Certified Financial Planner

This article will discuss the nature of the position of a certified financial planner and what a CFP can do for you. You will learn here about estate planning, personal finance, retirement planning, and what is entailed in the job of a certified financial planner.


1. Certified Financial Planning Designations

There are many different designations of accreditation within the field of personal finance. While there is much crossover between the different designations and what they do in terms of financial planning, knowing what the accreditations are will be an excellent source of education when you are looking for a financial planner. It is a good idea to familiarize yourself with the different terms, as you will see them a lot when you are conducting your initial research.

An Accredited Estate Planner (AEP) is one dedicated to estate planning and will be able to assist you with all your legal and estate planning needs. A Certified Financial Planner (CFP) has a wider range of duties and obligations to you as a consumer, and will be able to help you with many of your financial goals. A Chartered Financial Analyst (CFA) is very similar to a CFP, but has different requirements for being accredited. A Chartered Investment Counselor (CIC) is a financial planner that works specifically with investment portfolios and has specialized knowledge in helping you reach your investment goals. Finally, a Chartered Life Underwriter (CLU) is a financial planner that will be able to assist you in reaching your financial planning needs when it comes to insurance assets and life insurance policies.

2. The Credentials of a Certified Financial Planner

The process of becoming a certified financial planner is a long one, so when you choose a CFP as your financial planning professional, you can rest assured that their experience and education will work for you in the best way possible. To receive a CFP designation or accreditation with the CFP board, a lot of work and experience is required.
Your CFP will have either three years of work in the financial planning industry with a bachelor's degree, or five years work experience in the financial planning field. Every CFP will also have to pass an examination issued by the CFP board. In order to pass this exam, a full schedule of coursework is required that you will be able to take through most educational institutions. Also, in order to take the CFP exam, you must already have a CFA, CPA, or CLU accreditation, or hold a Ph.D. with either economics or business. Another option, if you do not have any of these credentials, is to hold a license for attorney. Once you undertake these courses and acquire the proper education credits, the CFP board will then accredit you.

3. What Does the CFP Board Do?

The CFP Board accredits all qualified applicants with the Certified Financial Planning designation. It is also a regulatory board in that it offers online complaints for consumers experiencing difficulties with an accredited CFP. Within the CFP board is also a disciplinary process for practitioners holding the CFP designation that come under complaint. The CFP board is also responsible for ensuring professional status of all their members is up to date.

The CFP board is ultimately responsible for ensuring that ethical and competent financial planning professionals are available to the public. The CFP board is the owner of the certification designation of CFP for Certified Financial Planner and its accompanying logo. The CFP board is responsible for establishing and enforcing the experience, education, and ethical requirements of all its designees. As such, the CFP board recognizes and awards those who have completed the initial certification requirements and also awards those that maintain these certification standards. Currently, the CFP board authorizes almost 45,000 people in the U.S. to work under the CFP designation and its logo.

4. How to Find a Certified Financial Planner

If you are looking to hire a Certified Financial Planner to help you achieve your financial goals, you may be confused initially at the broad range of services out there. You need to know what you are looking for, and what you need to avoid. You also need to know what your specific financial needs are before you seek assistance from a CFP. Knowing beforehand what your immediate goals are will help you and your CFP meet your goals concisely and expediently.

Once you have identified your immediate needs, conduct research in your area to determine what CFP's have experience working with individuals that are in the same position as you are in terms of income and debt loads. In your initial stages of interviewing potential CFP's, you want to find out as much as you can about their experiences and their services. Bring a list of questions with you to your initial interviews. Jot down your ideas of your specific needs such as investment assistance, debt load management, or budgetary consultations. Ask the CFP for specific answers to your questions. If the CFP you are interviewing offers vague answers or laughs off your questions, you may want to steer away and continue your search.

You also want to know specifics about the fees and charges you will incur with your CFP. You will probably want to work with someone who will bill you monthly and provide a detailed invoice monthly. Some CFP's will invoice for every transaction, and you may end up paying more out of pocket if you go this route. This is a question you want covered in your initial interview.

Finally, if you are really having a hard time locating a CFP, do some research with your local tax office to see if anyone stands out. You can also ask for advice from a local representative from the CFP board. This contact information will be located on the Certified Financial Planner Board of Standards website.

5. Fee-Based Certified Financial Planner

There are two different kinds of certified financial planners. One is known as fee based, and the other is known as fee-only financial planners. You need to understand the difference, and this will be the most important question you ask during your initial interview stages. Not knowing the difference could end up costing you a lot of money in the long run.

A CFP that is fee based will simply charge you a fee for the services they provide. They may also make their money through commissions that are generated from the recommendations that they make. If this is the case, this is a red flag for you. Commission-based CFP's are required to disclose this information, so this is an important question to ask.

This is not to say that a fee-based CFP is working unethically. You need to ask more questions as to the nature of their work and how it will meet your needs. Remember, a commission based CFP may only make money if you make money with your investments, so while it may seem sketchy, they will ultimately have your (and their) best interests at heart. Ask questions about the recommendations they are making, and why the recommendations are being made. You also want to be aware of every risk within your investments. A sound fee-based CFP will be able to answer satisfactorily all these questions quickly and efficiently.

6. Fee-Only Certified Financial Planner

On the other hand, you may come across a CFP that conducts your personal finance and financial planning on a fee-only basis. This fee-only CFP will construct a financial plan with the ultimate objective being that their solution reaches your desired financial goals. The CFP is then compensated through a fee structure based on this plan, and they are paid for advice in the same manner that you pay a lawyer or a doctor.

This type of personal finance planning may be considered a safer route for you to go, and is often the better option if you are not considering any major investment strategies. If you are undergoing an investment plan with a fee-only CFP, you will want to ask them whether or not they receive additional funds from the investments they are sourcing out to you. This information must be fully disclosed, so you feel comfortable with your CFP, and that you completely understand what fees you are obligating yourself to.

The decision to go with a fee-only CFP is not always the best decision, but this does not necessarily mean it is the worst either. The final decision is up to you and will depend on your goals. If you are looking to make a lot of money through investments, a fee-only CFP may not be your best option, as they will not be working as hard to make commissions off your investment. If, however, sound financial planning with low risk or no investments is the way you are going, a fee-only CFP may end up saving you the most money down the road. Since saving money is your ultimate goal, this is something you need to consider.

7. Retirement Planning With Your Certified Financial Planner

Every CFP is dedicated to ensuring their clients meet their ultimate financial goals. For many people, a comfortable retirement is at the top of their list when it comes to personal finance and financial planning. Research shows that over the next ten years, the Baby Boomers, America's biggest generation, will go into retirement. If you fall into this category, or are considering retirement planning, you may want to speak with a CFP to see how you can do so comfortably.

A good CFP will be able to help you formulate a sound financial plan for your retirement planning, regardless of your current income and debt situation. They will help you construct a plan to ensure that you have a goal for retirement income, and that you will end up having enough money to meet that goal. With this plan, you will get a sound idea of when you can retire, and how you can ensure your funds will last your lifetime.

You will learn as you work with your CFP that timing is the most critical factor when working out your retirement planning. It is best to start as early as possible in order to create a long-term horizon to ensure your needs are met. The farther away you are from retirement, the better you are at increasing the probability of actually achieving your retirement planning goals. This only makes sense; the more time you have to save, the likelier you are to have enough.

8. Estate Planning With Your Certified Financial Planner

Another critical element to any personal finance plan is estate planning. Essentially, your estate plan will contain all the information necessary to ensure your final financial goals are met and carried out after you die. A will is the most commonly known tool that is used when it comes to estate planning. If your affairs are simple, then you can do this through an estate lawyer or even a simple will kit. If, however, you have a complex financial picture, blended families, and a large number of personal effects and assets, you may want to consult a Certified Financial Planner to assist you with your estate planning needs. A CFP will be able to devise your plan and develop the most tax-efficient ways to ensure that your final wishes are met.

Your CFP will help you construct a plan that includes all your children and any other beneficiaries that you name. You can also include charities, friends, or whomever you wish as your beneficiaries in your estate plan. In this plan, you will want to name guardians for your children in the event that you pass before they are of adult age. It is also important here to specifically name and list any persons that you want to be excluded from your beneficiary list.

Your CFP will also ensure that you include a detailed listing of all your financial and personal assets. This will include banking information, real estate holdings, stocks or bonds, life insurance policies, 401 (k), and any mortgages. The CFP will also help you develop a listing of all your personal assets that are owned outright which will include all major assets such as homes and or vehicles, as well as a complete inventory of the contents of your home. Your CFP will also list a directory of each of your advisors from doctors to banking relationships, and also include a complete list of each of your liabilities or debts. You will also include in your estate plan an inventory containing a list of the locations of all your crucial documents such as deeds, vehicle titles, bank accounts, life insurance policy, and the like.

9. Insurance Planning with your Certified Financial Planner

Depending on what your specific personal finance needs are, your CFP will be able to help you decide if insurance policies are a sound way to go with your financial planning. Insurance policies are always a safe means of protection when you are considering financial goals. The reason for this is that insurance will ultimately protect you from any large financial losses that you might encounter. Insurance plans are an excellent means to protect yourself from future financial tragedies, and a CFP will be able to help you construct an insurance plan if you can afford it.

The CFP will ensure that you lower your future risk financially by helping you select insurance products that will cover you in the event of extreme financial loss or unexpected events. Insurance plans will also help protect your overall net worth and assets like a home or vehicle. A good CFP will ensure that you will never have to liquidate your assets in order to protect yourself from financial loss. They will develop an insurance plan for you so that in any event, you will be protected. In many cases, your CFP will develop an insurance plan before even discussing investment options, as insurance plans are the only way to guarantee full financial protection. Make sure you talk to your CFP about insurance planning when you are discussing your financial goals.
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