Certified Financial Planner (CFP) Exam 2026 – 400 Free Practice Questions to Pass the Exam

The correct choice highlights that fee contingent compensation is not allowable according to the CFP Board standards. This method suggests that the planner may receive compensation based on the results of their recommendations, which could create conflicts of interest. Fee contingent arrangements imply compensation tied to specific outcomes or performance metrics, raising concerns about objectivity and fiduciary responsibility. The CFP Board emphasizes that financial planners must act in the best interests of their clients, and compensation based on results could lead to a focus on personal gain rather than client welfare.

In contrast, fee based, fee only, and sales-related compensation methods can exist under certain frameworks established by the CFP Board. Fee only compensation, for example, ensures that planners receive compensation solely from their clients, eliminating conflicts of interest that arise from commissions or sales-related fees. Fee based can include additional revenue sources but must clearly disclose any potential conflicts. Sales-related compensation, while potentially more controversial, can still be utilized if it is transparently communicated and not the primary means of receiving fees. Overall, the emphasis is on maintaining a transparent and unbiased approach to client relationships, which is not aligned with the principles of fee contingent compensation.