Hiring a financial advisor can be a confusing and tedious process. Different advisors have different qualifications and finding the right one means navigating a sea of different acronyms. If you’re looking for financial advice tailored to individuals and families, your best bet is likely, a fiduciary advisor with a focus on personalized financial plans.
A CERTIFIED FINANCIAL PLANNER™ is often confused with a Chartered Financial Analyst (CFA) and a Certified Public Accountant (CPA), but those professions are more geared toward business finance and taxes. Since a CFP® focuses on individuals and families, the approach is more personal and the entire financial picture is taken into consideration.
Education, Experience, and Ethics
CERTIFIED FINANCIAL PLANNER™s have an edge over non-certified planners and advisors in three specific areas. First, the educational requirements to earn the CFP® designation are strenuous. Prospective applicants need a bachelor’s degree and 120 hours of coursework for consideration, plus a capstone course on financial planning designed by the applicant. Those seeking a CFP® designation also must pass a 170-question exam in two 3-hour sessions.
Education and testing isn’t the only prerequisite. To become a CERTIFIED FINANCIAL PLANNER™, applicants will need substantial work experience – 6000 hours in a professional setting over three years (or 4000 hours over two years in an apprenticeship). The work experience must take place no more than five years after completing the exam.
Finally (and most importantly), a CERTIFIED FINANCIAL PLANNER™ must adhere to a strict ethical framework outlined by the CFP®s Board’s Code of Ethics and Standards of Conduct. A CERTIFIED FINANCIAL PLANNER™ is a fiduciary advisor, which means recommendations can only be made if products or services are in the client’s best interests. Non-fiduciary advisors are only held to a suitability standard, which means they can recommend investments they benefit from directly as long as it suits the client’s risk profile. A fiduciary will only recommend the best possible option.
Convictions for fraud, insider trading, and other financial crimes earn an automatic ban from the CERTIFIED FINANCIAL PLANNER™ Board. Personal financial standing also comes into play. If an applicant has too many personal bankruptcies or outsized credit card debt, the CFP® designation may be withheld. After all, you wouldn’t want your financial advisor to be neck-deep in debt, would you?
Areas of Expertise
Passing the CERTIFIED FINANCIAL PLANNER™ exam means the candidate must show competency in several different financial disciplines. Personal finance is a lot more detailed than telling people to save money or invest with their 401(k). Each client who comes to a CFP® will present a different financial outlook, so planning can’t be a ‘one size fits all operation. Clients require customized plans tailored to their specific needs. Some of the aspects CFP®s can focus on include:
● Investment Management – Are you investing efficiently and getting the most out of your capital? A CERTIFIED FINANCIAL PLANNER™ can look at your investment accounts and find areas where you may be paying too much in fees or accepting too much risk without commensurate return. A CFP® excels at developing an investment plan based on a client’s personal risk tolerance and the amount of capital they have at their disposal.
● Retirement Planning – Building a nest egg for retirement is one of the biggest worries in working Americans’ minds. A CFP® can help maximize retirement savings by utilizing efficient investment and tax strategies. Planning for retirement is complicated and a CFP® can help guide you toward the right decisions.
● Tax Planning – Sure, you can go to HR Block to get your return completed, but that’s just tax prep. Tax planning is a year-round process where a CERTIFIED FINANCIAL PLANNER™ can help clients reduce their obligation to Uncle Sam (and his affiliated state and local governments). This service is especially crucial for retirees living on a fixed income who need to maximize every dollar possible within their specific tax bracket.
● Estate Planning – No one likes to talk about this one, but estate planning is a must if you have wealth you’d like to pass on to your heirs with as little hassle as possible. For example, should you establish a trust for your assets or simply hand everything down in a will? A CERTIFIED FINANCIAL PLANNER™ can help answer these difficult questions.
● Personal Finance / Saving – What’s the best way to save for your children’s college? How much life insurance do you need to feel secure? Some topics might not have their own section in the CERTIFIED FINANCIAL PLANNER™ exam, but these are issues where mistakes have long-ranging repercussions. There’s more to financial planning than just recommendations on investments and savings vehicles. Buying too much life insurance or getting trapped in a costly and unnecessary annuity are problems CFP®s help their clients avoid.
Who Needs A CERTIFIED FINANCIAL PLANNER™?
If you see the little CERTIFIED FINANCIAL PLANNER™ designation following an advisor’s name, you know that person has education and experience backed up by loyalty to a code of ethics. A CFP®’s livelihood depends on making the best possible recommendation for their clients, but that doesn’t mean everyone needs the services of a CFP® who will usually have higher rates than a non-fiduciary financial planner and you don’t want to dip into your nest egg to pay for financial advice. That’s not something any advisor worth their sport coat would recommend anyway. Just because an advisor isn’t a fiduciary doesn’t mean they can cheat you – non-CERTIFIED FINANCIAL PLANNER™s must adhere to certain rules and regulations too.
But one thing hiring a CERTIFIED FINANCIAL PLANNER™ can do is bring peace of mind. You’ll know all recommendations are made without a conflict of interest and benefits only accrue to the advisor if they accrue to you first. A CFP® can provide lifelong advice based on your unique situation and that’s often worth paying up for, especially if you’ve built up significant assets and see retirement looming on the horizon.
To learn more about why you need to work with a CFP® professional or how you should choose a financial professional to work with visit https://www.letsmakeaplan.org/.
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 CERTIFIED FINANCIAL PLANNER™ to help you live the retirement you have dreamed of, contact us today.