The National Association of Personal Financial Advisors is tightening its membership rules and will no longer allow members to own even a small stake in any financial firm that charges commissions, Investment News reported.

 

NAPFA, composed of fee-only financial planners, notified its approximately 2,500 members in an e-mail Thursday that it was rescinding the provision that allowed them to own up to 2 percent of a firm that generates transaction-based revenue.

 

Just 10 NAPFA-certified advisers practice in the state, five of whom work at Syverson Strege & Co. in West Des Moines, said Johnne Syverson, a principal with the firm. He said the change will have no impact on himself or on four of his colleagues who are also NAPFA-registered advisers, because his firm has no ties to fee-based firms.

 

"I wasn't even aware of this 2 percent exception until I read this today," Syverson said of the Thursday email. Syverson said he doubts that any of the other NAPFA advisers outside his firm have any ownership interests in firms that generate fee revenue. Any who might would have to decide whether to give up their NAPFA membership or end their ownership interest in the fee-based firm, he said.

 

The change resolves a difference between NAPFA's fee-only definition and the one outlined in Certified Financial Planner Board of Standards Inc. rules. The CFP Board says financial advisers are fee-only if they only charge fees for their services and are not affiliated with a firm that charges commissions, a rule that has caused much controversy.

 

"We're really trying to eliminate a discrepancy between our membership standard and [the CFP Board's] rules of conduct," NAPFA chief executive Geoffrey Brown said in an interview with Investment News. "This change in alignment is really about our members' commitment to providing financial services in a manner that is open, clear and easily understandable for consumers. The 2 percent exception is confusing."

 

The CFP Board said it backed NAPFA's decision.