Simply stated, we feel that commissions, referral fees, 12b-1 fees, and other sources of compensation that do not come directly from our clients have the potential to cause conflicts of interest between us and our clients. We choose not to operate in an environment with the opportunity for those conflicts of interest to arise with the people we serve. We also adhere to a strict policy of disclosing, in clear understandable terms, any potential conflicts of interest that we believe may have the potential to exist now or in the future.
We always provide our clients with an invoice, identifying the fee associated with our services. Our clients do not find themselves in a position to wonder how we get paid or to whom we owe our loyalties. Our clients truly come first in our financial planning practice.
Fee-Based is not the same as Fee-Only. A Fee-Based advisor will generally accept fees from clients as well as additional compensation in the form of a commission from recommending and selling investment products.
NAPFA’s definition of Fee-Only
NAPFA defines a Fee-Only financial advisor as one who is compensated solely by the client with neither the advisor nor any related party receiving compensation that is contingent on the purchase or sale of a financial product. Members may not receive commissions, rebates, awards, finder’s fees, bonuses, or other forms of compensation from others as a result of a client’s implementation of planning recommendations. “Fee-offset” arrangements, 12b-1 fees, insurance rebates or renewals, and wrap fee arrangements that are transaction based are examples of compensation arrangements that do not meet the NAPFA definition of Fee-Only practice.
What the press has to say about Fee-Only financial planners:
“Financial Planners who take commissions have a built-in conflict of interest… even with disclosure, my choice would be a Fee-Only planner.”
“Start with the general practitioner… a Financial Planner (whose) compensation should be from fees alone.”
“The most important matter is how the planner is compensated. Hire the planner who… has no financial stake in (your) investments.”
“Seek an advisor who can offer you a wide range of choices. A Fee-Only planner does not represent any company.”
Your doctor, lawyer, and Certified Public Account all must hold to a Fiduciary Standard. This means they have an ethical obligation to act in your best interests. The highest Professional standard for Financial Advisers is a Fiduciary Standard. Not all financial professionals agree to be held to this high standard.
Only Financial Advisors who are also Registered Investment Advisors are held by law to a Fiduciary Standard. Mote Wealth Management is a Registered Investment Advisor, registered in the states of Iowa and Texas. Mote Wealth Management embraces our ethical obligation to work in the best interests of our clients.
Financial Advisors who are not also Registered Investment Advisors are usually not fiduciaries and may be influenced to act in their own or others’ best interests, not yours. It is worth your time and effort to determine whether your advisor or potential advisor is willing to accept fiduciary responsibilities in your working relationship and to put your interests ahead of their own.
THE DEFINITION OF FIDUCIARY
The Board of Directors, Representatives, and Financial Advisors comprising NAPFA have developed the following definition of Fiduciary:
fi·du·ci·ar·y – A financial advisor held to a Fiduciary Standard occupies a position of special trust and confidence when working with a client. As a Fiduciary, the financial advisor is required to act with undivided loyalty to the client. This includes disclosure of how the financial advisor is to be compensated and any corresponding conflicts of interest.
NAPFA firmly believes this is the strongest definition of Fiduciary available because of the basic requirements of Trust, Loyalty, and Disclosure.
Trust – Someone who does not completely trust their financial advisor can never be fully confident that they are receiving the best possible advice from the best possible advisor. Without trust, can confidence really be achieved?
Loyalty – An advisor who is loyal to only their clients will not be swayed by outside forces to recommend investments with higher commissions or payouts. Without loyalty, can people ever be sure their own interests are being looked after?
Disclosure – People must know, and understand, how their financial advisor is being compensated for the advice they are providing and whether or not any conflicts exist that may cause a problem with that advisor’s ability to provide truly independent advice. Without disclosure, can prudent advice be provided?
A CERTIFIED FINANCIAL PLANNER™ is a practitioner who has meet the requirements set by the CFP® Board of Standards in education, examination, experience, and ethics. The CFP® is considered the premier designation for financial planners and establishes a baseline of competency for practitioners. In addition to meeting all of the preliminary requirements, designation holders must also meet requirements for continuing education.
A CFP® practitioner must complete an educational program offered by a college or university and accredited by the CFP® Board of Standards. These educational programs cover all of the crucial areas of comprehensive financial planning including investments, risk management, taxation, estate planning, and retirement planning.
After completing a CFP® educational program practitioners are eligible to sit for the CFP® exam. This exam was 10 hours long and delivered over two days when Eric and Jean passed it, but it was changed in 2016 to a 6-hour online exam. Practitioners must score high enough overall on the exam to earn a passing mark and fulfill the examination requirement to complete the examination portion of earning their designation.
After completing the education and examination portions, financial planners must also meet the experience requirements of a minimum of three years in order to use the CFP® marks.
The final step of becoming a CERTIFIED FINANCIAL PLANNER™ is agreeing to abide by the Code of Ethics determined by the CFP® Board of Standards. This code establishes a financial planner’s ethical responsibilities to the public, clients, and employers. While the CFP® Code of Ethics has many great guidelines for practitioners, it is worth noting that it is nowhere nearly as strict as the NAPFA’s Code of Ethics, and many CFP® practitioners do not practice comprehensive financial planning – they only sell products. The CFP® mark is a great baseline for competency, but consumers should understand that A CERTIFIED FINANCIAL PLANNER™ is not required to put the client’s interests ahead of their own. At Mote Wealth Management, we exceed the CFP® Code of Ethics and always put our fiduciary responsibility to you in writing.