All CFPs® are Not the Same
According to the U.S. Bureau of Labor Statistics, in 2018 there were approximately 270,000 Personal Financial Advisors in the United States. With so many people referring to themselves as financial professionals, what distinguishes one from the next? Where do you begin the search for someone right for you and your financial future?
A good financial advisor will be an important ally in building your financial growth and working toward helping you fulfill dreams you may have for your future. Do you want to retire early? Amass wealth to pass down to future generations? Create a lifestyle that allows extensive travel? Or, maybe you are looking to create a solid financial plan that will grow along with your career and family’s changing needs and will give you a stable structure to build on. Advisors will use their experience to work with you in designing a plan that is customized to your needs, not just one-size fits all. They will help you to establish both short and long-term financial goals, and as life happens, will adjust the course of action to achieve them as necessary. On the other hand, a bad relationship with the wrong financial advisor can leave you frustrated, stressed out, wondering what went wrong and potentially no closer to realizing your financial goals.
What is a CFP®?
As stated by the Certified Financial Planner Board of Standards, Inc., a CFP®, or a Certified Financial Planner, is a financial professional “rigorously trained in 72 areas of financial expertise and must accrue thousands of hours of experience prior to earning their certification.” Candidates who meet the high standard of criteria take a comprehensive exam that covers the financial planning process, tax planning, employee benefits and retirement planning, estate planning, investment management and insurance. CFP® professionals also have ongoing continuing education requirements, including Ethics. While the terms financial advisor and financial planner are frequently interchanged, CFPs® are held to a high standard of ethics, required to act as a fiduciary and subject to CFP Board sanctions if they violate these standards. There are currently approximately 85,000 CFPs® practicing in the U.S. today.
What is a Fiduciary?
Some financial advisors are also fiduciaries. Fiduciaries have a fiduciary duty which is the obligation to act in the best interest of their clients. A fiduciary is expected to behave with the highest standard of integrity and transparency and may not, in any way, benefit personally at the expense of the client. Not all investment professionals are held to this high standard; for example, some may use a suitability standard or a best interest standard which are not as robust as the fiduciary standard. Frisch Financial believes this is of utmost importance and has always acted as a fiduciary. In addition, Frisch Financial provides fee-only financial planning and investment management which means that all fees received are paid exclusively from clients as a fixed, flat, hourly or percentage-of-assets fee and no commissions are received. We believe this helps reduce potential conflicts of interest.
How do I begin my search?
The Certified Financial Planner Board of Standards has developed a list of important questions you’ll want to ask any financial professional that you are considering working with. “How to Choose a Financial Advisor” can be found at https://www.letsmakeaplan.org/blog/view/lets-make-a-plan-blogs/ten-questions-to-ask-your-cfp-professional. In addition to seeking out information regarding their experience and qualifications, you should also inquire about any disciplinary actions they may have faced due to unethical or unlawful conduct in their career. While financial advisors who have earned the CFP® designation are held to a set of high standards, they may use differing investing philosophies. It can be helpful to have a conversation to learn about a financial planner’s approach to determine if it is a good match for your own level of risk tolerance. Additionally, services offered, minimum investible assets which might be required from you and all associated costs should be disclosed so that you can make an educated decision when selecting an advisor.
What to Expect from the Financial Planning Process
Once you’ve selected a financial planner to work with, there are some common steps you can expect to take. Customarily, this would be the sequence of events in the financial planning process:
- Understand your current financial situation. A planner will work with you to get a clear picture of your income, assets and liabilities as well as your risk tolerance.
- Identify your financial goals. Where do you want to be in a year? Five years? Twenty years? Are you looking at changing jobs in a few years? Retire? Create your legacy? Simplify your finances?
- Analyze current and proposed new courses of action. What are the possible strategies that can be used to achieve your financial goals? What may impact the potential course of action? What is the economic forecast? What strategies are you currently implementing?
- Develop and review financial planning recommendations. Based on evaluation of your specific financial profile and goals, your financial planner will customize a plan and portfolio to fit your needs. This will be discussed with you in detail.
- Implement your financial action plan. Once an action plan has been determined, your financial planner will assist you with the implementation process.
- Monitor and update the financial plan. Your financial advisor will review your current plan’s effectiveness, along with any changes in your life which could impact your earnings and goals. If any modifications to your financial plan are necessary, updates will be made accordingly, discussed and implemented. Education is also provided throughout the process.
Benefits of a Financial Plan
Establishing a budget, setting aside money for savings and investments, and preparing for retirement are all things which can set you on the right path toward achieving your goals. When you work with a financial planner who can advise you on investments, insurance, taxes and can help you adjust to the changes life will throw your way, you can have peace of mind knowing that you have prepared for the unexpected. At Frisch, all our advisors are CFPs®, and we are here to help you create a plan for your financial success.
Our mission is to help our clients protect, preserve, and enhance their wealth. We achieve this by combining our investment management expertise with our financial planning services. Our co-management approach offers customization of portfolios and client involvement. As a fee only advisor, we do not sell any products and therefore, provide unbiased advice. Our clients always come first.