THE WALL STREET JOURNAL. **** Saturday/Sunday, March 7 - 8, 2020 |B5
when you buy insurance, for exam-
ple. That can generate an incentive
to rack up excess trades or to take
payments from third parties—al-
though a commission-only adviser
can also be more willing to handle
small accounts and may be the
cheapest choice for clients who sel-
dom trade.
A fee-only adviser charges either
a one-time or recurring fee for
managing your investments or pro-
viding financial-planning services.
While that eliminates the adviser’s
payoff for making trades and can
reduce some conflicts of interest,
an annual fee can seriously erode
your returns over time—and no
way of paying for advice can elimi-
nate all conflicts.
Most CFPs—more than half, ac-
cording to the CFP Board, or per-
haps 80% by some industry esti-ALEX NABAUM
investors to ask even more ques-
tions than before. It’s a shame the
CFP Board is punting instead of
pointing toward clear and simple
disclosure.
The CFP Board, a nonprofit that
has awarded the certified financial
planner designation to more than
86,000 planners, said in its email
that its website’s disclosures had
been “broad enough to capture
the various compensation meth-
ods financial planners use today,
but not very specific or helpful to
consumers.”
The organization added, “We be-
lieve the best way for consumers to
select their financial advisor is to
have a conversation with their pro-
spective advisor.”
A financial adviser on commis-
sion earns a sales charge when you
trade a stock, bond or fund, ormates—charge at least some
commissions.
LetsMakeAPlan.org has long
served as a shortcut for investors
to find a certified financial plan-
ner, although the quality of its in-
formation has sometimes been
questioned.
In 2013, The Wall Street Journal
determined that up to 11% of CFPs
working at big brokerage firms,
where by definition commissions
are involved, were describing them-
selves on LetsMakeAPlan.org as
“fee only”—presumably to attract
clients who didn’t want to pay
commissions.
Last year, an investigation by the
Journal found that more than 6,300
CFPs listed on LetsMakeAPlan.org
had customer complaints or had
faced criminal or regulatory prob-
lems undisclosed on the website.The Puzzle of Your Adviser’s Pay
Doesthefinancialprofessionalyouemployearncommissions?Fees?Apopularwebsitewillnolongersay.
THE INTELLIGENT INVESTOR|JASON ZWEIG
With markets in
turmoil, investors
need financial advice
more than ever. Un-
fortunately, figuring
out where to get it
andhowtopayforit
just got a little harder.
Until now, consumers could use
LetsMakeAPlan.org, a website run
by the Certified Financial Planner
Board of Standards Inc., a profes-
sional-certification body for plan-
ners, to see whether an adviser
earns commissions, fees or a com-
bination. In an email this week, the
CFP Board told financial planners
the public search tool on Lets-
MakeAPlan.org will no longer dis-
close how they are paid.
That means the search for finan-
cial advice, already bristling with
jargon and confusion, will requireWEEKEND INVESTOR
In both situations, the CFP
Board said it had been relying on
self-disclosure by planners without
verifying that their statements
were accurate.
In response to the Journal’s 2019
investigation, the CFP Board said it
would increase its scrutiny of plan-
ners and consult other sources to
validate information, although it
declined to implement all the
changes recommended by an inde-
pendent task force that reviewed
its procedures.
This June, the organization
will begin enforcing a revised
code of ethics and conduct re-
quiring all CFPs to act in their
clients’ best interest when pro-
viding financial advice.
In a meeting last June, the CFP
Board’s directors voted to remove
the compensation disclosures from
the LetsMakeAPlan website, say
CFP Board Chair Susan John and
Chief Executive Kevin Keller.
“We’d been talking about it for a
long time, because self-disclosure is
a dangerous thing to be relying
on,” says Ms. John, who is manag-
ing director of financial planning
for F.L. Putnam Investment Man-
agement Co. in Wellesley, Mass.
Any given planner’s incorrect dis-
closure about compensation “some-
times may have been inadvertent
and sometimes may have been a
marketing ploy,” she says.
The LetsMakeAPlan disclosure of
how planners get paid is voluntary.
The CFP Board has never required
planners to “use a soundbite to de-
scribe their compensation,” says
Leo Rydzewski, the group’s general
counsel. “What we’ve done instead
is say, ‘If you’re going to use those
terms, you can’t use them in a false
or misleading way.’ Over time,
some people have done just that.
When we’ve identified those cases,
we’ve issued disciplinary actions
against them.” Such enforcements
will continue, he says.
How a planner gets paid is
“very difficult to verify,” adds Ms.
John. “If we couldn’t verify that
it’s correct, then what’s the point
of doing it?”
All this is another reminder of
how lonely and intimidating the
world of the individual investor
can be.
The CFP Board will no longer be
in the business of attempting to
verify how financial planners get
paid, because it isn’t easy to do—
even though the organization had a
$36 million budget in 2017. As a re-
sult, you’ll have to do it yourself.Carefullyconsidertheinvestmentobjectives,risks,charges,andexpensesbeforeinvesting.
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