Since becoming the first Certified Financial Planner (CFP) in South Dakota in 1983, “I’ve been an ardent supporter of the CFP designation,” Rick says in a July 23 article in Financial Planning.
Keeping that designation may no longer be possible for Rick and other staff members at KFG. After a year of discussions with representatives of the CFP Board over new regulations, Rick received a letter this week informing him that, beginning August 1, he can no longer describe his practice as “fee-only.” The requirement is based on his 50% ownership of a family-owned real estate firm, even though Rick has not sold real estate for around 10 years, doesn’t actively participate in the day-to-day management, and does not receive any salary or commissions from the business.
Rick told Financial Planning, “I will either drop my CFP or bring a lawsuit against them.” He added, “It’s sad to become a fatality of friendly fire and an unintended consequence of a poorly constructed policy.”
The Financial Planning article, by Ann Marsh, is titled “Planner Threatens Suit After CFP Board Order.” You can read it here.
WOW. What a maze.
In the meantime after August 1, suggest you use ‘fee-based…former fee-only…under protest until CFP resolution.’
Your ‘arms-length’ offerings sound reasonable…Jerry
Sounds like our HOA: either silly rules or no rules or too many rules.
Sad position to be in, but these things happen. I like jerry’s suggestion, though.
There are many terms I could use, advise-only, no commissions, I like the “formerly a fee-only” planner under dispute. The CFP Board want us to identify our company as “commission and fee” planning firm (the same as fee-based), which is more dishonest than calling it fee-only because KFG accepts no commissions whatsoever.
The issue is fairly complex and the unwillingness of the CFP Board to give clear direction as to what consitutes “a related party” “compensation” “non-trivial economic benefit” “non-trivial non-monetary economic benefit” is maddening. They expect me to be a mind reader. If I guess wrong, they will will bring an action against me. It’s like swinging a bat at a ball thrown in a dark room.
It appears the only way I can know assuredly that I can comply with their new rules (aside from calling my firm a “commission and fee” planning firm) within the next 5 days is to sell the real estate firm or KFG, or give up my designation. I am exploring all possibilities.
It seems that your ownership in the real estate entity is your own, and not your firms. I am not sure why you, RK, cannot list himself as fee and commission, and yet have the firm advertised as fee-only.
It is true that my RIA doesn’t own the real estate company. What you suggest is one option I’ve considered. However, the CFP Board disagrees with that point of view. My understanding is that the CFP Board believes their power to regulate the CFP mark of an individual extends to the right to regulate any financial service company owned or associated with the Certificant. I don’t think that is a correct interpretation and indeed a court of law may not agree, but nerveless I believe that is how they interpret it.