The CFP Board outlines the requirements for becoming a CFP and is responsible for administering the CFP exam. At a minimum, candidates must have a bachelor’s degree and three years of relevant full-time financial planning experience. The CFP exam is administered three times per year and covers a wide range of financial planning topics.
How Certified Financial Planners Work
Individual Certified Financial Planners may use different strategies to help their clients, but generally, their services and skills may cover:
Analysis of your current situation and preparation of financial reports, such as your net worth.Insurance planning.Maximizing the use of your employer’s retirement benefits program, i.e., your 401k.Investment planning.Income tax planning.Estate planning.
The CFP’s job is to help you create a comprehensive financial plan for managing your money. That’s different from something like a registered investment adviser, who would offer advice on investments exclusively. A CFP would possess specific knowledge and expertise related to these planning areas.
Types of Certified Financial Planners
There are thousands of CFP professionals in the United States and finding the right one for you starts with doing some preliminary research. The first step is ensuring that a CFP you’re considering is certified by the CFP Board, which is something you can check online. From there, you can draft a list of questions and topics to discuss when vetting potential CFP candidates you want to work with. Here are some areas to explore when interviewing a potential advisor to handle your money:
How do you approach financial planning? Make sure the planner’s investing philosophy isn’t too aggressive or too conservative for your agenda and needs.Describe your client base. Some planners require a minimum net worth or have other parameters for prospective clients. Make sure you aren’t going to be an afterthought.Tell me about your experience. Obviously, the more market cycles the CFP professional has seen, the better.What are your qualifications? Ask about their credentials and try to determine if they really have a passion for finance.Who will handle my account? Some CFP professionals handle all clients directly, while others work with a team. Ask to meet any other team members, and check out their credentials as well.How do you get paid? Planners may receive commissions and/or fees. Make sure all this is detailed in your agreement. Fee-only Certified Financial Planners are paid only by you—they don’t get commissions for selling you into various investment products.How much do you charge? Get a clear estimate of hourly rates, late fees, or commission percentage.Do you see any conflicts of interest? Again, CFP professionals must adhere to a strict code of conduct that requires them to put your needs ahead of all others.
The CFP Board, the Financial Industry Regulatory Authority (FINRA), and state insurance and securities regulators are good sources for checking an advisor’s credentials. For example, you can use FINRA’s Broker Check tool to research the background of a financial professional or advisory firm. Planner Search from the Financial Planners Association is another helpful tool. Researching Certified Financial Planners can take time, but it’s time well spent if you’re able to connect with a professional who understands your unique financial situation and needs. Once you’ve established a working relationship with a CFP, remember to review your progress each year to make sure the person you’ve chosen is still a good fit.
