Over the past year, a series of revelations about the CFP Board's compensation disclosure requirements have significantly shifted the landscape in how CFP certificants must explain their compensation to prospective and current clients. While the CFP Board maintains that "nothing has changed" since the rules were formally enacted over 5 years ago, the fact that large numbers of advisors continued to find themselves out of compliance - with another potential shoe soon to drop - suggests that whether the organization admits it or not, the CFP Board has changed the rules of the game.
In fact, the CFP Board's current framework is so expansive in the compensation that must potentially be included, that virtually all advisors in today's environment end out being in one broad bucket labeled "commission and fee", which groups together not only advisors who earn 1% in commissions with those who earn 99% of income in commissions (despite the clear difference in actual business model!), but even renders "commission-only" advisors who earn 100% commission income as "commission and fee" because they work for a firm that "could" generate a fee (along with requiring a number of advisors who earn 100% of income as fees to declare themselves "commission and fee" if they "could" earn a commission as well). The end result: when nearly all advisors must use the same compensation disclosure label of "commission and fee" to define a wide range of actual compensation structures from 0% commissions to 100% commissions, the very purpose of compensation disclosure begins to lose its meaning, value, and clarity for the public that the CFP Board purports to serve.
While the CFP Board maintains that it cannot "fix" or change its rules without a long drawn-out rulemaking process, arguably the reality is that it already changed its rules without such a process to reach the point we're at now. In addition, the fact that the CFP Board eliminated its own "salary" compensation category just over 6 months ago, makes it clear that when it comes to interpreting and adjusting its own definitions, the CFP Board does have latitude to fix its own mistakes. Yet, mysteriously, the CFP Board has yet to be held accountable for the problematic definitions it is now using. With CFP certificant stakeholders reporting behind-the-scenes that they are afraid to speak out for fear of retribution (justified or not), and the FPA and NAPFA apparently abdicating their advocacy roles on behalf of members to take a back seat to the CFP Board, it remains unclear what will finally push the issue. Will someone have to file complaints against a thousand CFP certificants in violation of the CFP Board's own problematic rules, effectively "throwing those CFP certificants under the bus", just to force the CFP Board to pay attention? Will its Board of Directors finally take a more active accountability role to intervene and preserve the enforcement integrity of the organization?