Look for these three letters — CFP — when planning out finances now and in the future

When searching for a financial planner to partner with, you’ve likely come across several different candidates. Perhaps a few of the names were followed by three distinct letters: CFP.

The financial advising industry is filled with a plethora of different career titles and designations. It can be daunting to attempt to uncover the services that are actually being offered, as well as the credentials and background of the practitioner. You have a lot on the line when deciding which adviser to hire. The CFP (Certified Financial Planner) letters indicate that the practitioner has met rigorous requirements, and likely offers services centered around comprehensive financial planning.

You can think of a CFP professional as your financial quarterback. They orchestrate the financial plays, coordinate with other professionals you work with (i.e., CPAs and attorneys), and ensure that every aspect of your situation is accounted for in your financial plan. This is primarily done through holistic financial planning.

Let’s take a look at some key areas:

▪ Estate planning: CFPs frequently collaborate with your attorney to establish estate plans that align with your needs and wishes.

▪ Tax analysis/planning: It is becoming common practice to conduct tax analyses aimed at minimizing your lifetime tax bill. This is typically done with the assistance of your CPA.

▪ Investment planning: When people picture financial advisers, they commonly think of someone who does nothing more than manage your investments. Contrary to that perception, CFPs view investments as merely a piece of your overall plan. Investment strategies are not viewed in isolation but are developed to align with your financial objectives and risk tolerance.

▪ Retirement savings and income planning: CFPs are well-versed in creating income strategies for retirees. This includes optimizing Social Security and pension benefits, and creating tax-conscious withdrawal strategies for you.

▪ Insurance analysis: CFPs commonly evaluate insurance needs for your clients and recommend the appropriate amount of coverage for each situation.

This list only scratches the surface of the services and value that CFPs provide for their clients. If the financial advisor you’re interviewing isn’t offering the services listed above, it may be worth asking yourself: why not?

For many clients an important differentiating factor between a CFP and most other financial advisers is that CFPs are required to uphold a fiduciary standard. This means that the interests of the client are the top priority, and no other interests of any other parties (including those of the CFP), can be put before them.

So, what does it take to become a CFP professional? The requirements are commonly referred to as “The Four E’s.”

▪ Education: A CFP must hold a bachelor’s degree from an accredited college or university. Additionally, they must complete coursework requirements (which typically takes 12 to 18 months) in the major topic areas of personal financial planning.

▪ Exam: The CFP exam is a six-hour exam that contains 170 multiple-choice questions that address the principal knowledge topics of financial planning. This exam is difficult and has a 64% pass rate.

▪ Experience: To achieve CFP certification, an individual must complete 4,000 to 6,000 hours of experience related to the financial planning process.

▪ Ethics: All CFP professionals must attest to a strict ethical code of standards for the practice of financial planning and agree to abide by and uphold these standards while working as a CFP professional.

The letters behind a practitioner’s name can reveal a great deal of information concerning their expertise and the services they offer. If you are looking for a holistic approach to financial planning, a great place to start is by asking, “Are you a CFP?”

Jordan Priddy is a CERTIFIED FINANCIAL PLANNER professional and an active member of the Financial Planning Association of Greater Kansas City. He serves as an Associate Wealth Advisor for Buckingham Strategic Wealth.