A Certified Financial Planner, or CFP, is a special type of financial planner who meets the certification requirements of the CFP Board. The CFP must keep up with continuing education, pass the exam, and adhere to the CFP Board’s code of ethics. CFPs are bound by a fiduciary duty, which means they must meet the highest standards of service when providing advice to clients.
CFP applicants must have at least 4,000-6,000 hours of planning experience or equivalent, and have completed coursework through the CFP Board program. It also requires a bachelor’s degree or equivalent, as well as an ethical commitment to work for your clients.
The CFP certification is one of the most sought after awards for financial professionals and can greatly add value to their careers.
Are CFPs better than paid planners?
First, it’s important to note that CFP and paid schedulers can sometimes be one and the same. CFPs may only claim to be paid as long as the planner and planner firm do not receive sales-related compensation and related parties receive sales-related compensation for the services provided by the CFP, in accordance with the CFP Board’s standards of conduct. This may be a particularly high standard for CFPs that work for some financial firms.
CFPs are part of a larger professional network so they have a lot of resources at their disposal if clients have questions, a resource that independent paid planners may not have.
One of the benefits of working with CFPs is that they must be held to fiduciary standards, which means they must put the client’s needs first. However, paid planners are not required to meet fiduciary standards. And don’t confuse paid consultants with “paid” planners, the latter of whom may recommend products for which they are paid a commission.
The value of the paid planner for clients is that it provides better incentive matching for the consultant. That is, a paid planner is more likely to work on behalf of a customer if it does not have an incentive (i.e. a commission per sale) to offer financial products and services to the customer.
While paid planners only charge customers for their time or other services, CFPs can also be compensated for the products they sell. In some cases, this compensation can be up to 100% of the commission that the financial institution receives for selling the product.
What does this mean for you? The more products a planner recommends, the more money he makes. So a plan that includes many high commission products is probably not in your best interest. While such an arrangement may sound bad, experts say CFP won’t necessarily recommend only those products that pay the highest commissions.
Thus, bounty-only compensation combined with the CFP designation can be a powerful combination that indicates that the planner is qualified and at the same time motivated to act in your best interest.
CFP is a good designation, but it’s not everything and not everything. Just because a planner is CFP certified doesn’t mean he’s the best person to give you advice. It is important to get recommendations and feedback from any financial planner you are considering. Whether it’s a paid consultant or a CFP (or both), you need someone who understands your needs.
(Here are some tips for finding the right financial advisor for you.)
How much does CFP cost?
You should expect CFP to charge you for providing financial advice on your investments and possibly managing your investments for you. CFP services are not cheap. Most CFPs charge you an hourly rate for their services, and larger firms or those CFPs with more experience usually charge more.
According to a recent survey by Bankrate, a typical CFP charges an average of $256 per hour, but you can easily find a CFP that charges twice as much. While it may not seem like a big deal to pay someone $500 or $1,000 for a few hours of their time once a year, the amount can add up quickly if you pay for advice on a regular basis.
As a result, it may make sense to contact a financial planner who charges you a flat monthly or yearly rate so that you can budget for the advice you receive.
If you’re looking for a flat fee, Charles Schwab offers a portfolio of robo advisors that costs $30 per month and offers unlimited CFP access.
Other CFPs charge you a fee that depends on how much money you have to invest. They may charge 0.5 to 1 percent per year on the assets you manage. A planner that charges a percentage of assets under management is usually more expensive than a fixed fee planner because the interest fee is tied to the size of your portfolio.
It’s worth noting that while these fees may be paid out of your pocket initially, you can end up making much smarter decisions in line with your goals than if you were to use the “free” advisors that many financial institutions offer you. Often they are just salesmen in disguise.
How to become a CFP
A financial planner requires a bachelor’s degree, but there is no specific concentration or specialty to earn certification. Individuals must have at least 4,000-6,000 hours of financial planning experience and successfully complete financial planning coursework and pass a comprehensive exam. According to the CFP Board, the exam covers a range of topics including insurance, annuities, securities and investments, taxes, retirement planning, estate planning, and financial planning practices. You must then be ethical and act as a fiduciary on behalf of your clients.
The CFP exam is administered by the Financial Planning Standards Board, an independent non-profit organization that advocates for consumer advocacy and financial planning standards.
Those who pass the exam and meet other criteria are awarded the title of CFP. To maintain status, professionals must pay an annual renewal fee of $455 starting October 1, 2022. Applicants must also complete Continuing Education (CE) credits and the CFP Board requires a minimum of 30 CE hours over two years. -summer period.
More and more financial planners are becoming CFPs, which can be a boon for their careers.
Certified Financial Planner is a professional title obtained through a certification process. CFPs may be hired by a financial firm or act as independent planners. But there is no guarantee that CFP will suit all your financial needs. It is essential to ask questions and understand the provider’s qualifications and experience to make sure they meet your needs.