Until you go to hire a financial advisor, you might not know about the different designations financial advisors operate under. For instance, one advisor might advertise as a certified financial planner, while another might claim to be an investment advisor representative. What do these titles mean? Today, we will talk about the certified financial planner designation, what qualifications it describes, and what a CFP can do for you.
What Is a CFP?
CFP stands for certified financial planner. A CFP can help you build a long-term financial plan for any situation, such as retirement savings, budgeting, college savings, or debt management. Many CFPs specialize in a few different kinds of planning, so the best advisor for you might be someone with a focus in your specific situation.
The certified financial planner designation means that this advisor has met exacting standards. It’s considered one of the more difficult qualifications an advisor can receive. Every CFP has to have a bachelors degree and 4000 to 6000 hours of related experience. They also have to complete a courseload that takes 18 to 24 months to finish and pass a challenging exam. By the time an advisor earns the CFP designation, you can be certain they have the financial knowledge to help you with your financial plan.
In addition, a CFP has a fiduciary duty, meaning they are legally required to place clients’ financial interests first. They must meet high ethical standards, including passing a background check.
The CFP and Other Designations
There are several other designations that could be confused with CFP, such as chartered financial analyst (CFA) or chartered financial consultant (ChFC). These are other types of financial advisor, but the standards are somewhat different for each. The CFP is bestowed by the Certified Financial Planner Board of Standards, Inc., while other designations are offered by other organizations, which set their own standards.
In general, a CFA tends to work just with investments, often with corporate clients. So if you’re an individual, looking for help in creating a comprehensive financial plan, you’ll likely want a CFP, not a CFA. The ChFC designation is more similar. Both types of advisor tend to help individuals with their finances. Both are also held to a fiduciary standard. So, from the point of view of the client, they’re not very different. But the coursework going into each is different, because of the different organizations issuing each designation.
Last of all, what’s the difference between a CFP and a CPA? A CPA is an accountant, not a financial advisor. A CPA can be great for preparing your taxes or managing the accounts of your small business. But they don’t provide long-term financial planning the way a CFP does.
Working With a CFP
When you decide to work with a CFP, you probably have one of two things in mind. The first is a specific project, such as getting out of debt or building a comprehensive financial plan. The second is ongoing financial advice, perhaps helping you manage your portfolio. When you first schedule a meeting, tell them what you’re looking to do.
Different CFPs arrange things in different ways. Some will prefer to have scheduled appointments and bill you hourly. You will likely end up paying between $150 and $350 an hour. But keep in mind, a lot can get done in a single hour. Other advisors will take a percentage of your portfolio or a commission of the products you buy. In this case, they will talk to you as needed.
Choose a CFP who will see you in the way you prefer: appointments billed hourly or ongoing advice. You also should find someone who works with people like you. For instance, if you are going through a divorce, saving for retirement, or starting a business, you’ll prefer an advisor who specializes in these areas. Last, experience is always a plus. Remember, though, that a newer advisor may be easier to get an appointment with and might charge less. And, if they have that CFP designation, you know they are both trained and experienced.
Finding the CFP for You
If you’re looking specifically for a certain designation, you’ve already narrowed down the field of possible advisors. Searching for only CFPs will limit your search to advisors who are trained and experienced and who meet a high ethical standard. But if you want someone who is also experienced in your specific issues, uses the pay structure you want, and can meet you locally or virtually, it can be hard to find even one person who meets your standards.That’s where Advice Chaser comes in. In our initial call with you, you can tell us what you’re looking for and what you need. You don’t need to be an expert on financial advisors—just tell us what kind of help you want. Then we will do the legwork to find the person on our exclusive list who can give you the help you need. Request your free phone consultation today.
