Were you confused about who can call themselves fee-only advisors?  When you’re done nodding you’ll be comforted to know you’re not alone.

This past weekend The CFP Board stepped in with an attempt to clarify the issue after fumbling the ball last week.  Never fear – bureaucracy is here!

First we take a trip down memory lane…

The financial services industry has long been associated with various stereotypes.  There’s old crusty money, new-wave folks claiming “we’re not your father’s advisor,” purveyors of hot tips and shysters.  All have been lumped together in generic categories such as stockbroker or insurance agent regardless of what one actually does.

Sometimes The CFP Board was out in front of lawmakers.  Sometimes not.  In the wake of the financial crisis of 2008 they’ve tried very hard to stay current and relevant lest Uncle Sam hijack the attempt at self-policing.

Until recently The CFP Board stated only a financial planning certificate holder (a professional who passed The CFP Board’s licensing exam and met other qualifications) could state he or she provided such services and could use the term “financial planner.”  In response various folks who could not use the term intentionally muddied the waters with terms like “financial consultant” and “financial advisor” – terms meant to sound important and official and obfuscate the truth behind whose interest was truly being served.

The CFP Board stepped up the fight by defining it in terms of compensation.  There was “commission”, “fee and commission” and “fee-only.”  Commission speaks for itself – the collecting of a sales charge for peddling load mutual funds, annuities, insurance, etc.  “Fee-only” was supposed to be the pious of the bunch – collecting 100% of fees directly from clients for the provision of advice and strategies.  “Fee and commission” obviously is a blend.

The issue arose when (a) consumers got lost in the maze of semantics and (b) advisors skirted the issue by bifurcating their compensation methods and doing an end run by claiming some income as “salary.”

The battle came to a head last week.  Without notice The CFP Board stripped from its website and the profile of certificate holders the term “fee-only.”  No one was permitted to use it.  Days later it was reinstituted with strict definitions.  The onus is on the advisor and advisory firm to prove a true fee-only method of compensation.

Under the new system a holder of a financial planning certificate from The CFP Board may call himself/herself “fee-only” if and only if 100% of compensation from every client comes exclusively from those clients in the form of fixed, flat, hourly, percentage or performance-based fees.

Similarly the fee-only option is not available for use by brokers (are you listening Merrill Lynch?) or insurance agents (anyone home over there at Prudential?) that may receive commissions even if they choose not to.

Still confused?  The gist is as it always has been – there’s nothing wrong with the purchase of a product but there always has been and always will be an existing or potential conflict of interest.  The only way to receive 100% objective advice is an engagement where the provider is truly “fee-only” under The CFP Board’s current definition.

What’s more the only way to receive holistic advice is from a Certified Financial Planner professional.  These are the only folks who may call themselves “financial planners.”  A “financial advisor” or “financial consultant” cannot legally claim to be a fiduciary putting the best interest of clients first and foremost.

How does this impact Apollo Wealth Management?  It doesn’t.  We remain what we have always been – a 100% objective, fee-only financial planning firm providing unbiased and uncolored advice and strategies.  We have always placed the interest of our clients ahead of our own – not only because we’re legally required to as fiduciaries and holders of the CFP designation but because we believe it is our moral and ethical responsibility.  We take the trust our clients place in us very seriously.

How does your “advisor” stack up?  Are you concerned?  Are you still confused?  Give us a call and let us show you what exceptional customer service and truly objective, “big picture” advice is all about.