Definition and Examples of Certified Financial Planner (CFP)
The term Certified Financial Planner (CFP) indicates that the advisor has professional credentials that validate their knowledge, experience, and ethics in providing financial advice. They work in the client’s interest, not their own.
How Certified Financial Planners Operate
Certified financial planners may use various strategies to assist their clients, but in general, their services and skills may include:
1. Analyzing the current situation and preparing financial reports such as your net worth.
2. Insurance planning.
3. Maximizing your retirement benefits program, such as your 401k account.
4. Investment planning.
5. Income tax planning.
6. Estate planning.
Types of Certified Financial Planners
There are thousands of certified financial planners in the United States, and finding the right advisor starts with conducting some initial research. The first step is to ensure that the financial advisor you are considering is a CFP certified by the CFP Board, which you can check online.
From there, you can create a list of questions and topics to discuss when interviewing potential CFP candidates you wish to work with. Here are some areas you may explore when meeting with a potential advisor to manage your finances:
1. How do you approach financial planning? Make sure the advisor’s investment philosophy isn’t overly aggressive or too conservative for your agenda and needs.
2. Explain your client base. Some advisors may require a minimum net worth threshold or have specific programs for prospective clients. Make sure you won’t just be an afterthought.
3. Tell me about your experience. Of course, the more market cycles a professional financial advisor has seen, the better.
4. What are your qualifications? Ask about their credentials and try to gauge if they truly have a passion for finance.
5. Who will manage my account? Some certified financial advisors handle all clients directly, while others work with a team. Request to meet with any other team members and verify their credentials.
6. How do you get paid? Advisors may receive commissions and/or fees. Make sure to detail this in your agreement. Certified financial planners receive compensation only from you – they do not earn commissions from selling you different investment products.
7. What do you charge? Get a clear estimate of hourly rates, retainer fees, or commission percentages.
8. Do you see any conflicts of interest? Again, certified financial planners must adhere to a strict code of conduct that requires them to place your needs above everyone else’s.
Be sure to ask whether the CFP candidate you are interviewing has ever faced disciplinary actions for unethical or illegal behavior.
The Certified Financial Planner Board is an independent regulatory body for financial planners in the United States, and the Financial Industry Regulatory Authority (FINRA) and state certified insurance and securities regulators are good resources for verifying advisors’ credentials. For example, you can use the FINRA BrokerCheck tool to research the background of the financial professional or advisory firm. The Financial Planning Association’s advisor search program is another useful tool.
Researching certified financial planners takes time, but it is worthwhile if you can connect with a professional who understands your financial situation and unique needs. Once you establish a working relationship with a CFP, remember to review your progress each year to ensure that the person you chose is still the right fit for you.
Summary
– A certified financial planner (CFP) must pass an exam that proves their knowledge of financial matters.
– A CFP acts as an agent only in the client’s interest and does not prioritize their own interests.
–
CFP provides advice on all financial matters, not just investments.
– Do thorough research to find an advisor that fits your situation and personal circumstances.
Source: https://www.thebalancemoney.com/certified-financial-planner-4123903
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