How to Choose a Financial Planner – Day 1 – Certified Financial Planner

by Neal Frankle, CFP ®

how to choose a financial planner

The world of financial advice sales is confusing.  Or at least it can be.  How do you know how is qualified?  How do you know who is impartial?  How do you know who to trust?

Here are a series of posts that explains each of the different types of financial advisors and some of the main designations we pursue. But let me give you one key secret that sort of explains the whole ball of wax;  the type of license an advisor has, determines what kind of financial advice he/she can give you. Let me repeat.

The type of license an advisor has determines what kind of financial advice he/she can give you.

That means when your advisor gives you a solution, it could simply be the only product that particular advisor is able to sell.  So when they tell you they are offering the best investment for you, understand that this could differ based on what’s in the advisor’s interests. That should never be, but it happens.  Also, even if you find an advisor who is honest, trustworthy and impartial, it doesn’t mean that he or she is smart.   OK…..there is a lot of material to dive through. Let’s get started by discussing the CFP (R) designation.

What Is A CFP (R) ?

A CFP(R) is not a license. It is a designation.  It has no impact whatsoever on which investment products the CFP can or cannot suggest to you the client. The CFP (R) designation is regarded highly within the professional community because it takes a lot of work to get. But it’s no guarantee of anything.  No license or designation is.

Oh and keep in mind that I am a Certified Financial Planner.  That means I’m biased.  I will try my best to keep this post objective but I want you to understand that I do think the CFP(R) is the cat’s pajamas and that sentiment may creep through in this post.

I said earlier that it’s work to become a CFP (R).  In order to qualify for the designation there are education, experience, ethics and examination requirements.  I’m not going to go through all of the requirements, but they are relatively vigorous.  To be frank, advisors don’t learn how to be good advisors by studying for the designation.  They learn that by working with clients for years and years.  But I do feel that having a CFP (R) is a differentiator.  It demonstrates a ton of commitment.  It also reinforces the need to work with clients’ entire financial situation rather than just the money management side of things.

The Main Benefit Of Working With A CFP (R)

There is another huge benefit to becoming or working with a CFP that far eclipses the training itself. The designation creates fiduciary responsibility to the client.

This means CFPs have to put clients’ interests first. If a CFP knowingly acts in any other way, he/she breaks that fiduciary responsibility and can lose the designation.  This act also exposes the CFP to liability.  A broker or insurance agent doesn’t have that same standard or liability.   Of  course, this doesn’t guarantee that every CFP you meet is going to be Sister Teresa with an adding machine, but it does set a higher standard.

Bottom Line

Working with a CFP designee can be a smart move.  It demonstrates commitment, the need for comprehensive planning and the supreme importance of putting clients’ needs first. Will it teach someone how to manage money? No. Will it teach them how to help clients put a financial plan together? Not really. Will it help someone starting in this profession build their business? Nope.

I’ll discuss how insurance agents and stockbrokers work soon.  Afterwards, I’ll talk about Registered Investment Advisors. Then, I’ll close the series by bringing it all together to tell you how to choose a financial planner.  I encourage you to tune in for entire series. I will give you the inside scoop on how different advisors operate, and that will help you avoid working with the wrong people.

OK. I’ve spent a lot of time putting this post together. Now it’s your turn. If you have a financial advisor, please call her up. Ask her if she is a CFP. If so, great. Ask why. If not, ask why not. Let me know what you find out.



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