Why You Should Hire a Certified Financial Planner – Benefits
Are you a planner?
I’m not. Until my wife convinced me to join a shared household calendar, I more or less lived by the seat of my pants. I’ll admit that spontaneity extended to my personal finances. Though I’ve always been financially disciplined, strategic money management hasn’t been my strong suit. Spending less than I earned and spreading the surplus across savings and tax-advantaged retirement accounts was about the extent of my financial planning strategy.
That changed, big time, when my wife I and began working with a CERTIFIED FINANCIAL PLANNER™ (CFP®). For the first time since we merged our finances, we feel in control of our collective financial future.
Here’s why you should consider hiring a CFP® professional too, even if you’re not sure you need one. Before we dive in, be sure to follow #LetsMakeAPlan on social media, check out the CFP® Board Facebook page, and find out how a CFP® pro can help you at LetsMakeAPlan.org.
A CFP® certificant is a credentialed financial professional held to strict ethical and performance standards. According to the CFP® Board, CFP® professionals “are trained to help you develop a comprehensive strategy to reach your short- and long-term financial goals … from planning for retirement to saving for college.”
In order to earn this coveted credential, every prospective CFP® certificant must have at least 4,000 hours of financial planning experience and meet additional initial certification requirements in four main categories. Only those who meet these rigorous requirements can call themselves CFP® professionals.
All CFP® professionals must have or obtain a four-year bachelor’s degree from an accredited educational institution. Prospective CFP® certificants don’t need a completed bachelor’s degree when they sit for the CFP® exam, but they must earn it within five years of initial exam passage.
Aspiring CFP® certificants must also complete five college-level courses offered by institutions that have been approved by the CFP® Board. This coursework covers topics such as:
The CFP® Board exam is a rigorous daylong exam that tests students on dozens of financial planning subtopics covered in the CFP® coursework, as well as measuring their ability to apply financial planning principles to real-world situations.
The CFP® Board exam is considerably longer, and more difficult, than the FINRA proctor tests for securities licensure or state-sponsored tests for life, health, and property/casualty insurance. The CFP® Board exam pass rate typically ranges between 55% and 60%.
Prospective CFP® certificants must acquire at least 4,000 hours of relevant financial planning experience. There are two ways to do this:
Both options expose prospective certificants to a range of real-world situations they’re likely to encounter as CFP® professionals.
Every CFP® professional is a fiduciary, meaning they’re sworn to act in their clients’ best interests. Moreover, certificants are expected to adhere to rigorous standards of professional conduct as defined in the CFP® Board’s “Standards of Professional Conduct” handbook.
Before they’re welcomed into the fold, prospective certificants must complete a CFP® Certification Application, which includes a thorough criminal and professional background check. Certificants can’t use the CFP® mark until they’ve cleared this step and officially received the designation.
All this rigorous training and preparation equips CFP® professionals to assist clients in any stage of life, no matter how complex their personal finances or how ambitious their plans.
You can look for a CFP® professional at any time. Indeed, there’s something to be said for proactive planning, or calling in a CFP® professional to give a second opinion or provide a fresh set of eyes, even if you feel like you’re on track to meet your financial goals.
In other cases, a specific event might prompt you to seek out a CFP® professional, such as:
This isn’t an exhaustive list, of course. And bear in mind that there’s no need to wait for a precipitating event to call on a CFP® certificant. Any time is a good time to make a plan.
The CFP® Board’s Consumer Guide to Financial Planning outlines a six-step financial planning process. Depending on the arrangement you’ve worked out with your CFP® professional, this process may be of finite or indefinite duration.
Don’t rush into a planning relationship. Once you’ve narrowed down your financial planner options to a handful, sit down or set up a call with each one to get a better sense of their approach, strengths, and weaknesses. Questions to ask them include:
Why should you work with a CFP® professional?
Think of your CFP® professional as a coach or teammate. It’s not their job to judge or reprimand you; it’s their job to help you create and set in motion a plan for your financial future. If you’re hesitant to work with a CFP® professional because you’re worried they’ll demand radical lifestyle changes or nitpick your spending decisions, then think again. Your plan probably won’t maintain your current financial status quo, but it won’t force you to live like a monk, either.
Remember, “coach” doesn’t mean “scold.” For many planning clients, a plan is just the opening act; the real work begins afterward. Setting a comprehensive financial plan in motion is tough, ongoing work, and having a knowledgeable professional in your corner makes a big difference. My wife and I appreciate all the hard work that went into our plan’s development, but we’re even more grateful to have someone to whom we can turn for counsel.
Your CFP® professional is more qualified to create and guide your financial plan than anyone else who calls themselves a “financial planner,” hands down. The CFP® Board’s rigorous education and experience requirements ensure that only the most qualified, committed candidates earn the right to use the CFP® mark.
Most importantly for your peace of mind, CFP® professionals are sworn fiduciaries. As fiduciaries, they must act in their clients’ best interests, even if they have relationships with third parties such as insurance companies.
We saw this firsthand when our CFP® professional guided us through a disability insurance underwriting process that was, frankly, confusing and a bit intimidating. The process wasn’t particularly quick or easy, and it was certainly no one’s idea of fun, but at no point did we feel we were receiving biased advice. The outcome was almost certainly better for us than the DIY alternative, which — if we’re being honest — we may not have pursued to completion on our own.
It’s quite common for planning clients to seek out professional guidance before a planned life change or in the aftermath of an unexpected one. Whether you’re anticipating the birth of a child, preparing for a divorce, or are unsure how to deal with an inheritance, you can trust a CFP® professional for frank advice and comprehensive guidance.
The CFP® Board’s Consumer Guide to Financial Planning devotes a full page to “Financial Self-Defense” and publishes a separate Consumer Guide to Financial Self-Defense to boot. Before you begin your search for a CFP® professional, give both guides a thorough read.
The CFP® Board takes a “trust but verify” approach to consumer protection. Though the CFP® mark assures clients they’re working with a true pro, it’s crucial that clients take proactive measures to safeguard their finances and personal information and to work with like-minded CFP® professionals.
Never forget that you and your family are the most important people in your financial plan. Your CFP® professional is sworn to act in your best interest, and they’re committed to providing unbiased advice and counsel to help you implement your plan and prepare for an uncertain future with confidence. But they can’t force you to do anything you don’t want to do or take full control of your finances. You wouldn’t want them to, anyway.
The power to make a plan is in your hands. What will you do with it?
Are you thinking about hiring a CFP® professional? Why?
This piece is in partnership with CFP® Board.
Updated: November 16, 2018
Categories: Money Management
Brian Martucci writes about frugal living, entrepreneurship, and innovative ideas. When he’s not interviewing small business owners or investigating time- and money-saving strategies for Money Crashers readers, he’s probably out exploring a new trail or sampling a novel cuisine. Find him on Twitter @Brian_Martucci.
Why You Should Hire a Certified Financial Planner – Benefits
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