepping through the looking glass into Lewis Carroll’s Wonderland where Humpty Dumpty insists that when he uses a word “’it means just what I choose it to mean, neither more nor less?”
The debate in financial advisory circles comes over the meaning of the term “fee- only.” Naturally, you’d figure that a “fee-only” advisor is one who is compensated only by fees for services, not commissions on products. However, you’d be correct less than 89% of the time. In Jason Zweig’s recent article for the Wall Street Journal, ‘Fee-Only’ Financial Advisers Who Don’t Charge Fees Alone, he shares the surprising fact that more than 11% of certified financial planners (CFPs) who work at major brokerage firms call themselves “fee-only” when the CFP Board specifically prohibits them from doing that.
As Zweig reports, “The CFP Board’s standards of professional conduct say that a CFP can describe his services as “fee only” if—and only if—all his compensation comes from fees. And if any “related party”—such as the adviser’s parent company—receives commissions, then the adviser can’t use the term “fee only,” the CFP Board’s standards say.” Therefore, even if a Morgan Stanley advisor uses a “fee only” compensation model, because the firm sells commission-based products and employs advisors who earn commissions, he or she cannot describe the practice as “fee-only.”
However, Zweig reports that many of the CFPs from major Wall Street banks and brokerage firms listed on the CFP Board’s website LetsMakeAPlan.org do just that. According to Zweig, advisors at Morgan Stanley, UBS, J.P. Morgan Chase, Bank of America Merrill Lynch, Wells Fargo, LPL Financial Holdings, RBC, Raymond James Financial and Ameriprise Financial are among the 661 offenders.
No wonder consumers are confused in regard to how financial advisors are compensated!
The good news is that the CFP Board’s Chief Executive Kevin Keller has responded to Zweig’s article and instructed all the advisors in question to revise their profiles.
And, for the record, each of the advisors at Bernhardt Wealth Management is a fee-only fiduciary advisor.