How to Choose a Financial Planner
Most people think all financial planners are “certified,” but this isn’t true. Anyone can call himself a “financial planner.” Only those who have fulfilled the certification and renewal requirements of CFP Board can display the CFP® certification marks, which represent a high level of competency, ethics and professionalism. CFP Board’s Standards of Professional Conduct require CFP® professionals to act in your best interest, putting your needs above their own.
Why Choose a Certified Financial Planner?
CFP® Certification Requirements
Unlike many financial advisers, CFP® professionals must develop their theoretical and practical knowledge by completing a comprehensive course of study at a college or university offering a financial planning curriculum approved by CFP Board. Applicants may also satisfy the education requirement by submitting a transcript review or previous financial planning-related course work. Or, they can show that they have attained certain professional designations or academic degrees that cover the important subjects in CFP Board’s financial planning curriculum.
CFP® professionals must pass the comprehensive CFP® Certification Exam, which tests their ability to apply financial planning knowledge to real-life situations. The exam covers the financial planning process, tax planning, employee benefits and retirement planning, estate planning, investment management and insurance. The average pass rate for this difficult exam is only 56%. This comprehensive exam ensures that Certified Financial Planner™ professionals are highly qualified to develop a plan for your finances.
Certified Financial Planner™ professionals must have a minimum of three years experience in the financial planning process prior to earning the right to use the CFP® certification marks. This hands-on experience guarantees that CFP® professionals have practical financial planning knowledge, so you can count on them to help you create a realistic financial plan that fits your individual needs.
When it comes to ethics and professional responsibility, Certified Financial Planner™ professionals are held to the highest of standards. CFP Board’s Code of Ethics outlines CFP® professionals’ obligations to uphold principles of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence. And the Rules of Conduct require CFP® professionals to put your interests ahead of their own at all times and to provide their financial planning services as a “fiduciary” — acting in the best interest of their financial planning clients. CFP® professionals are subject to CFP Board sanctions if they violate these standards.
CFP Board’s rigorous enforcement of its Standards of Professional Conduct — including releasing disciplinary information to the public — distinguishes the CFP® certification from the many other designations in the financial services industry. Everyone who seeks CFP® certification is subject to a background check, and those whose past conduct falls short of CFP Board’s ethical and practice standards can be barred from becoming certified. After attaining certification, a CFP® professional who violates CFP Board’s ethical and practice standards becomes subject to disciplinary action up to the permanent revocation of certification. Through diligent enforcement of its ethical and practice standards, CFP Board provides you with the confidence that your CFP® professional is both competent and ethical.
You are ultimately in charge of your finances, and the results you get from working with a Certified Financial Planner™ professional are as much your responsibility as they are the planner’s. These tips can help you avoid some common mistakes and get the most out of financial planning:
- Set measurable financial goals.
- Create specific targets for what you want to achieve and when you want to see results. For example, instead of saying you want to be “comfortable” when you retire or that you want your children to attend “good” schools, you need to define exactly what “comfortable” and “good” mean so you’ll know when you’ve reached your goals.
- Understand the effects of each financial decision.
Every financial decision you make can affect several other areas of your life. For example, an investment decision may have tax consequences that are harmful to your estate plans. Or a decision about your child’s education may affect when and how you meet your retirement goals. Remember that all of your financial decisions are interrelated.
- Re-evaluate your financial situation periodically.
Financial planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. Revisit and revise your financial plan as time goes by so you stay on track to meet your long-term goals.
- Start planning as soon as you can.
People who save or invest small amounts of money early and often tend to do better than those who wait until later in life. By developing good financial planning habits such as saving, budgeting, investing and regularly reviewing your finances, you will be better prepared to handle emergencies and life changes.
- Be realistic in your expectations.
Financial planning is a common sense approach to managing your finances to reach your goals. It cannot change your situation overnight—it’s a lifelong process. Remember that events beyond your control, such as inflation or changes in the stock market or interest rates, will affect your financial planning results.
- You don’t need to go it alone.
Just as you seek a doctor’s expert opinion for medical issues, there are times when you need a qualified financial planning professional to provide financial advice. Certified Financial Planner™ professionals are ready to help you develop and implement a financial plan that will help you on your journey to a healthy financial future. The CFP® mark provides confidence that your financial planner is both competent and ethical. Learn more about CFP® certification.
- Realize that you are in charge.
If you’re working with a Certified Financial Planner™ professional, be sure you understand the financial planning process. Provide your CFP® professional with all relevant information about your financial situation. Ask questions about the recommendations offered to you, and play an active role in decision-making.