Why it Matters to Work with a “CFP®”

photo-1466154714956-9f5f64682fccConfused about what professional designation your financial advisor holds and what it means?

I am not surprised. The Financial Industry Regulatory Authority or FINRA lists 162 designations for financial professionals on their website. You can find a list of them here.

Although FINRA doesn’t approve or endorse any of these designations, eight are listed on their website as being accredited by either the American National Standards Institute or the National Commission of Certifying Agencies.

But only one focuses specifically on financial planning — the CERTIFIED FINANCIAL PLANNER™ or CFP® designation.

To earn your CFP® designation you must have a bachelor’s degree, pass a series of 6 exams plus a comprehensive exam, and have three or more years of full-time experience. Maintaining the designation requires an additional 30 hours of continuing professional education every two years in addition to the continuing education requirements needed to maintain your securities and insurance licenses.

If you want to know more about the technical details of what it takes to be a CFP click here.

Yes, I may be biased, but I believe working with a CFP® makes a difference. Here are three reasons why.

Commitment to financial planning. When I meet new clients for the first time I am often asked what qualifies me to provide financial planning advice and how I am different from other advisors they may meet.

Short answer: my CFP® designation. In fact, on the CFP Board website they state, “Certified equals qualified”.

For compliance purposes, I don’t know that I would go that far, but when an advisor holds the CFP® designation it does represent a commitment to the financial planning process and shows they have the training and background to deliver financial planning services to their clients.

By definition, the CFP® mark means you have a bachelor’s degree, have passed a series of rigorous, proctored exams, have industry experience and continue to sharpen the saw through continuing professional education.

Unfortunately, that’s not true of all financial advisors.

Not everyone who claims the title “financial advisor” provides financial planning services and advice. Some advisors only manage assets. Others work primarily as insurance agents. Some are employed by banks or brokerage firms, and work as sales people representing their company’s products and services.

Advisors working under the CFP® designation offer detailed, comprehensive, financial plans that define the client’s goals and outline a specific action plan to meet them. Most financial planners also provide ongoing advice and services on a wide range of topics including taxes and estate planning, strategies to maximize retirement income, social security income planning, IRA distribution planning, paying for college, and other areas specific to each client. All this in addition to any investment services they may provide.

Highest ethical standards. The CFP® Board holds its professionals to the industry’s highest ethical standards. Values such as integrity, competence, objectivity, fairness, confidentiality, diligence, and professionalism are outlined in the CFP Board’s Code of Ethics. Violation of these standards can result in disciplinary measures including permanent revocation of the CFP® certification.

Fiduciary standard of care. Today we live in a post-Madoff era in which consumers may be vulnerable to the actions of some financial advisors. Unfortunately, older investors, people in periods of transition, and inexperienced investors are often the most vulnerable.

Recently Congress took action requiring all financial advisors who work with retirement accounts including IRAs will be held to a fiduciary standard. This means they will soon be required by law to always put their clients’ best interest first.

For CFP® professionals this is nothing new. The Rules of Conduct require CFP® professionals to act in their clients’ best interest at all times whether they are working with clients’ retirement assets or not.

Being a CFP® is a choice. Most CERTIFIED FINANCIAL PLANNERS™ voluntarily choose to spend their own time and money to maintain this important designation. The CERTIFIED FINANCIAL PLANNER™ and CFP® designations tell you that your advisor has gone the extra mile to ensure that he or she is properly trained and educated to serve you as their financial planner, and that they are committed to acting in your best interest at all times.

With the increasing scrutiny that our industry faces and the continual need to separate oneself from the crowd of “financial advisors”, I really don’t know why a financial advisor wouldn’t choose to hold what many consider be the highest standard in financial planning. To me it just makes sense.

If you work with a financial advisor who isn’t a CFP®, maybe you should ask them.