Why You Should Work With an Advisory Firm That Has a Certified Financial Planner (CFP)
What is a CFP?
A certified financial planner is a financial professional who has taken the extra step to demonstrate their financial acumen and professionalism within the industry by voluntarily submitting to the rigorous CFP examination process. The coursework required for this exam is important within financial advisement as it proves fluency in all aspects of financial planning for the advisor.
CFPs are required to go through years of training to earn the designation, over 4,000 to 6,000 hours in total, before they are even eligible to take the examination and put the letters CFP after their name. After earning the certification, these financial professionals must continue their education further even after receiving the designation.
With a CFP designation, a financial advisor or financial planner is better able to help their clients identify and plan for short and long-term financial goals, make plans to achieve financial freedom and use strategies to execute their financial plan. Such goals include retirement planning, college saving, navigating debt repayment, and maximizing the impact of one’s charitable giving.
CFPs and Fiduciary Duty
CFPs often come in all shapes and sizes, specializing in different areas of finance, such as tax planning, estate planning, or investment management. Other CFPs could have other designations, such as the Certified Public Accountant (CPA) or Certified Financial Analyst (CFA), to help their clients even further. However, the one thing that all CFPs have is their fiduciary duty and responsibility to put the client’s financial best interests above their own. This means that by law, CFPs must follow this strict standard of fiduciary duty and are barred from selling financial products or services to clients because the financial advisor or financial planner would earn a commission from such activity.
Helping you achieve your evolving financial objectives
CFP vs. Financial Advisor
While most CFPs call themselves financial advisors, not all financial advisors are CFPs, as becoming a CFP is very difficult and stringent. With a CFP being one of the many types of financial advisors, it is important to understand the differences for a few reasons.
A financial advisor is a financial professional who can help an individual or family manage their finances. There is no specific or required license or certification that requires an individual to call themselves a financial advisor. However, oftentimes, a financial advisor is required to pass some kind of licensing or designation exam by their firm to manage, buy, and sell securities on behalf of the client.
Financial advisors are also not required to be fiduciaries. This means that if they are not held to a fiduciary standard by their firm, they may only be held to a suitability standard. This means that they are required to offer suggestions that would generally fit the client’s financial situation, but there is nothing preventing them from charging higher fees or bigger commissions than they otherwise could have. These advisors can pick and choose the options that also best fit their own personal needs as well as their clients.
Meanwhile, a CFP has proven their ability to provide comprehensive financial advisement and planning services while also making fiduciary recommendations that best fit the needs of the client. All CFPs have the same regulated requirements that come with carrying the CFP designation, including the requirement of acting as a fiduciary when providing financial advice to their clients.
Who Should You Choose a CFP?
While the services of a CFP might not be a necessity or cost-effective for every individual or family, there are situations where receiving financial advice and engaging with a CFP is a great option to further advance one’s financial situation. If one is looking for a comprehensive financial plan that can grow with the individual or family, then a CFP can be an excellent fit. A CFP can assist with crafting a budget to save for one’s retirement, planning the disbursement of a children’s education fund, or strategizing to invest and navigate an expected inheritance. CFPs specialize in educating those who are not financially savvy and can help individuals and families bridge the gap between their financial knowledge today and how they want their financial future to look.
CFPs are also excellent fits for affluent clients who have complex financial situations. Managing real estate holdings, businesses, or large amounts of debt can be extremely difficult, and having a financial planner or financial advisor on the inside can be a blessing. CFPs have seen it all, so they can help their clients tackle any financial situation and assist in understanding how to attack each financial problem the individual or family faces.