With over 100 different designations and specialties, financial advisors can often seem like a dime a dozen. You can’t go very far in this country without seeing a billboard or advertisement for a financial guru or tax specialist who claims to have the ability to solve all your money problems. While the less reputable advisors can often be spotted a mile away, choosing the proper advisor for your financial situation can be a burden. Especially if you don’t know what all those darn acronyms stand for.
A CERTIFIED FINANCIAL PLANNER™ (CFP®) is one of the prominent designations amongst advisors and for good reason. CFP® professionals are well-rounded financial planners focused on personal finance and wealth management. CFP®s aren’t advisors to high-powered corporations; they focus on family and individual clients who have assets across the wealth spectrum.
Hiring a financial advisor can be an exhausting process, so you’ll want to know exactly what you’re looking for before starting your search. Here are six reasons to consider a CFP® for your financial advisor.
1) Education and Experience
The process to acquire the CFP® designation is a daunting one. Prospective CFP® professionals need to have a prerequisite amount of education and experience to be granted their license, plus a difficult exam must be passed.
To begin, a CFP® must attain a bachelor’s degree and complete a minimum of 120 hours of coursework. Part of this coursework must be a capstone course on financial plan development. Other subjects CFP®s must cover include Professional Conduct and Regulation, Risk Management, and a variety of planning courses (taxes, retirement, estate, etc.)
The experience required is equally extensive. To achieve the CFP® designation, applicants must complete either 6,000 hours of professional experience or 4,000 hours of apprenticeship experience. (hyperlink- What does a CERTIFIED FINANCIAL PLANNERtm do?)
Applicants can complete their experience requirements before or after taking the exam, but all hours must be logged with the CFP Board.
Finally, there’s the exam – a 170-question multiple-choice test that’s broken up into two 3-hour sessions. The exam is only offered a few times each year and naturally, there’s a fee to take it.
2) Held to a Fiduciary Standard
A fiduciary advisor is held to a higher standard than a non-fiduciary advisor – and CFP® professionals carry this fiduciary duty. A fiduciary can only make a recommendation if it’s in the very best interest of the client. That means any investment advice or suggestions about retirement planning must be made with the client’s best interests in mind. No secret commissions, no high fee products, only the instruments that make sense for your specific financial plan.
Non-fiduciary advisors are held to a suitability standard. If a product suits a client’s profile and the non-fiduciary gets a commission from it, you can bet on what the recommendation will be.
3) Must Maintain a Code of Ethics
Isn’t a code of ethics just another way to say fiduciary? Well, not exactly. A fiduciary must maintain ethics when making investment recommendations, but the CFP Board Code of Ethics and Standards of Conduct goes beyond that. Certain misconduct will automatically bar or revoke an applicant’s CFP® license, like embezzlement, fraud, or other such financial crimes.
Personal finances can get a CFP® in trouble as well. If you have too many bankruptcies or owe a ton of back taxes, you might be unable to get the CFP® designation (or have your renewal denied).
4) A Personalized Touch to Finance
Financial planners often serve different sets of clients based on their designation. Certified Public Accountants (CPAs) specialize in tax planning and often work for large companies or high net worth clients. Chartered Financial Analysts (CFAs) help large firms and financial institutions invest their capital most efficiently. A CFP® could also deal with business clients, but mostly they work with families and individuals to come up with personalized financial plans.
A CFP can be a lifelong compatriot on your financial journey. You might share details of your financial life more intimately with a CFP® than you do with your family members (maybe even your spouse). CFP®s understand their role and guide a personal level, specifically tailored to each client’s needs and financial goals.
5) Expertise in a Wide Range of Areas
Personal finance is a tree with many different branches. Some advice is low-hanging fruit – save money early, invest for retirement, and don’t spend beyond your means. But this isn’t the type of advice you need to pay for because it’s vague and just a template to be built upon.
Real personal finance involves planning and that’s where a CFP® can really shine. Because of their extensive educational background, CFP® professionals can advise on investment management, retirement planning, tax planning, insurance planning, estate planning, education planning, and much more.
Are you trying to find the best way to sock money away for a child’s college costs? A CFP® can help. Trying to assist a frail relative with their assets? A CFP® can help. If the matter pertains to personal finance, there’s a good chance a CFP® will offer the best advice.
6) Peace of Mind
Finally, we come to the most crucial reason to hire a CFP®. Financial matters cause many of us to lose sleep at night. How do we know we’re in the right investments? Should we open a trust or simply write a will? If you hire a CFP®, you’ll have peace of mind knowing that your advisor is a well-educated and experienced professional held to a strict ethical standard.
You aren’t guaranteed to never lose money, but you’ll know that the advice and recommendation are made only with your goals in mind. Peace of mind is more valuable than any bank account or stock portfolio and a CFP® can provide it.
The team of retirement planners and investment advisors at Advanced Retirement Strategies in Bountiful, Utah includes two CERTIFIED FINANCIAL PLANNER™s who specialize in helping diligent savers with $250,000 or more of investment and retirement assets (not counting your primary residence) prepare for and then transition into retirement.
If you’re looking for a CFP® to help you live the retirement you have dreamed of, contact us today.