Choosing a CERTIFIED FINANCIAL PLANNER (TM) should be one of your top requirements when looking for guidance (as well as their compensation structures). Last week, I was reading Sterling Raskie’s blog about “How to Save More” and number 8 struck me as one of the most important items on his list. Some things are not taught and for many of us personal finance is one of them. We can read many articles about retirement, investing, and many other financial planning topics but in reality how does it fit into your specific goals? We’re all different and need advice that is customized to our comfort level. Hiring a CERTIFIED FINANCIAL PLANNER (TM) can help you with your concerns and help you achieve your goals. So what does it really mean to be a CERTIFIED FINANCIAL PLANNER (TM)?
Education
First things first. A CERTIFIED FINANCIAL PLANNER (TM) candidate must have a bachelors degree from an accredited university. Currently, the only requirement to become a financial planner is to pass a couple license tests (series 7 & 65). I’ve passed both exams and they are nothing compared to the exam required for the CFP (R). The Certified Financial Planner Board of Standards (the organization the gives out CFP (R) designation) requires a bachelors degree before you go through their process. Next, you must go through a course selection that includes:
- General financial planning principles
- Insurance planning and risk management
- Employee benefits planning
- Investment planning
- Income tax planning
- Retirement planning
- Estate planning
As a financial planner you should have a knowledge of all these topics and the CFP (R) courses provides a great foundation.
Examination
Like I mentioned above, the only requirement by FINRA (Financial Industry Regulatory Authority) is to pass a couple exams. Having gone through all of those exams, the series licenses are nothing compared to the CFP (R) exam. When I went through it, it was a 2 day 10 hour exam. To prep for this I started studying 4 months prior to the exam and took a 4 day prep class. The average pass rate for the CERTIFIED FINANCIAL PLANNER (TM) exam is about 56%. The exam tests each candidate’s knowledge in real life situations.
Experience
Each candidate must work with another CERTIFIED FINANCIAL PLANNER (TM) for a required minimum of 3 years. Some things can’t be taught in a book and the experience can be extremely valuable. Prior to obtaining my CFP (R), I was doing some high level estate planning with family businesses and each client situation was an experience that I have taken with me. Other non CFP (R) advisors may have years of experience but done so through an insurance company or a large firm that requires their in house training. The CFP (R) experience allows each candidate to think outside the box and think independently for each client.
Ethics
This is probably the topic that I am most passionate about. I have seen so many situations where someone was sold a product not in their best interest and never hear from them again. Unfortunately, in this industry many people have gone through trial and error with advisors which has led them down the path of uncertainty and distrust. The CFP (R) Board outlines a code of ethics that advisors must adhere to. It also outlines that advisors must put their clients interest above all. A word that you will hear more often is the term fiduciary. A CERTIFIED FINANCIAL PLANNER (TM) takes an oath to put their clients interest above their own. FINRA only requires a suitability standard for financial planners. These advisors only have to find products that are suitable, not the best for their client. The problem lies when we talk about customization. An annuity may be a suitable investment but not necessarily for everyone.
There is a lot to think about when choosing a financial planner. Think about what a CFP (R) brings to the table.
