ABOUT THE PROFESSION

 

Financial planning is the process of wisely managing one’s finances to achieve certain goals and dreams, while at the same time helping negotiate the financial barriers that inevitably arise in every stage of life. The financial planning profession exists to help people make those financial decisions and achieve their life goals. Use the links below to find answers to the following questions:

What is a Certified Financial Planner?

Why do I need a Certified Financial Planner?

How do I choose the right Certified Financial Planner for me?

Are all Financial Planners regulated?

How are Financial Planners compensated?

What is a CERTIFIED FINANCIAL PLANNER™ Professional?
Also known as a CFP® certificant, in order to be certified to use the CFP marks, these individuals must meet the following qualifications, as specified by Certified Financial Planner Board of Standards, Inc. ( CFP Board ):

Examination - An individual must successfully complete CFP Board's comprehensive certification examination, which tests the individual's knowledge on a multitude of key financial planning topics.

  • Experience - Depending on the level of degree work completed in a collegiate setting, an individual must acquire three to five years of financial planning-related experience prior to receiving the right to use the CFP marks.
  • Ethics - An individual must voluntarily ascribe to CFP Board's Code of Ethics and additional requirements as mandated. This voluntary decision empowers CFP Board to take action if a CFP certificant should violate the code of ethics. Such violations could lead to disciplinary action, including the permanent revocation of the right to use the CFP marks.
  • Education - A CFP certificant must obtain 30 hours of continuing education every two years in the body of knowledge pertaining to financial planning areas such as estate planning, retirement planning, investment management, tax planning, employee benefits and insurance.

Why do I need a financial planner?
How do you know if you could benefit from the services of a qualified financial planner? You may not have the expertise, the time or the desire to actively plan and manage certain financial aspects of your life. You may want help getting started. You may benefit from an objective, third-party perspective on what are often emotional, difficult decisions. And in today’s hectic world, it can be beneficial just to have a financial expert looking over your shoulder to double-check your planning efforts and make sure you stay focused and follow through with your financial plans .

Events that might prompt you to seek the services of a planner

Often a specific event or need will trigger the desire for professional financial planning guidance. These might include:
• Saving enough for retirement, or rolling over a pension
• Handling the inheritance of a large sum of money
• Preparing for a marriage or divorce
• Planning for the birth or adoption of a child
• Facing a financial crisis such as a serious illness, layoff or natural disaster
• Caring for aging parents or a disabled child
• Coping financially with the death of a spouse or family member
• Funding education
• Buying, selling or passing on a family business

How do I choose the right financial planner for me?
Choosing a financial planner is as important as choosing a doctor or lawyer. Working with a financial planner is a very personal relationship. In addition to competency, a financial planner should have integrity, trust and a commitment to ethical behavior and high professional standards. You want a planner who will put your needs and interests first.

Also, many planners specialize in working with certain types of clients, such as small-business owners, executives or retirees. Many have minimum income and asset requirements. Some specialize in certain areas of planning such as retirement, divorce or asset management. This is why we recommend that you interview at least three planners in person to find the right one to serve your needs.

Questions to ask when choosing a financial planner
• What financial planning designations the planner holds and professional affiliations and memberships
• Educational background and work experience
• Licenses to sell certain financial products, such as life insurance or securities
• Services the planner provides
• The planner's basic approach to financial planning
• Areas of specialization
• Types of clients the planner serves, and any minimum net worth or income requirements
• How the planner prepares a plan
• How the planner might address your particular needs
• Whether the planner or others will implement recommendations from the plan
• Business relationships the planner has that might present a conflict of interest
• How the planner is paid for services, and the typical charges

Are all financial planners regulated?
No! People who call themselves financial planners are not currently regulated as financial planners by either state or federal government. Many financial planners are regulated by states through subsets of financial planning, such as insurance and taxes, but not for their overall financial planning activities.

The Securities and Exchange Commission (SEC) and most states have requirements for people who give investment advice, which would include any legitimate financial planner. The FPA encourages you to make sure the planner you choose is a registered investment adviser or is an agent of a company that is registered. CFP ® practitioners are licensed and regulated by the Certified Financial Planner Board of Standards Inc. (CFP Board). By virtue of their CFP ® license, granted by the CFP Board, CFP ® professionals are held accountable to the CFP Board’s code of ethics for their financial planning activities. CFP ® professionals must meet continuing education requirements, experience requirements, ethics requirements and exam requirements to maintain their certification. The CFP Board of Standards is the professional regulatory body that licenses Certified Financial Planner professionals, administers the CFP ® examination and continuously monitors licenses to assure their compliance with ethical standards. Following is contact information on several agencies to call for background information on a financial planner:

  • The Securities and Exchange Commission (SEC) will verify if an adviser is registered with them. Call 800.732.0330 or for more information on the SEC, visit www.sec.gov .
  • The North American Securities Administrators Association (NASAA) can provide you with the phone number of your state securities department to confirm registration as an investment adviser in your state. Call 202.737.0900 or for more information on the NASAA, visit www.nasaa.org.
  • The National Association of Securities Dealers (NASD) will verify whether the adviser has had any disciplinary action brought against him or her. Call 800.289.9999 or visit www.nasd.com.
  • The Certified Financial Planner Board of Standards will verify a Certified Financial Planner (CFP ® ) designation. Call 888.CFP.MARK or visit www.CFP-Board.org.

How are financial planners compensated?
Financial planners can be paid in a variety of ways for their work, which are listed below. Some are paid by more than one method. The FPA has no formal position on the merits of any form of compensation. Instead, it is our belief that the planner’s competence and ethical standards should be the primary consideration in your selection process. However, before entering into a relationship with a planner, you should have a clear understanding of how he or she will be compensated. A particular compensation arrangement may best suit your needs.

Methods of compensation:
Fee Only: The planner is compensated entirely from fees for purposes of consultation, plan development or investment management. These fees may be charged on an hourly or project basis depending on your needs, or on a percentage of assets under management.

Commission Only: There is no charge for the planner’s advice or preparation of a financial plan. Compensation is received solely from the sale of financial products you agree to purchase in order to implement financial planning recommendations.

Combination Fee/Commission: A fee is charged for consultation, advice and financial plan preparation on an hourly, project or percentage basis. In addition, the planner may receive commissions from the sale of recommended products used to implement your plan.

Fee-offset: Commissions from the sale of financial products are offset against fees charged for the planning process.

Salary: Some planners work on a salary and bonus basis for financial services firms.

In all of the above categories of compensation, you should request information on any real or potential conflicts of interest. In addition to commissions received from any financial product sales, you should ask whether there are outside incentives or bonuses to be gained by the planner for certain recommendations.
 

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