1. NAPFA’s definition of a Fee-Only financial planner
NAPFA defines a Fee-Only financial advisor as one who is compensated solely by the client with neither the advisor nor any related party receiving compensation that is contingent on the purchase or sale of a financial product. Neither Members nor Affiliates may receive commissions, rebates, awards, finder’s fees, bonuses or other forms of compensation from others as a result of a client’s implementation of the individual’s planning recommendations. "Fee-offset" arrangements, 12b-1 fees, insurance rebates or renewals and wrap fee arrangements that are transaction based are examples of compensation arrangements that do not meet the NAPFA definition of Fee-Only practice. If you have questions about specific compensation arrangements, please contact the NAPFA Membership Manager.
2. Prohibition of certain ownership interests and employment relationships
Neither a Member nor an Affiliate may own any interest in or be employed by a financial services industry firm (see definition below) that receives commissions, rebates, awards or any form of compensation prohibited by the NAPFA Standards of Membership or Affiliation.
A party related (see definition below) to a member or an affiliate may not own an interest in a financial services industry firm (see definition below) that receives commissions, rebates, awards or any form of compensation prohibited by the NAPFA Standards of Membership or Affiliation; and to whom the member or affiliate makes referrals or otherwise directs business.
"Related party" means a business colleague or family member with whom a Member or Affiliate shares income or economic benefits. A related party may include, but is not limited to, a business partner or an officer or Director of a Member's or Affiliate's business, or a spouse, parent, dependent minor child, an adult child still residing in the home, or other dependent.
"Financial services industry firm" includes any entity or individual that offers any type of financial service, e.g., securities broker or dealer, investment adviser, asset manager, investment company, banking institution, savings institution, trust company, mortgage bank, credit union, savings and loan association, insurance broker or dealer or agent, real estate broker or agent, commodities broker or dealer or agent.
An individual who has a question about the application of the above prohibitions to his or her situation may submit a written inquiry to the NAPFA Membership Committee for determination. The procedures outlined under item 1 above concerning review of compensation arrangements are similarly applicable to inquiries concerning ownership and employment situations. Applicants for initial membership or affiliation with NAPFA who have questions concerning ownership and/or employment arrangements are advised to make inquiry to the Membership Committee in advance of submission of a complete application form.
3. Compliance with NAPFA standards and industry regulations
- must abide by the NAPFA Code of Ethics, Standards of Membership and Affiliation, Bylaws, resolutions adopted by the Board and all rules set forth in the NAPFA Policies and Procedures Manual.
- agree to comply with all federal and state statutes, rules, regulations, administrative and judicial rulings, and other authorities applicable to the provision of financial planning or advisory related services.
- agree that they will make all appropriate filings, amendments and renewals as appropriate to required filings with regulatory authorities. This shall include, but is not limited to, Form ADV. As a condition of NAPFA membership, any and all Form ADV filings may be reviewed by the Membership Task Force.
4. Prompt notification of certain disciplinary and legal events.
Members and Affiliates have a continuing obligation to inform the NAPFA National Office, in a prompt manner and in writing, of significant disciplinary and legal events. These events include, but are not limited to, the following:
- any disciplinary inquiry or proceeding initiated by any federal, state or local civil or criminal authority or regulatory body, including any inquiry or proceeding relating to the firm with which the individual is associated;
- any disciplinary inquiry or proceeding initiated by a credentialing or membership organization or authority to which the individual is subject, e.g., Certified Financial Planner Board of Standards, State Board of Public Accountancy;
- any bankruptcy, receivership, or other type of assignment or arrangement for the benefit or protection of creditors of the individual or any entity in which the individual holds an interest of 5% or more.
NAPFA reserves the right to decline membership if the applicant has failed to comply with statutes or regulations governing the profession, or has been unsuccessful in the defense of civil claims arising from professional services, unless such violations or claims are not material.