CFP isn’t lone credential enforced via sanctions

An Aug. 18 letter [“Industry group responds to editorial criticism,” by Ray Ferrara, chairman of the Certified Financial Planner Board of Standards Inc.] contains the incorrect assertion that the certified financial planner designation “is the only certification or designation in the financial services industry whose standards are enforced through public sanctions, including public admonishment, suspension or revocation of the right to use the CFP marks.”

That statement is in error.

As a credentialing body, [the Investment Management Consultants Association] administers two active certification programs: the certified investment management analyst and certified private wealth adviser. As such, our standards are enforced through private and public censures, suspension or revocation of the right to use the certification marks we administer, as evidenced on IMCA’s website (imca.org/pages/ public-disciplinary-actions).

A volunteer professional review board comprising CIMA and CPWA professionals is responsible for enforcing IMCA’s Code of Professional Responsibility and other standards. In addition, IMCA’s “Find a certified professional” directory lists all CIMA, CPWA and certified investment management consultant designees with a link to that individual’s public disciplinary history.

Complaints and grievances against IMCA-certified professionals may be filed by the public, industry regulators or other credentialing bodies (like the CFP Board). In addition, IMCA-certified professionals must disclose, among other things, any complaints, legal and/or regulatory actions taken against them as they occur, and during the recertification process.

IMCA’s disciplinary procedures have been reviewed by a third-party, independent accreditor of personnel certification programs. IMCA’s CIMA certification is the only financial services credential in the U.S. to meet an international standard for personnel certifiers (ANSI/ISO 17024).

Thank you for the opportunity to address the error.

Sean Walters

Executive director and CEO

Investment Management Consultants Association

Your Aug. 11 editorial “CFP Board: Talking tough but acting soft” brings into focus one of the more contentious issues regarding fee versus commission.

From the standpoint of a consumer, this area is muddied language that does not accurately describe different types of remuneration.

The general public is interested in only two things: How much will it cost and on what basis is the payment justified.

To clean up this difficulty, I suggest that “fee” and “commission” should be carefully redefined.

This is perhaps a first stab at improving definitions that clients can understand:

Commission based remuneration:

1. A commission paid is based on a percentage of the sale price.

Fee based remuneration:

2(a). A fee paid is based on a percentage of assets under management.

2(b). A fixed fee is paid for all work done when completed.

2(c). A fee is paid for work done on an hourly basis.

Client payments made under 2(a), while being described as a fee, are more in line with a commission, as the payment is based on a percentage. Professionals are more likely to charge under 2(b) or 2(c).

The CFP Board, which has taken great steps in improving industry standards, is in a unique position to refine the definition of fee-based planning, including perhaps the introduction of the three categories above.

In my view, clients need to know how they pay for services, and this should be put into writing by financial companies. Planners should have rules laid out in such a way that there is no room to claim they are fee-based when, in fact, they are paid by fees and commissions.

Stanley Kravitz

Katonah, N.Y.

Related Topics: Certified Financial Planner Board Of Standards Inc. (CFP Board), Letters To The Editor