NAPFA REQUIRES MEMBERS TO TAKE OATH, BUT OTHER GROUPS CRY FOUL: NOW, THEY’D BE FEE-ONLY ‘FIDUCIARIES’

In its latest attempt to set fee-only advisers apart from the rest of the planning profession, the National Association of Personal Financial Advisors is requiring its members to sign a Fiduciary Oath.

Although some advisers and competing industry groups argue NAPFA isn’t breaking any new ground, the Buffalo Grove, Ill.-based association for fee-only planners says its oath “holds advisers to the highest standards in the industry” and allows consumers to identify “objective, independent advisers who will put their clients’ interest first.”

In signing the oath, unveiled in late April, advisers promise to “act in good faith and in the best interests” of their clients, to disclose possible conflicts of interest to new clients and to guarantee that they do not receive commissions or referral fees from the sale of financial products.

NAPFA — which is being challenged by other trade associations over its trademark of the term fee-only — intends to ask its 450 members to sign the pledge as part of their 1999 membership renewals. Those who refuse will no longer qualify for “full” membership, says Mark F. Spangler, chairman of the association’s board.

NAPFA also is making the pledge available to consumers who can either ask their current advisers to sign it or use it in their search for a financial planner. NAPFA says the pledge is not restricted to its members.

“Nobody really puts it down in plain English and certain people don’t act like they are fiduciaries,” says Mr. Spangler, also president of Seattle-based MFS Associates Inc.

“Our goal is to get this industry to be more like a profession, and this Fiduciary Oath aligns it more with the medical or legal profession,” he adds.

Still, other industry groups as well as regulatory agencies require advisers to disclose their compensation methods and possible conflicts of interest. And some observers argue that fee-only arrangements guarantee neither professional competency nor freedom from conflicts.

“Our position is that conflicts are inherent in any method of compensation,” says Richard P. Rojeck, president of the Atlanta-based International Association for Financial Planning, which requires its 17,000 members to disclose “actual or potential conflicts” and compensation methods. “Just because you are fee-only does not mean you are free of conflicts of interest.”

What’s more, some planners say that professional advisers are inherently fiduciaries, whether or not that is spelled out. And the code of ethics of the Denver-based CFP Board of Standards, which has 32,500 licensees, states “a financial planning practitioner shall act in the interest of the client.”

Says Madeline I. Noveck, president of New York-based Novos Planning Associates Inc.: “All they are saying that is different is that they will not accept any compensation other than from the client.”