Conversations with 20 of the nearly 500 wirehouse advisors who had inaccurately been calling themselves fee-only on the CFP Board website failed to turn up any who informed clients of the change in their compensation disclosure.
Im not going to tell anyone that I changed my disclosure, says Geraldo Alves of Merrill Lynch in Pasadena, Calif., expressing a common sentiment. The issue is that most clients do not have a clear [understanding] of these definitions.
My clients dont really care about that, adds Dev Gupta of Merrill Lynch in San Francisco. I dont really rely on [a CFP] for marketing purposes.
Both were among the roughly 8,000 advisors affected in September when the board abruptly and unilaterally removed all fee-only compensation disclosures from advisor profiles on its website.
The boards rules forbid advisors in commission-taking firms such as wirehouses, independent broker-dealers and insurance companies to advertise themselves as fee-only. However, the board had been allowing hundreds of advisors from those firms, including nearly 500 at wirehouses, to use the term on its site while it was sanctioning other advisors for the same or similar misrepresentations.
The discrepancy has led some to charge the board with pursuing a selective disciplinary policy against CFPs, especially while it has rapidly grown its membership ranks and operating budget in recent years by adding CFPs from large firms. Two independent planners in Florida are suing the board to try to stop it from sanctioning them for the same violation the board permitted Alves and Gupta to commit without consequence.
After the CFP Board altered the profiles in September, it instructed those 8,000 planners to rethink their compensation disclosure choices before selecting one of three options: fee-only, commission and fee, and commission-only. Later on, however, it quietly removed fee-only as an option for all wirehouse advisors -- without informing either the public or CFP holders.
We took this step for the benefit of the public -- to help make sure that our Find a CFP Professional search tool contains accurate information, board spokesman Dan Drummond says. He did not respond when asked if the option still remains available to CFPs at independent broker-dealers, banks or insurance companies. Nor did he provide an explanation when asked why the board waited to take this step, nor why it chose not to announce it publicly or to all CFPs.
In the course of being interviewed for this story, two wirehouse advisors learned that they could no longer choose the term for their profiles.
Its gone. Its not an option any more, one wirehouse advisor on the West Coast says as she clicks through her options for reconfiguring her profile on the boards website. She insists she can only speak anonymously because her employer forbids her from speaking to the media.
Now theyve also added a little link that you can click on, she says as reads aloud some of the explanation visible on that link. Misrepresentation of your compensation structure is a violation. Please review the following explanations carefully. I think they should have done this from the beginning before they sanctioned anybody, she says. Unless you are going to sanction everybody, you shouldnt sanction anybody, she adds. You cant say its black and white, and sanction on gray.
A Wells Fargo advisor, who also asked that his name be withheld to shield him from any punishment from his employer, expresses a similar sentiment. All I can say is it seems to be a bit premature to sanction people before clarifying [the definition of fee-only] first because I think the vast majority of people are confused by the distinction.
Asked about the boards decision to alter their profiles and its choice to not punish them for violations, many wirehouse advisors who were contacted say the matter wasnt a high priority for them.
Im absolutely oblivious to whats even on my profile, says Dale Christenson of UBS Financial Services in Omaha, Neb. I know its a big deal to the CFP people. Im sure they take themselves very seriously, but my day isnt going to change whether they exist or whether they dont exist. Im glad I have [the CFP], I enjoy it, but, if I didnt have that designation, Id just get another one.
I just got an email or something [about the altered profile] and I didnt really consider it worthy of any effort, said Michael Stuart of Morgan Stanley in Washington, D.C. I really dont know even know what they did. I just spend my time focusing on my clients.
Virginia Anne Clay of Morgan Stanley in Raleigh, N.C., said she thinks it might be better if the board allowed advisors to use more specific language to describe their practices, rather than choosing among short descriptions such as fee-only or fee-and-commission. Clay says she had chosen fee-only because it was the closest thing that I could pick to describe how I do what I do. I dont think Ive ever told a client that Im fee-only.
The West Coast advisor who wished to remain anonymous says she selected fee-only to describe her practice to in order to avoid attracting clients who wanted transactionally oriented advisors. Im not interested in that type of relationship, she says. That may have been my selection online, but that has not necessarily been to my message to clients in person.
Kent Matson of Merrill Lynch in San Francisco says he also chose fee-only because the preponderance of his business is compensated through fees.
If I would have been punished by the CFP board for checking fee-only when 90% of my business is fee-based, I would have been really upset, obviously, Matson says. I would have felt that that would have been an unfair punishment, because the check box is on their website and its not like Im being deceitful.
James Anderson of Morgan Stanley in Bell Buckle, Tenn., says he understands why advisors whove been investigated or sanctioned over this issue are upset.
I understand where they are coming from, he says. People got into trouble and I didnt get into trouble.
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