ARBOR WEALTH: Seek fiduciary standard in advisors

Published: Thursday, December 12, 2013 at 05:02 PM.

According to a recent article in the Wall Street Journal, the “CFP (Certified Financial Planner) Board’s Standards of Professional Conduct dictate that the term fee-only can be used (by an investment advisor) only if all the advisor’s compensation … comes from client fees.” Thus, the hybrid model that some investment firms have begun using cannot classify itself as fee-only. 

This hybrid model separates the investment advisory practice into two wings:  one is the fee-only side, where no products are sold and no commissions are accepted, and the other is the fee-based side, where the advisor can accept commissions and can sell products to the client. The creation of this hybrid model has caused considerable confusion for clients, and some concern by the SEC. In response to the creation of this hybrid, the SEC recently and succinctly stated: “This (hybrid) business model presents multiple conflicts ….”  Further, “the SEC separately expressed a rising examination focus on conflicts of interest related to … other compensation arrangements that could be an indirect further conflict for hybrid advisors.”

When a fiduciary advisor faces a conflict of interest, he/she is required to disclose any conflicts that may exist.  A non-fiduciary advisor is not held to the same standard.

Margaret R. McDowell, ChFC, AIF, a syndicated economic columnist, chartered financial consultant and accredited investment fiduciary, is the founder of Arbor Wealth Management, LLC, (850-608-6121 —, a fee-only registered investment advisory firm located near Sandestin.




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