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4 Reasons Your Financial Advisor Should Be a Certified Financial Planner (CFP®)

 

When can I retire? How much will I need to have saved in order to retire comfortably? How much of that will end up going to taxes? When should I start claiming Social Security? Do I have the right investment allocation for my desired level of risk? These are a few of the nagging questions facing Americans as they approach or enter retirement.

According to Schwab’s Modern Wealth Survey (2021) only 33% of Americans have a financial plan in writing that includes financial goals. The survey also found that those who planned were more likely to have an emergency fund, be debt-free, regularly rebalance their retirement investment portfolio, and be aware of investment fees and other costs. Another way of putting it is - having a written plan leads to healthy money habits. And healthy money habits increase your chances of having a successful retirement. 

If you’ve started the process to gain control and understanding of your finances and retirement planning, congratulations! The hardest part (getting started) is behind you. If you haven’t yet begun, it’s not too late - and you don’t have to do it alone. 

You Have Options When It Comes to Choosing a Financial Planner  

Choosing a financial planner to help you secure your retirement plans is a big decision. It can be a bit overwhelming, as there are literally dozens of certifications available to financial professionals. But what most investors don’t realize is, almost anyone can use the term “financial planner”. Unfortunately, this means levels of education, experience, and ethical standards can vary greatly among people giving financial advice. 

There are a number of elements you should look for when choosing an advisor - investment process, communication style, chemistry, and how they are compensated, just to name a few. 

However, the very first thing you should do before working with a financial advisor is to check the individual’s professional credentials. A CFP®, or Certified Financial Planner, is an advisor who has achieved the industry’s gold standard. They’ve got the education, experience, and more to help you handle whatever comes your way financially.

Why the CFP Designation Stands Out 

The Certified Financial Planner Board of Standards, Inc. (CFP Board) sets the initial and ongoing certification requirements for Certified Financial Planners. Created in 1985, the CFP board is a 501(c)(3) non-profit organization that serves the public interest. The board exists to certify financial planners and offer fair and objective oversight of the profession. They can also revoke the CFP designation, if necessary, from anyone who has achieved it. 

So, why is the CFP designation the gold standard in the financial industry? There are four main prongs to the extensive certification process for becoming a CFP professional:

 

Educational Requirements

Unlike many financial services professionals, Certified Financial Planners must fulfill rigorous educational requirements. First, all CFPs must have or earn a four-year bachelor’s degree from an accredited educational institution. If they don’t already have one, CFP certificate holders must obtain a bachelor’s within five years of passing their initial CFP exam. 

In addition, CFP certificants must develop theoretical and practical knowledge through college-level courses covering topics including:

  • General principles of financial planning
  • Tax planning
  • Estate planning
  • Risk management
  • Financial plan development

 

Examination

To obtain a CFP certification, applicants need to pass a ten-hour, two-day exam that tests comprehensive financial planning skills - and application of that technical knowledge to real-life situations.

The CFP Board exam is significantly longer, and considered more difficult than the proctor tests for the Financial Industry Regulatory Authority (FINRA) license. The CFP Board exam has an average pass rate of between 55% and 60%. Thus, you can be assured that a CFP knows their stuff, and is highly qualified to help you plan your future retirement.

 

Extensive Practical Experience

At this point, you might be thinking, wow! It takes a lot of knowledge and dedication to become a certified financial planner. But the requirements don’t stop there. CFP professionals must have 2 years of real life experience providing financial planning services (4,000 to 6,000 hours in total) before they can use the CFP designation. Thanks to this requirement of hands-on experience, clients can expect a realistic and thorough financial plan.

 

Unparalleled Ethical Standards 

CFP professionals pledge to follow a strict code of ethical standards set and enforced by the CFP board. Any CFP who does not uphold this code can be sanctioned or risk losing their certification. More specifically, every CFP is also a fiduciary, which means they’re under oath to act in the best interests of their clients. 

What that means for you is that unlike many financial advisors who are in the business of sales, a CFP will never offer you a financial product simply because they’re getting a commission for it. 

Choose a Financial Advisor You Can Trust

If all these requirements seem stringent, it’s for good reason. When it comes to managing something as precious as your personal retirement portfolio, you need a financial advisor you can trust. You need someone who understands all aspects of your personal finances, and can meet your needs for retirement planning, tax strategy, estate planning, and more.

At Wealth Legacy Institute, we don’t take this trust lightly - that’s why we’re proud to honor and uphold the CFP designation, working under the strict standard of fiduciary duty at all times. You can find a qualified Certified Financial Planner for your wealth management needs by searching the CFP Board database at letsmakeaplan.org. We’ve also created a free, actionable guide to help you recognize a fiduciary financial advisor, including red flags to look out for and questions to ask. 

 

Go further with a fiduciary - download the guide now! 

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