Certified Financial Planner (CFP) Exam 2025 – 400 Free Practice Questions to Pass the Exam

Flat fees for services are permissible under the Code of Ethics for CFP® professionals because they are transparent and allow clients to understand the total cost of the services being provided. This fee structure aligns with the fiduciary responsibility to act in the client's best interest, as it reduces the potential for conflicts of interest often associated with commission-based structures or performance-related fees.

Performance fees may create incentives that can lead to taking on excessive risks to achieve higher returns, while fulcrum fees, which adjust based on performance thresholds, can also pose similar ethical concerns. Commission-based fees can lead to conflicts as they may incentivize advisors to recommend products that yield higher commissions rather than those that best suit the client's needs. In contrast, flat fees provide a straightforward, predictable compensation model that is easy for clients to comprehend and does not inherently favor one product over another, supporting a more ethical advisory relationship.