What Is A Certified Financial Planner And Do You Need One?
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A Certified Financial Planner, or CFP, is a financial planning professional with the education, training, certification, and experience to help you strategize to achieve your financial goals. Whether you need help budgeting for your daily expenses or want someone to manage your retirement account, hiring a CFP could be money well spent.
What is a Certified Financial Planner?
To become a CFP, you must meet a set of strict requirements for certification. These requirements include:
- A bachelor’s degree and courses in financial planning, including courses in professional conduct and regulation, general principles of financial planning, educational planning, risk management and insurance planning, investment planning , tax planning, retirement savings and income planning, estate planning and the financial plan Development
- Pass an exam that covers all aspects of financial planning advice
- A minimum of 6000 hours of experience in the financial planning process or 4000 hours of learning experience in financial planning
- Respect strict ethical standards and put the interests of their clients first
It takes about 18-24 months to become CFP after earning a bachelor’s degree.
Who certifies a CFP?
By definition, a CFP is certified by the Certified Financial Planner Board of Standards. Since 1995, the CFP Board of Standards has itself been certified by the National Commission of Certification Agencies, which ensures that the agency meets legal requirements for testing.
The CFP Board of Standards creates and enforces the requirements for obtaining and maintaining the CFP designation. The goal is to ensure that planners are competent and ethical for the benefit of their clients.
After obtaining their initial certification, certified financial planners must meet continuing education requirements for 30 hours of approved coursework every two years. The curriculum should include:
- 2 hours of ethics training
- 28 hours in one or more core knowledge topics, which are the areas of financial planning covered by the CFP exam.
Courses should focus on content that helps CFPs provide clients with current and accurate financial planning advice. Courses that focus on issues such as running a practice or leadership skills are not counted towards the continuing education requirement.
The requirement that really sets certified professional financial planners apart from other financial advisors is the commitment to act as a trustee. As such, CFPs must always act in the best interests of their clients. For example, a fiduciary will not direct you to an investment that would result in a higher commission for them compared to an investment that better matches your financial goals.
What Does a Certified Financial Planner Do?
A CFP works with you on a savings and investment roadmap that can help you reach your financial goals. Certified financial planners provide advice in areas such as:
- Tax planning
- Pension saving
- Investment planning
- Estate planning
- Budgeting and saving for education spending.
CFPs can also help with risk management and insurance needs. Different planners may specialize in different areas.
To do their job properly, CFPs must first learn about your current financial situation, including the value of your current investments and how much you owe on your home and other loans. The CFP will ask you questions about your financial goals, determine how comfortable you are with investment risks, and make sure you have adequate insurance.
Once the CFP understands your current situation and your future goals, it will develop recommendations designed to help you reach your financial goals on time. Your personal financial situation and your level of comfort in managing your own finances are the most important factors in determining whether to hire a certified financial planner.
Is A Certified Financial Planner Worth It?
The main benefit of working with a CFP is that you get the advice of a highly qualified professional who can look at your personal finances objectively. A CFP can point out the pros and cons of various options and offer alternatives that you might not have thought of.
Chartered Financial Planner Fees
There are costs to consider when working with a certified financial planner. Below is a breakdown of the different types of fee structures. When working with a CFP, know how they are paid and that you are clear on the details before they start working with you.
- Flat rate : Also known as a flat fee, this payment plan charges a flat fee for individual services.
- Hourly rate : It looks like an hourly rate: you pay a certain rate for each hour that you need CFP services. This gives you a little more control over your budget. The downside is that you might pay for meetings or phone calls that last longer than you expect.
- Percentage of assets under management: As part of this plan, the CFP charges a percentage of the total value of the investments managed for you, including stocks, bonds, and retirement accounts. For example, if the planner charges 1% per year and manages $ 250,000 in investments for you, the annual fee would be $ 2,500.
When to hire a certified financial planner
Certified Financial Planners can help you plan for all stages of life, whether you are starting your career or retiring and doing estate planning.
Here are some common scenarios where a CFP can be useful:
- When you get married and combine households and accounts, or get divorced and need advice on how to get by on one income
- When you have kids and need to plan for life insurance and college expenses
- When you have changed your employment status, either through a new job or a better paying job, or after losing a job
- When you want to maximize your retirement savings
- When we inherit a large sum and want to profit from the windfall
What is the difference between a financial advisor and a certified financial planner?
Financial advisor is a broad term that applies to people who offer advice on a variety of topics, from estate planning to stocks and bonds. A CFP is a certified financial advisor who specializes in helping clients strategize on specific financial goals. Their specialty is to come up with a comprehensive plan to achieve your goals.
Since CFPs must meet specific educational and experience requirements that are not required of all financial advisers, they can generally offer more expertise and a greater wealth of knowledge. CFPs are also committed to the fiduciary standard, which requires placing the interests of the client before their own. Not all financial advisers meet the fiduciary standard.
How to find a certified financial planner
The Certified Financial Planner Standards Council has a search feature on their website to help you find a CFP located nearby.
When selecting a CFP, interview a few planners to find one you are comfortable working with and who has expertise in the areas you need help with. Be sure to ask these questions:
- What is the planner’s pricing structure for the services you want?
- Has the planner ever worked with people like you? For example, a planner who works primarily with millionaire baby boomers is not a good choice for a millennial who is considering buying their first home.
- Does the planner have relevant expertise? If you need an estate planner, a college savings expert isn’t the best choice.
It is important to exercise due diligence when looking for a certified financial planner. You may find that a CFP is a good choice to guide you in setting and achieving your financial goals.
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