National Association of Personal Financial Advisors
From Wikipedia, the free encyclopedia
National Association of Personal Financial Advisors (or NAPFA) is an American organization created in 1983 to aid the field of Fee-Only financial planning by encouraging interest and establishing a new level of professional standards and reputation for excellence. According to its web site, NAPFA's core values are competancy, comprehensive financial planning, objective Fee-only compensation, a client-centered fiduciary relationship, and complete disclosure of fees.
Magazines and media often cite NAPFA's checklist of difficult questions to ask your financial planner.
One of the distinguishing characteristics of NAPFA, aside from its insistence on Fee-only as the most certain method of minimizing potential conflicts of interest between a financial planner and their clients, is that NAPFA is the only financial planning organization to require a peer review of a candidate members work output prior to granting membership. NAPFA members are compensated directly by their clients. They cannot accept sales commissions from financial services or insurance firms. Members that have been through the peer review process are allowed to use the designation "NAPFA Registered Financial Advisor". The combination of Fee-only and a peer review have kept NAPFA's membership small compared to other professional financial planning organizations.
NAPFA defines a 'Fee-only' financial planner 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. This definition describes an hourly or retainer fee schedule similar to tax advisor or attorney. However, NAPFA's definition of Fee-only has been interpreted by the organization to allow membership to financial planners who are compensated based upon a percentage of the clients' assets under management. Client-agreed-upon asset management fees that are billed directly to the client by an investment fiduciary and are visible on the client's investment statements pass the NAPFA "sniff-test".
NAPFA does not permit its members to be compensated via the industry-standard 12b-1 sales & marketing expense fees. These 12b-1 fees are removed from the clients assets without notice or invoice to the client, are not reported on their investment statements and are generally invisible to the client except through reduced investment returns. A mutual fund pays 12b-1 fees directly to the selling broker-dealer, to be shared with the selling broker. These 12b-1 fees are a sales commission paid from the mutual fund to the salesperson for selling its product. NAPFA considers a sales commission paid to a financial planner to be a material conflict-of-interest between a financial planner and their client. This principled position has caused some otherwise-excellent financial planners that sell insurance or investments for a commission to not qualify for NAPFA membership.
History of NAPFA
Since 1983, consumers across the country have looked to the National Association of Personal Financial Advisors (NAPFA) for access to financial professionals who meet the highest membership standards possible for professional competency, comprehensive financial planning, and Fee-Only compensation.
It all began at a Society of Independent Financial Advisors meeting in 1982 in Atlanta where the experienced Fee-Only practitioners in attendance had begun to receive numerous requests from prospective planners desiring to start their own businesses. These same planners were firm believers in their Fee-Only mission – to provide financial advice free from contingency on the purchase or sale of a financial product. Excited to set a new course for the industry, the planners established a new level of professional standards and reputation for excellence. In February 1983, the Fee-Only practitioners called another meeting in Atlanta, where anyone interested in starting their own Fee-Only planning service was invited. More than 125 people attended that meeting and NAPFA was born.
Since then, NAPFA has lived up to its original expectations and standards, attracting more than 2,000 members. The continued presence of NAPFA in the media and the public provides for the promise of further growth in the years to come.
Significant NAPFA Milestones, include:
1982 – The concept for NAPFA begins at an Atlanta meeting of the Society of Independent Financial Advisors.
1983 – The first Fee-Only planning meeting is held – NAPFA is born.
1983 – The first NAPFA National Conference is held – 25 people attend.
1997 – NAPFA introduces Fee-Only certification mark.
1998 – NAPFA requires all members to sign a Fiduciary Oath pledging to always place the interests of clients first.
2001 – More than 700 members, affiliates and exhibitors attend NAPFA's National Conference in Phoenix, AZ.
2002 – NAPFA creates the NAPFA-Registered Financial Advisor credential to define its highest level of membership.
2003 – NAPFA achieves the 1,000 member level.
2005 – NAPFA creates the Consumer Education Foundation.
2006 – NAPFA Consumer Education Foundation launches Focus on Fiduciary campaign.
2007 – A record 7,700 consumers participate in January’s Kiplinger/NAPFA Jumpstart your Retirement Plan days.
2008 – NAPFA celebrates 25 years of comprehensive fee-only financial planning
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