ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Saturday, January 11, 1997 TAG: 9701130096
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
NOT ALL INVESTMENT ADVISERS tell the truth when they say their only compensation comes from customers; many of them also receive commissions from companies whose securities they recommend.
A majority of financial planners surveyed by a consumer group hid from clients the fact they can get commissions and other payments for recommending securities.
The Consumer Federation of America said this week the survey conducted with the National Association of Personal Financial Advisors was done by examiners posing as customers. It looked at how many planners in the Washington area were incorrectly calling themselves ``fee-only'' financial planners.
A fee-only planner is paid by the customer asking for advice and receives no commissions or other financial incentives for the sale of insurance, stocks, bonds or mutual funds by the companies that offer those investments.
About 14 percent of financial planners legitimately offer fee-only services. Surveys have found many consumers balk at fee-only planners because they can be charged a sizable upfront payment for the service. They can recover that money over time because they don't pay sales commissions to the planners.
The survey of 288 firms found 58 percent claimed to offer fee-only services, but they actually earned commissions or other financial incentives for carrying out customers' financial plans.
``We are concerned that consumers who are shopping for fee-only financial planning advice are being routinely misled by financial planners who claim to offer fee-only services but actually earn commissions selling products,'' said Barbara Roper, CFA director of investor protection.
The survey stopped short of accusing the firms of breaking the law, and Roper said it couldn't be determined if consumers would lose money.
Duane Thompson, a spokesman for the profession's main trade group, the Institute of Certified Financial Planners in Denver, said he hadn't seen the survey but found the findings troubling.
The term financial planner broadly describes a range of professionals - insurance agents, stockbrokers, accountants and independent advisers - who counsel consumers about investment and retirement savings strategies.
Under federal law, a person operating a business that gives advice on stocks, mutual funds or other securities for compensation is supposed to register as an investment adviser with the Securities and Exchange Commission and describe how they are paid.
The CFA analyzed the SEC registration forms of the surveyed financial planners in its study.
LENGTH: Medium: 55 linesby CNB