The definition of “fee-only” under NAPFA and the CFP Board is straightforward – if you can earn a commission by selling something in the financial services industry, you must disclose the commission and therefore cannot be fee-only. Any act of holding out as a fee-only advisor while ANY commissions are coming in constitutes a violation.
Notably, the CFP Board expands this definition to include even the ability to earn a commission, including through a related party. So having a “separate” insurance agency relationship to which clients could be cross-referred, or a relationship with a broker-dealer, violates the fee-only requirement. Holding an insurance license is permitted as a fee-only advisor – as some states actually require an insurance license even just to give insurance advice – but being appointed with an insurance company to sell their products would violate the fee-only requirements. XYPN adopts the CFP definition of “fee-only.”
Short term side hustle of real estate / insurance sales may seem attractive, but as Michael Kitces always reminds us: “never make long-term decisions based on short-term cash flow needs”. If you need to work on a commissioned basis before making the transition to fee-only advising and XYPN that is your choice, but to be a member of XYPN and a fee-only advisor, the commissions have to end. Even just selling the rare one policy every few years is still a violation of being fee-only.
We at XYPN allow members to transition to fee-only, recognizing that some people may have had insurance or other commission-based relationships in the past, and that it takes time to transition. We allow for a 12 month transition.
As such, upon joining XYPN, Members:
- Must not sell any new products immediately as of joining (member requirement)
- Must eliminate all trails within 12 months (member requirement)
- Must not hold out as fee-only at ANY POINT (including during the 12 month period) while still receiving trails
- Cannot be listed on the XYPN website as an XYPN advisor while still receiving ANY trails
If you decide to sell real estate or insurance during your tenure with XYPN, you will need to leave XYPN, NAPFA and notify the CFP Board. If you’re under a 12 month contract with us, you agree to buyout the remaining portion of the contract per the terms listed therein.