A financial planner can help you create a roadmap for achieving just about any financial goal, from increasing your savings to avoiding unnecessary taxes to building a retirement nest egg. But the term “financial planner” is unregulated, so almost anyone can use it to describe their advisory service, whether or not they’ve earned recognized professional credentials.
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For that reason, you should always verify a planner’s competence and experience before you trust their advice.
One way to do that is to hire a certified financial planner (CFP) — that is, one who meets the education, training and ethics standards established and enforced by the Certified Financial Planner Board. The Oklahoma-based Butterworth Financial Group calls those rigorous standards the “four Es” – education, examination, experience and ethics.
Read on to learn how working with a CFP can benefit you.
Education and Experience
In addition to having earned, or being in the process of earning, a bachelor’s degree, CFP candidates must complete CFP Board-registered coursework and pass a comprehensive exam. However, they receive their certifications only after significant experience as a financial planner.
They have two ways to achieve the experience requirements:
The first is to perform 6,000 hours — slightly more than three years at a maximum of 40 hours per week — of financial planning-related work They can work directly with clients, support or supervise other planners, complete an internship or teach financial concepts at the college level to meet this requirement.
Alternatively, candidates may apprentice for 4,000 hours — just over two years. The entire 4,000 hours must be client-facing and directly supervised by a CFP.
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Fiduciary Duty to Clients
CFPs agree to serve as their clients’ fiduciaries, which means they act in the client’s best interest, not their own. CFPs charge flat fees for financial advisory and planning, for example, to eliminate conflicts of interest.
If a material conflict arises — if, for example, you go to a CFP to purchase an annuity for which they’ll receive a commission from the insurance company — they must disclose the conflict and get your consent to proceed.
Holistic Approach
Generic financial planners and advisors are often limited in the products and services they can provide. A CFP, on the other hand, has demonstrated competence in a range of areas.
The coursework and exam cover risk management and insurance in addition to investment, retirement, tax and estate planning. They also study the psychology of financial planning, so you can work with a CFP to overcome any attitudes and behaviors that might hamper your ability to reach your financial goals.
Accountability
Although the CFP Board is not an enforcement organization, per se, it does hold member planners accountable for adhering to strict professional and ethical standards. Violations can result in disciplinary action, including loss of certification.
The Securities and Exchange Commission recommends that you visit the Certified Financial Planner Board of Standards website to verify a financial planner’s credentials and check to see if the Board has revoked or suspended their certification. You can also request information about disciplinary action by calling the board at 800-487-1497.
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This article originally appeared on GOBankingRates.com: The Benefits of Working With a Certified Financial Planner
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