When working professionals cross over into their 30s and 40s, they often begin to receive advice from friends, family, and even strangers on the best ways to save and invest their money. However, these inputs tend to be based on an experiential understanding of tactics that have personally worked for them. What’s tricky about financial planning is that not every strategy is designed for every person. As an individual or business owner, you have a unique set of circumstances, goals, and risk tolerance that are each necessary to consider when creating a successful financial plan.

This is where a Certified Financial Planner (CFP) can step in. If you need help with creating a customized financial plan as per your needs and goals, consider seeking the services of a certified financial planner who can guide you on the same.

This article will discuss who a CFP is, their credentials, what they do, and when to hire one.

What is a Certified Financial Planner?

Unlike the average investor or other financial professionals, a CFP is a licensed expert in areas like estate planning, taxes, retirement, insurance, and investment planning. One only earns the title of a CFP after years of rigorously studying, completing multiple standardized tests, gathering years of experience in the industry, and having a strong grasp of ethics.

After passing the exam designed by the Certified Financial Planner Board of Standards, i.e. the body of individuals responsible for determining who can be certified for financial planning, the CFP must continue to participate and perform well in yearly education programs in order to upgrade their skills and maintain their certification. These requirements are the chief distinguishing factor between CFPs and other types of financial advisors, thus qualifying the former as true experts in their craft.

According to the Financial Planning Standards Board (FPSB), only 17% of consumers feel knowledgeable about financial matters. In comparison, only 22% are confident about achieving the financial goals they have set. At the same time, 66% of consumers don’t know whom they should trust in conversations about financial planning. The purpose of a CFP is to bridge this gap and act as a reliable source of information to help people achieve their life goals.

In addition to knowledge and experience, another noteworthy benefit a CFP brings to the table is that of being a trusted fiduciary. This implies that the advisor is obligated by law and ethics to serve the interests of a client above their own, binding them to demonstrate loyalty and advise clients to the best of their ability. With a whirlwind of new investment avenues transforming the market these days, investors are in dire need of trustworthy professionals who aren’t only financially savvy but also look out for you and your future.

What are a Certified Financial Planner’s credentials?

Becoming a designated CFP comprises four main requirements: gaining a formal education, completing the CFP exam, gathering relevant work experience, and demonstrating the profession’s ethics.

Every Certified Financial Planner must hold a bachelor’s degree or higher from an accredited college or university under the U.S. Department of Education before appearing for the CFP exam. The next step is to gather relevant industry experience. This means working for three years (i.e. 6,000 hours) full-time or two years (i.e. 4,000 hours) as an apprentice.

Equally important for sustaining their license is the professional conduct of the CFP, which is subjected to great scrutiny by the Board. This is done to establish a fiduciary duty within the candidate and make them a reliable, upstanding member of the fraternity.

What does a Certified Financial Planner do?

Let’s begin by discussing the various characteristics that set a Certified Financial Planner apart from other financial advisors:

  • Most CFPs may refer to themselves as financial advisors, but not all financial advisors can claim to be CFPs.
  • Financial advisors may or may not have a fiduciary duty, whereas CFPs must uphold the fiduciary standard of the Board. This makes the latter more trustworthy and accountable.
  • The process of becoming a financial advisor may or may not involve a certification process, while a CFP must undergo specialized coursework and perform well in the CFP exam.

Being a Certified Financial Planner adds more value to one’s knowledge, experience, and approach toward clients.

Here are some of the ways a CFP can help you grow and manage your finances:

1. They can help you create a personalized financial strategy:

Whether you need a plan for your retirement, want to manage extra income or debt, or simply understand your financial state, a CFP is the right person to guide, inform, and devise tactics to help you reach your goals. From learning how to maximize your income and plan your estate to providing investment recommendations based on factors like objectives and risk appetite, CFPs can play a huge role in keeping your finances on track. Here are some services a CFP is trained to deliver:

  • Guidance on student, mortgage, or auto loans
  • Understanding how to get Social Security benefits
  • Opening Individual Retirement Accounts (IRAs) and managing your 401(k)
  • Retirement planning, estate planning, tax planning
  • How to make the most of veteran and other public benefits
  • Developing a diversified investment portfolio
  • Asset allocation and goal-oriented savings
  • Insurance planning and debt management

Additionally, a CFP can be an invaluable resource during significant life events, including but not limited to earning a large inheritance, selling a property, getting a divorce, deciding to retire early, or in the unfortunate event of a loved one’s death. Known as ‘triggering events’, these are usually the times during which individuals seek out a professional. Whatever your circumstances, a CFP will take into account even the most microscopic financial requirements while bringing their expertise to the table, with the sole purpose of customizing the right strategy. They also act as mediators as well as vigilant overseers to make sure nothing slips through the cracks.

2. They can help you build your wealth:

At the end of the day, the duty of a Certified Financial Planner is to make sure your money works for you. This involves understanding your finances, executing ideas designed to achieve your financial objectives, and building a portfolio that nets a positive return on investment. A non-negotiable aspect of this job is to look at the bigger picture of your future as well as address immediate concerns before devising strategies.

For instance, if you are planning for the higher education expenses of your children, the Certified Financial Planner can help you figure out ways to manage your income without diverting all funds away from other important goals, such as buying a home or contributing to your retirement nest egg.

In addition to gaining the perspective of a trustworthy expert, hiring a CFP can also allow you to focus on other aspects of your life, such as business, family, and personal interests. You won’t have to spend all that free time worrying about your finances and future. This peace of mind is an indispensable part of bringing in a certified planner.

3. They will serve as a trusted fiduciary:

More than knowledge and expertise, this quality of a CFP matters most to average investors who don’t know where to turn for sound financial advice. According to a 2015 survey by FPSB, 68% of consumers regard trustworthiness as the most important trait of a financial planner. Consumers feel more confident and satisfied with the services of a CFP since they’re honest, upfront, transparent, attentive, and of course, obligated to place clients’ interests before their own.

When to hire a Certified Financial Planner

No financial situation lies beyond a CFP’s capabilities, but it’s also true that not every CFP is suited for a particular situation. Many planners choose to specialize in a type of client or area of interest, be it high-net-worth individuals (HNWIs), students with debt, or estate planning. So, before you start scouring the web for the nearest CFP, you must ask yourself what kind of financial planning you need.

Here are some of the most common circumstances during which people seek the services of Certified Financial Planners:

1. You are about to retire

Even if you plan to start saving early, saving for retirement can be tough. Knowing how much money you need for an unpredictable future requires a certain level of foresight that not every investor can claim to have. However, this is what CFPs are trained for, and they can help you develop a realistic corpus by considering the big picture. They will take a detailed account of your assets, investments, real estate, debts, and other valuable resources and use that information to draft a comprehensive financial plan. This step will help determine how much you need to start saving every month to achieve your goals, as well as your monthly withdrawal limits during retirement.

2. You need finances for a big life event

Getting married, having kids, switching careers, getting a divorce, seeing an unexpected windfall or the death of a partner are significant life events that not only have an emotional impact but also affect your finances. In many of these situations, it becomes necessary to take stock of your funds, restabilize your accounts, and chart out a clear, unambiguous plan of action to regain control of your life. With a certified financial planner, this feels easier and less risky.

3. You need to manage large-scale finances

If you have recently amassed a substantial amount of money, perhaps a large inheritance or even a lottery, it might be overwhelming to know what to do without wasting any of it. Money management is a CFP’s key forte. They understand how to step back, take the bird’s eye view, and help you prioritize. The planner has market insights that he or she uses to guide your investments and build a diversified portfolio. And if your current strategy is not working, it’s up to the CFP to review and modify it to get you the desired results.

To conclude

CFPs comprise the ideal combination of knowledge, skills, expertise, and ethical obligations to guide individuals as well as organizations toward a secure, stress-free financial future. So, whether you have a specific requirement or need a fresh perspective on your financial circumstances, a CFP is one of the most qualified advisors you may consider hiring.

You can reach out to a financial expert to help you with short-term goals, long-term investments, or other kinds of financial challenges. Use WiserAdvisor’s free advisor match service to find 1-3 highly qualified and vetted financial advisors that are suited to meet your financial requirements. All you need to do is answer a few simple questions about yourself and the match tool will find advisors that match your financial needs.

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