personal finance advisor group bans commissions for
Send a link to a friend
[June 28, 2014]
NEW YORK (Reuters) - The
National Association of Personal Financial Advisors
(NAPFA)on Thursday barred its members from owning stakes
in financial services firms that receive
transaction-based compensation, as part of its push to
promote fee-only investment advice.
NAPFA, which has about 2,500 members, has permitted members since
2004 to own up to 2 percent of a firm that receives commissions. The
exception was meant to accommodate members who owned shares of
common stock or a trust company, but NAPFA's inability to audit its
members and growing interest in fee-only compensation among its
members and the public led to the change.
"This is about eliminating a sense of confusion in the industry for
advisers and consumers," said Geoffrey Brown, chief executive of the
Washington, D.C.-based planners group.
Removing the 2 percent exception will affect about 125 members,
Brown said, adding he expects most to resolve their situation by the
time they renewed their annual NAPFA memberships. Those who don't
comply cannot be members.
The move also aligns NAPFA with the Certified Financial Planner
Board of Standards' tightened scrutiny of advisers who advertise
themselves as fee-only planners. The CFP Board, which oversees the
CFP designation used by planners who pass its exams, temporarily
delisted about 8,000 planners from its list of fee-only planners
last year after finding that some were affiliated with companies
that take commissions.
NAPFA and the CFP Board are members of a coalition lobbying to have
the U.S. Securities and Exchange Commission and the Department of
Labor adopt a fiduciary standard of care for anyone who gives
investment advice to the public or retirement plans. That means the
advisers must put a client's interest ahead of their own in
[to top of second column]
Stockbrokers currently are held to a less rigorous standard that
permits recommendation of investment products suitable to a
customer's risk profile, even if they may be more expensive than
similar products that yield a broker a lower fee or commission.
At a conference this week of investment management companies and
brokers, brokerage firm officials urged their colleagues to join
them in lobbying against a strict fiduciary standard that could
prevent them from working with retirement plans.
"It's slow going," Brown said of the fiduciary standard effort. "The
climate in Washington hasn't really changed."
(Reporting by Jed Horowitz; Editing by Paul Simao)
[© 2014 Thomson Reuters. All rights
2014 Reuters. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed.