What is a Certified Financial Planner™ (CFP) and why do you need one?

0
Advertising disclosure
This article/post contains references to products or services of one or more of our advertisers or partners. We may receive compensation when you click on links to these products or services

For many people, trying to make sense of their finances and making plans for their money can feel overwhelming. A financial planner helps you understand how to take the next step with your finances. They also help you plan things like paying for college or saving for retirement.

Let’s see how a CFP can help you, as well as how to find a planner (CFP or CFA) and get the most out of their services.

What is a CFP?

A Certified Financial Planner™ (CFP®) is a professional who has strived for a designation through the Certified Financial Planner Board of Standards. This organization is a non-profit organization and one of the leading voices for ensuring that financial planners meet certain ethical and professional standards.

Becoming a CFP is not exactly easy. CFPs must:

  • Take courses and receive training on certain financial topics
  • Pass a rigorous exam
  • Fulfill experience requirements

In addition to these basic criteria, CFPs must respect ethical standards. On the one hand, a CFP must act in your best interest, since he is a fiduciary. In many cases, CFPs have a broad knowledge of how to apply financial concepts and planning to real-world experience. So if you’re looking for someone who can help you with practical money-related issues, a CFP might be right for you.

CFPs help you establish a “road map” so that you can achieve your financial goals. This includes:

  • Saving to buy a house
  • Improve your credit
  • Save for your child’s college
  • Build your retirement plan and meet several objectives.
  • CFPs also help you with tax planning and certain estate planning.

How to Find a Certified Financial Planner

  1. Look for CFPs on the Certified Financial Planner Board of Standards website or use the website to verify that someone referred to you is a CFP.
  2. Ask for recommendations from people you know. Ask your friends and family who they use.
  3. Use reliable networks like Paladin Registry and XY Planning Network to find CFPs near you. It is also possible to work remotely with financial planners via video chats or phone calls.

Are CFPs worth the cost?

Because there are costs associated with using a CFP, you’ll probably ask yourself, “Is getting a CFP worth it?” The answer of course depends on the situation.

First, it’s important to understand how your CFP is paid.

  • You can pay a CFP on an hourly basis, or maybe you can get a “planning package” for a specific goal.
  • Other CFPs work on commission, depending on the products they recommend.
  • If you get an insurance policy or mutual fund based on CFP’s recommendation, they might get a bribe.

However, the CFP Board requires that CFPs always keep the client’s interest first. The CFP code states, “A CFP® the professional must exercise professional judgment on behalf of the client that is not subordinate to the interests of the CFP® professional or otherwise. » Still, some consumers prefer CFPs that only charge fees.

Finally, if your CFP is also a fund manager or investment advisor, you may have to pay a percentage of assets under management if they handle your portfolio on your behalf.

In general, a CFP is worth the cost you pay if you get the help you need. If you’re too busy or don’t feel comfortable building your own track record, or just want an outside eye to watch your finances, it may be worth paying for a CFP. Sometimes the career prospects are worth the cost.

Why should you consider working with a CFP

Due to the education and experience requirements to become a CFP, you can be reasonably sure that they understand how to make money work in everyday life. They know how to plan for the future. And they know how to create a roadmap for your money that allows you to achieve multiple financial goals at once.

In addition, a CFP is a professional who can see your whole financial picture and give you a perspective you might not have considered. This is especially helpful for partners who are looking for ways to plan a future together but are having trouble reconciling. A CFP can be a third party that helps mediate your financial styles and take the same approach to working.

Tips for choosing a financial advisor

When choosing a financial advisor, whether a CFP, CFA or any other type of advisor, consider the following:

  • Check the qualities. Review the qualifications of your potential advisor. Check with the CFP Board or your state to make sure they are up to date on regulations and offerings.
  • Make sure they meet your needs. Think about what you want from a financial adviser, whether it’s investment assistance, small business information or tax planning. Look for an advisor whose specialty reflects your situation.
  • Review their strategy. Ask about the strategies used by the counselor and make sure they match your priorities and that you are a good fit.
  • Check if it fits your budget. Finally, make sure the fee structure stays within your budget. You must be able to pay your financial advisor.

Ultimately, you have to ask questions and trust your instincts. Talk to two to four financial advisors and get a feel for them. Choose someone who feels like the right person for you and your needs.

CFP versus CFA: what are they doing?

CFPs aren’t the only financial professionals who can help you with your money. Another professional designation is Chartered Financial Analyst.® (CFA).

Essentially, the distinction between CFP and CFA is about the people the professional works with.

  • Calls for proposals typically work with individuals and families and are trained to help you create roadmaps to achieve your financial goals.
  • CFA often focus on investing and analytics for institutions.

However, this does not mean that CFAs never work with individuals. Some CFAs have counseling practices that help individuals achieve their goals. If you’re looking for someone to manage your investment portfolio and make recommendations on how to set up your investment account, a CFA might be a good fit.

A CFP will probably not manage your assets for you. Instead, they will make recommendations and may help you purchase certain financial products, but they may not always actively manage your portfolio for you (although some CFPs may). Ultimately, the type of professional you choose depends more on what you expect from your planner or advisor.

Share.

Comments are closed.