CERTIFIED FINANCIAL PLANNERS™: What You Need to Know
- By Joe Pond, CFP® and Russ Hodgson, CFP®
Hiring a CERTIFIED FINANCIAL PLANNER™ is often a great move when you’re serious about getting your financial life into great shape.
If you’re looking to plan for your financial future – investing, saving for retirement, or taking on a new financial goal – it can be intimidating to go it alone, but getting the right help can be complicated as well. How do you know which professionals are qualified to assist you in your financial life, and which ones are right for your needs?
But before you begin searching for a CERTIFIED FINANCIAL PLANNER™, there are several things you need to know about hiring and working with a CFP®. Fortunately, we’ve got your guide to doing that right here.
In this guide we will cover:
What Is a CERTIFIED FINANCIAL PLANNER™?
A CERTIFIED FINANCIAL PLANNER™, or CFP®, is a professional who has received a formal designation from the Certified Financial Planner Board of Standards, Inc. CFPs® can help you with a variety of tasks in your financial life including financial planning, insurance, taxes, and retirement and estate planning.
While there are many financial advisors out there, many of them are not CFPs® – they have not met the strict standards for the certification. The CFP® designation is a likely indication of high quality, extensive and ongoing education, strict ethical standards, significant professional experience, and a commitment to acting in the best interests of their clients.
CFPs® are highly credentialed professionals who can help you manage your whole financial life with integrity and expertise. If you have complicated financial needs or significant assets, seeking out a CERTIFIED FINANCIAL PLANNER™ to work with you can be an excellent investment. We’ll cover more about when you should work with a CFP® later in the guide.
CFPs® and Fiduciary Duty
One of the most important distinctions between CFPs® and other financial professionals is that CFPs® have a fiduciary duty. This means they are bound to act in the best interest of their clients when making decisions. A CERTIFIED FINANCIAL PLANNER™ is also obligated to disclose any potential legal or economic conflicts of interest so you know when you’re getting advice untainted by any other commitments or priorities.
While this requirement might seem basic, it’s actually not guaranteed with many financial professionals. Some people who market themselves as financial advisors are brokers in reality, and their job is to sell you certain products or services whether it’s in your best interests or not. Every CFP® is bound to act in their client’s best interests. So, when you work with one, you can have complete confidence that you’re receiving the best guidance and advice for your needs instead of serving someone else’s agenda.
Trust is vital in any business relationship, never more so than when you need to put your financial information and affairs in the hands of someone else. When you work with a CFP®, you will often find that trust follows quickly since you know that they are bound to a fiduciary duty. Fiduciary duty is a very serious obligation, and breaking that duty comes with the potential for damages.
Are All Financial Advisors CFPs®?
There are many financial advisors who are not CFPs®. They are still financial professionals and may have other certifications, but they have not passed the strict regulations and difficult CFP® exam that is needed to become a CERTIFIED FINANCIAL PLANNER™.
And since those other financial advisors don’t hold the CFP® certification, they also might not be bound by the same rules and regulations that a CFP® is. For example, CFPs® have a fiduciary duty to their clients, while non-certified financial professionals generally do not. That doesn’t mean they won’t act in their clients’ best interests, but it does mean that they’re not legally bound to do so.
CFPs® are also held to a higher standard than other financial advisors because they must adhere to the strict standards of professional conduct laid out by the CFP Board. These rules include regularly disclosing information such as criminal investigations, customer complaints, bankruptcies, and more. And the CFP Board also conducts thorough background checks on any candidates before they receive their CFP® designation.
How Does a Financial Advisor Become a CFP®?
Becoming a CERTIFIED FINANCIAL PLANNER™ is a long and difficult process, as the standards and requirements are strict. Candidates must have a bachelor’s degree and take a specific list of courses in financial planning. They must also have three years of full-time experience in the industry or undertake a two-year apprenticeship. And finally, they must pass the Certified Financial Planner Exam, which is extensive and challenging.
Once the CFP® designation is awarded, the work doesn’t stop there. In addition to the reporting requirements, CFPs® must also regularly complete continuing education courses to stay up to date on subjects such as tax law. And CFPs® are held to strict ethical standards, as well. If those are not met the designation can be taken away.
The training CFPs® receive ensures they are well-versed in financial planning and management tasks such as identifying a plan to achieve your short-term and long-term financial goals and helping you execute that plan. Some CPAs specialize in a certain area such as tax preparation, as well.
Who should choose a CFP®?
Becoming a CFP® requires a big investment of time, and the standards are quite high. That means you are often in good hands when you work with one – but working with a CFP® also can come with a higher cost than other financial professionals. Not everyone needs to work with a CFP® to get their needs met in the most cost-effective way, so it’s essential to know what your goals for working with a financial professional are before you engage one.
Working with a CFP® might be right for you if you are looking for help building a comprehensive financial plan covering many aspects of your life. For example, if you’re getting close to retirement and would like a plan to help you decide what to do about your retirement saving and spending strategy, your estate planning, and your current tax burden, a CFP® can be a sensible choice. Since they are highly skilled in a variety of financial areas, they can help you come up with one complete plan where each piece works together seamlessly, and build you a roadmap to get you where you want to go in your financial future.
Working with a CFP® may also be right for you if your financial situation is complicated. If you own your own business or have significant real estate holdings, you might benefit from the extensive knowledge and sound advice from a CFP®. They can help you develop a strategy that works well for your unique situation and ensure you have a solid plan for your financial future while saving on taxes and adhering to all the latest laws and regulations.
If you have significant assets, working with a CFP® might be a wise idea because they can help you manage them responsibly and guide you toward financial stability now and for years to come. Managing your money becomes increasingly complex as your assets grow, and mistakes at that level can be very expensive. The cost of hiring a CFP® can more than pay off as they help you create a smart retirement and financial management strategy, as well as any other financial services you might need.
Why Does This Credential Matter?
Since there are so many non-certified financial planners marketing their services, you might start to wonder if going through the expense and trouble of hiring a CFP® is worth it. CFPs® are often fully booked, and finding one who has availability and works well with you can take time out of your busy schedule. Why does that credential really matter, anyway?
In reality, the CFP® designation brings many benefits to your relationship with your financial planner. For one, you’ll have complete confidence that you’re getting the services of a highly qualified, educated, up-to-date professional. Tax laws can change quickly, and having a professional on your side who is obligated to complete continuing education means you know you won’t fall behind.
The most important aspect of the CFP® designation, however, is the fiduciary duty. When you work with a CERTIFIED FINANCIAL PLANNER™, you know that your partner in financial planning is required to always act in your best interests.
The financial planning and advice industry is ridden with less-than-scrupulous advisors who might seem genuine when trying to sell you a product or service, but likely make a commission on the sale and aren’t guided by your interests. With a CFP®, you know this will never happen to you. And since the other ongoing requirements, like reporting on any criminal activity and bankruptcies, are strict as well, you can feel confident that your financial future is in safe and secure hands.
This is especially true if you have significant assets, because mistakes or poor guidance can cost you quite a bit. You need someone on your side to help you manage your money in the most effective way possible, and only a CFP® can help you do that when you’re dealing with a significant amount of money. Financial planning and management are not a place where you want to simply hope for the best – you need to know you’re getting advice tailored to you and your interests, and that’s exactly what you get with a CFP®.
And finally, working with a CFP® means that you can have a complete financial plan in one place. Instead of relying on a network of advisors who each help you with one or two items of your financial life, you can rely on one trusted guide who knows every aspect of your goals and financial situation. You can receive better advice and save time working with just one trusted CFP® to manage your whole financial path.
Certified Financial Planners® at Advanced Retirement Strategies
Working with a CERTIFIED FINANCIAL PLANNER™ is an excellent investment of your time and money. With the high standards for CFP® certification, you’ll know you’re getting the expertise and knowledge of a highly-trained and educated professional who will always act in your best interests and with the loftiest ethical standards.
The team of retirement planners and investment advisors at Advanced Retirement Strategies in Bountiful, Utah includes two Certified Financial Planners® 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.
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