Choosing a financial planner is one of the most important decisions you will make in your life. That is because you are engaging someone who you will build a long-term relationship with over time to help you work toward your life goals and, in turn, your financial security.
But while many people in the industry may offer you “advice,” the reality is that not all financial advisors are created equally. They do not all have the proper training, skills, time-tested processes, or competency. Additionally, they do not necessarily maintain suitable ongoing continuing-education requirements to assist them in providing sound or up-to-date advice.
That’s why choosing to work with a CFP, or Certified Financial Planner, should be considered before you move forward.
Why work with a CFP? There are several reasons to do so, but one main reason is that you will know the individual you choose has elected to take the time to further develop their knowledge base and skills by taking it upon themselves to go the extra mile to earn CFP certification. This will give you, the consumer, the confidence in knowing the individual you choose is competent to serve you.
CFP Experience and Education
A CFP practitioner has to meet minimum educational requirements, and must have a number of years of industry experience as well as classroom prerequisites.
This experience-related requirement can help to give you comfort in knowing that the advisor is proficient in diverse areas of financial planning and management, versus simply possessing “textbook” knowledge without actually working with clients and putting the strategies into action.
CFP candidates are also required to pass an exam. This rigorous six-hour CFP certification examination tests both financial-planning knowledge and ability, and it includes measurements in the areas of critical thinking and problem-solving ability using real-life case studies.
An advisor must also possess, at a minimum, a bachelor’s degree from a college or university. Once a financial advisor has earned the CFP designation, they are required to complete regular continuing-education (CE) courses.
Many CFPs may opt to take it a step further and develop special areas of focus. For example, a Certified Financial Planner who focuses on issues related to the LGBTQ community can potentially better advise you and can help with questions like “Should we get married, and how will that impact our taxes?” or “How can we maximize our Social Security?” or “Do I need to adopt my companion’s child?” or “My life partner is significantly older than I am. What special planning should we consider?”
CFP Ethical Considerations
In addition to training on financial concepts and tools, an advisor also must commit to high ethical and professional standards—both for the purpose of initially becoming a CFP and for maintaining the designation over time.
This includes satisfying the CFP Board’s fitness standards, as well as committing to its Code of Ethics and Standards of Conduct that sets forth the ethical responsibilities that the advisor must use when working with clients and prospects, as well as with their employer(s).
A primary aspect of this code is the Certified Financial Planner practitioner’s obligation to act as a fiduciary, which refers to acting in the best interest of the client at all times when offering financial advice and strategies. A CFP’s professional fiduciary duty may even be higher than what is required through general financial industry regulation. For instance, CFPs are held to a duty of care and loyalty, as well as a duty to follow clients’ instructions.
Similar to the financial-related continuing education that is required for keeping the CFP designation, a Certified Financial Planner practitioner must also regularly complete a CFP Board-approved ethics course. Further, if a CFP has been involved in certain situations such as filing for bankruptcy, committing a crime, and/or being a party to a regulatory or civil proceeding, they must disclose this information.
Choosing the Right Professional
There is a wide range of financial advisors in the marketplace who would be willing to work with you and offer you advice. However, if you are seeking a financial professional who is well-versed in both planning and who is bound to fiduciary standards, aligning with a CFP would be advantageous for you.
It is recommended that you review an advisor’s background before you start an engagement with them. In order to verify an individual’s standing with the CFP Board, or for more information about working with a CFP, go to letsmakeaplan.org.
You can also visit the FINRA (Financial Industry Regulatory Authority) BrokerCheck tool at brokercheck.finra.org. This helpful website will tell you instantly whether or not an individual is registered (as required by law) to sell securities (such as stocks, bonds, and mutual funds), as well as to provide you with investment advice.
You can also view a “snapshot” of an advisor’s employment history and any complaints and/or regulatory actions that have been taken against them. This is important, as you are ideally seeking an advisor to work with for the long-term.
On top of a financial professional possessing a clean background, certifications, and the ability to create a customized plan for you, having a good rapport with an advisor can also be a key factor in choosing the right individual or firm.
For example, aligning with a financial advisor who is knowledgeable in issues that pertain to the LGBTQ community can be highly beneficial, and can allow you (and your spouse or partner, if applicable) to be more open in discussing your true objectives.
This article appears in the March 2021 edition of OutSmart magazine.