The public was first given access to CNBC’s second annual list of the “Top 100 Fee-Only Wealth Management Firms” earlier today. Consumers should “make sure you understand how that [advisor] gets paid, and that means understanding fees vs commissions,” according to CNBC when compiling the list. Additionally, “fee-only financial planners… do not accept any commissions or other compensation based on product sales,” it was noted.
Then, independent RIAs were assessed using a “secret algorithm” that took into account factors including assets under management, the presence of professionals with credentials like the CFP or CFA, typical account sizes, asset growth, years in operation, and the depth of advice provided. Intriguingly, the CNBC list does only include registered investment advisers (RIAs), and in the majority of cases, the RIA business does not directly get any insurance fees (though it does happen in at least one situation, as RIA status does not technically ban commissions).
However, in 90% of situations, the RIA has a clearly associated company or connection that earns commissions, ironically to the point that such “fee-only” companies explicitly report those commissions and the conflict of interest it creates in their own Form ADVs. In the end, whether a business does what’s right for the customer (and is held accountable for it) matters more than how the client pays for it; receiving commissions from a firm (or its connected companies) does not automatically warrant any complaints or make it a “bad” firm. However, this instance indicates that, at best, the problem initially described in the now-famous Camarda v. CFP Board case when advisers advertise themselves as “fee-only” based on their RIA but have a commonly owned/related insurance firm to earn commissions regardless may still be present. However, in this case, there is no evidence that any of the firms have ever represented themselves as “fee-only,” other than the regrettable fact that CNBC has incorrectly categorized them as such on its very public list of firms. As a result, these firms are put in an awkward position with the CFP Board, which has precedent from the Camarda and subsequent Goldfarb cases to issue public letters of admonition when commission-and-fee firms hold out as “fee-only
