“Planning is bringing the future into the present so that you can do something about it now.” Alan Lakein, American Author and Businessman.
Question: I’m curious, what is the difference between a Financial Advisor and a CERTIFIED FINANCIAL PLANNER™? In addition, what should I expect when working with an advisor or planner?
Answer: Anyone can call himself or herself a financial planner, yet only those meeting the requirements of the Certified Financial Planner Board of Standards Inc. may display the CFP® certification. Earning a professional designation demonstrates a level of commitment by an advisor to obtain and keep the certification.
The requirements to obtain the CFP® certification include a minimum of three years experience dealing with the financial planning process, passing a 10-hour comprehensive exam demonstrating a mastery of practical and theoretical financial planning knowledge, background checks and continuing education to maintain the designation. According to CFP® Board examination statistics, the exam pass rate fluctuates between a low of 42 percent and a high of 66 percent. When working with a CFP® professional, you know that the advisor has a base level of expertise backed by a larger organization. There is a certain level of confidence with the certification.
Not everyone needs to or wants to work with a CFP® professional. Some people decide to do their own planning. Do you need a planner? You may want to turn to a professional for advice and guidance if you:
1) Want to improve the management of your finances but don’t know where to start;
2) Lack the time, desire or discipline to do your own planning;
3) Have a need for an objective and professional opinion on an existing plan;
4) Require additional expertise in certain areas; or
5) Experience a life-changing event, which needs serious attention.
Before hiring any financial professional, consider what services you may need, what services they can deliver, if they hold the proper licenses for any investments you may need, what you’ll be paying for, how much those services cost, and how the adviser or planner is paid. Finally, ask if the planner has experience in dealing with clients like you.
Financial advisors are thinking partners. Select someone you are comfortable with personally and professionally for this important relationship. The more your advisor knows about you, the more assistance they can provide when things are going well and, more importantly, when you run into financial challenges. Here’s what to look for and expect when establishing this partnership.
UNDERSTAND CONCERNS AND IDENTIFY FINANCIAL GOALS
Expect an advisor to get to know you and your family by gathering information about current circumstances, future goals and concerns. Your plan may be straightforward or require a more complex solution. It all starts with a conversation.
EVALUATE COMFORT LEVELS AND DISCUSS EXPECTATIONS
Based on your time horizon and needs, an advisor will assess the type and level of risk you can afford to take. If an investment sounds too good to be true, it probably is. In periods of low interest rates, reaching for higher investment returns may imply greater risk to principal and could be a ploy to separate you from your money. Be skeptical about “guarantees.” Financial advisors cannot share losses or gains in a client’s account. Never, under any circumstances, approve a financial plan or initiate transactions until you clearly understand what you’re agreeing to buy or sell.
DESIGN, IMPLEMENT, MANAGE, MONITOR AND ADJUST YOUR PLAN AS NEEDED
One size doesn’t fit all. Appropriate strategies and recommendations should be tailor-made based on what’s best for you. When it is necessary to make modifications to your plan due to changing circumstances and goals, you’ll make those decisions and adjustments together. A financial plan isn’t an off-the-rack solution; this is an ongoing process.
FOCUS ON LONG-TERM PLANNING AND WORK WITH OTHER FINANCIAL PROFESSIONALS
Your advisor will discuss relevant market developments so you’ll understand their implications. This allows you to make financial decisions based on facts and careful research, rather than emotions and market volatility. When appropriate, your advisor will work with your CPA, attorney and other professionals to address all aspects of your financial and estate planning needs. Frequent and frank communication with everyone involved is essential.
Stockbrokers, investment advisors and financial planners come from a variety of educational and professional backgrounds. Before hiring anyone, find out about his or her credentials; understand what a designation means and how it was earned. Choosing someone to work with in connection with your financial affairs may be one of the most important decisions you make for you and your family. The Financial Industry Regulatory Authority (FINRA) provides an online tool designed to help understand professional designations.
Remember, it really is all about you. Investing hard-earned money is a serious task. Your attention and involvement are necessary. I hope that you will find the benefits of working with someone who is familiar with your unique situation to be profound. Stay focused and invest accordingly.
Information obtained from outside sources is believed to be accurate. This information is general in nature, it is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or solicitation to buy or sell any particular investment. Investing involves risk and the possible loss of principal invested, investors may incur a profit or a loss. Opinions expressed herein are those of the author and subject to change at any time, and not necessarily those of Raymond James & Associates.
“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S.”
This article provided by Darcie Guerin, CFP®, Associate Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at (239)389-1041, email [email protected] Website: www.raymondjames.com/InvestmentInsights
This article provided by Darcie Guerin, CFP®, Associate Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, [email protected] or www.raymondjames.com/Darcie. Please contact Darcie with any questions you would like to have answered in this column.