Practice Management

NAPFA Puts Kibosh on Commission Business

No more exceptions: Advisers who are members of the National Association of Personal Financial Advisors (NAPFA) cannot accept compensation in any form from any source other than their clients.

By Jill Cornfield editors@strategic-i.com | June 27, 2014
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NAPFA, which has about 2,400 members, adheres strictly to this fee-only standard, but used to allow advisers to own up to 2% of a firm that generates revenue based on commissions. That exception ended Thursday in an email to the members of the organization, which believes that fee-only compensation minimizes potential conflicts of interest between financial planners and clients.

James F. Sampson, managing principal of Cornerstone Retirement Advisors LLC, tells PLANADVISER he is unsure how many retirement plan advisers use the NAFPA designation, but he thinks some probably do. His firm does not. “I think that because of the nature of our industry products and platforms, most of us have some form of legacy business that the broker/dealer world would consider commission-based, so I don’t know that we would qualify for that designation anyway,” he says.

Does the membership change affect retirement plan advisers? Yes and no, says Ryan Mumy, president and founder of Mumy Financial Advisors LLC in Hickory, North Carolina. Mumy says he cannot be a member of NAPFA because he does holistic planning. His practice looks at a client’s insurance needs in the context of a complete financial picture. “I am going to show them the options for solving insurance needs, and the only way to get paid on life insurance is through a commission,” Mumy tells PLANADVISER.