According to the Bureau of Labor Statistics, over 250,000 professionals call themselves financial planners or advisors. When looking for advice, how do you determine who is qualified to provide you the personalized plan that can achieve financial independence?
There are no legal or professional requirements for using the title of "financial planner." Anyone can add this term to their business card or their firm’s advertisement without any training or education. Over the years, dozens of designations have been created and each claims to prepare planning practitioners to provide competent advice. However, only one has emerged as the industry’s highest standard due to its rigorous requirements, continuous review, and on-going compliance. What makes a Certified Financial Planner professional different?
As noted above, the one certification that has risen above the others and has become the standard for the financial planning profession is the CFP designation. As of June 30, 2016, there are nearly 75,000 CFP® professionals in the United States with 1,295 residing in Indiana. This is a small number of certified practitioners when compared to the 250,000 that call themselves financial planners.
The CFP designation is granted to those who have fulfilled the certification and renewal requirements of the Certified Financial Planner Board of Standards, Inc. (CFP Board). Once obtained, the CFP mark indicates to the public that the professional has a high level of competency, ethics, and professionalism. And because they are held to a fiduciary standard of care, a CFP professional is required to act in your best interest.
In order to provide you the type of comprehensive planning necessary to protect your family and plan for your future, your planner must have the skills required to provide analysis and advice on topics such as retirement planning, investment analysis and management, education funding, insurance needs (health, life, disability, and long-term care), cash flow, estate planning along with other topics that may be more unique to your financial and family situation.
For these reasons, the CFP Board requires a level of competency and proven experience in a broad range of financial issues. The four E’s of the CFP certification program are meant to prepare an individual to provide professional planning services.
Education. In addition to a four-year college degree, candidates must develop their theoretical and practical knowledge by completing a comprehensive course of study that has been approved by the CFP Board. Such qualifying programs are offered by many colleges and universities as undergraduate, master, and PhD programs.
Examination. Candidates are required to pass a comprehensive CFP certification exam. The exam tests a candidate’s abilities to apply financial planning knowledge to real-life situations.
Experience. Three years of hands on experience is required before a candidate can publicly display the CFP mark. This ensures that each CFP practitioner has practical experience.
Ethics. CFP professionals are obliged to uphold the principles of integrity, objectivity, competence, fairness, confidentiality, professionalism, and diligence as outlined in CFP Board’s Code of Ethics. The Rules of Conduct require CFP professionals to put the client’s interests ahead of their own at all times and to provide their financial planning services as a "fiduciary," which requires acting in the best interest of client. If a CFP certificate holder violates these standards, he/she is subject to CFP Board sanctions, including revocation of the marks.
The constantly changing financial world requires that a CFP® practitioner be in a continuous learning mode. For this reason, CFP professionals are required to complete 30 hours of continuing education requirements every two years. This includes a minimum of two hours focused on the CFP Board’s Standards of Professional Conduct. All educational programs must be approved by the CFP Board.
Meeting the initial certification requirements as well as the ongoing education and ethics requirements demonstrate to the public that CFP practitioners are committed to the highest standards of professionalism.
While preparation and on-going education requirements are meant to ensure competency and the focus on ethics, an honest practitioner; there are always bad apples. Because of this, the CFP Board publishes the names of CFP practitioners who violate the standards. The CFP Board website (www.cfp.net) allows the public to check the status of each CFP certificate holder. In addition, the website provides educational articles of interest and value to the public.
Seeking the services of a financial planner can mean the difference between achieving financial independence and falling short. Take time to research and select an advisor who has demonstrated a dedication to the profession by securing the CFP certification.
Contributions were made to this article by Ryan Jeffries, CFP, Manager of Financial Planning at Bedel Financial Consulting, Inc.
Elaine E. Bedel, CFP, is CEO and president of Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. She is a featured guest each Wednesday on the WTHR (NBC, Indianapolis) Channel 13 News at Noon, "Your Money" segment. Elaine’s book, "Advice You Never Asked For… But wished you had," is available on Amazon.com. For more information, visit www.BedelFinancial.com or email Elaine at email@example.com.