Trailing Commissions and Sales-Related Compensation

CFP® Certificants in the News

True or false, a CFP® professional who receives trailing commissions cannot represent their practice as “fee-only” under any circumstance.  The answer may surprise you.  Read on to see why.

CFP Board “Standard A.12 of the Code of Ethics and Standards of Conduct provides that a CFP® professional may not make false or misleading representations regarding the CFP® professional's or the CFP® Professional's Firm's method(s) of compensation. Trailing commissions are Sales-Related Compensation that would prevent a CFP® professional from representing his or her or the CFP® Professional's Firm's compensation method as ‘fee-only.’ A new FAQ addresses the limited circumstances where the CFP Board would find that a CFP® professional who refers to his or her or the CFP® Professional’s Firm’s compensation method as fee-only is not in violation of Standard A.12 [emphasis added], notwithstanding the receipt of trailing commission.”

In the FAQ, Question A.12.8 CFP Board tells us that if the CFP®  professional receives no sales-related compensation other than trailing commissions and complies with three requirements, the CFP®  professional is ethically compliant with Standard A.12 when representing their compensation method as “fee only.” Under the three requirements, the CFP®  professional must:

  • “Request a transfer or assignment of the Financial Assets paying trailing commission to a person or entity that is not a Related Party;
  • Contact the entities paying the trailing commission that may not be so transferred and request that these entities discontinue paying any trailing commission; and
  • Donate any and all remaining trailing commission to one or more 501(c)(3) organizations.”

Here’s the bottom line, a CFP®  professional that receives trailing commissions may represent their compensation method as “fee-only” if neither they nor a related party keeps the trailing commissions!


The information presented herein is provided purely for educational purposes and to raise awareness of these issues; it is not meant to provide and should not be used to provide legal, identity theft protection, investment, income tax, risk management, retirement, estate, or financial planning advice of any kind. An experienced and credentialed expert should be consulted before making decisions relating to the topics covered herein. There are variations, alternatives, and exceptions to this material that could not be covered within the scope of this blog.