Certified Financial Planner (CFP) Practice Exam 2025 – All-in-One Study Guide for Exam Success!

The description that accurately defines "Fee-Only" compensation according to the CFP Board Code of Ethics encompasses charging clients for services via hourly fees, flat fees, subscription fees, and asset under management fees, as well as custodial platform fees. Additionally, it allows for a salary or bonus that is not linked to sales or production goals. This model prioritizes the client's interests by ensuring that compensation is directly related to the work performed for the client without any conflicts of interest arising from product sales or performance-related bonuses that hinge on specific sales outcomes.

The focus on not having sales-related compensation is significant, as it delineates "Fee-Only" advisors from those who earn additional income through commissions or incentives for selling specific financial products. This structure is intended to enhance trust, transparency, and a fiduciary standard in the advisor-client relationship, allowing clients to feel confident that their advisor's recommendations are not influenced by potential commissions or sales targets.

In contrast, options citing commissions, sales incentives, or compensation tied to sales performance do not align with the principles of "Fee-Only" compensation. Such compensation methods can create a conflict of interest, as advisors might be incentivized to recommend products that generate commissions rather than those that are in the best interest of the client