What is the Financial Planning Association?
What is a CERTIFIED FINANCIAL PLANNER™ professional?
What is the financial planning process?
What should the public look for in a financial planner?
Is there one method of compensation that is better than others?
How are financial planners regulated?
How can a consumer find a financial planner in their area?
What is the Financial Planning Association?
The Financial Planning Association (FPA) is the membership organization for the financial planning community. Members include individuals and companies who have contributed to building the financial planning profession and all those who champion the financial planning process. FPA members are dedicated to supporting the financial planning process in order to help people achieve their goals and dreams. FPA believes that everyone needs objective advice to make smart financial decisions and that when seeking the advice of a financial planner, the planner should be a CFP professional.
What is a CERTIFIED FINANCIAL PLANNER™ professional?
A CFP professional has successfully completed the certification requirements of the Certified Financial Planner Board of Standards, Inc. To obtain the CFP certificate, the following qualifications must be met:
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Examination. An individual must successfully complete the CFP Board’s comprehensive certification exam, which tests the individual’s knowledge on a multitude of key financial planning topics.
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Experience. An individual must acquire three to five years of financial planning-related experience prior to receiving the right to use the CFP marks.
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Ethics. An individual must voluntarily ascribe to the CFP Board’s code of ethics and professional responsibility. This voluntary decision empowers the CFP Board to take action if a CFP professional 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.
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Education. A CFP professional 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.
What is the financial planning process?
Financial planning is a long-term process of wisely managing your finances so that you can achieve your goals and dreams, while at the same time helping to negotiate the financial barriers that inevitably arise in every stage of life.
What should the public look for in a financial planner?
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.
FPA recommends when seeking the advice of a financial planner, the planner should be a CFP professional. In order to earn the CFP certification, individuals must pass a comprehensive examination and continue to meet the education, experience and ethics standards established by the Certified Financial Planner Board of Standards, Inc.
Consumers should look for a CFP professional whose manner, style, area of expertise and technical knowledge is right for them. They should choose a planner who puts the client’s interests first and also offers a thorough explanation – or ‘full disclosure’ – of how he or she will be compensated.
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 FPA recommends that a consumer interview at least three planners in person to find the right one to serve their needs.
FPA offers a free brochure “How a Financial Planner Can Help You…and How to Choose the Right One” that is available online or by calling our National Financial Planning Support Center toll-free at 800.647.6340.
Is there one method of compensation that is better than others?
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. 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, one should have a clear understanding of how the planner will be compensated. A particular compensation arrangement may best suit one’s needs.
There are several commonly accepted methods of compensation:
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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.
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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.
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Fee-offset: Commissions from the sale of financial products are offset against fees charged for the planning process.
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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.
How are financial planners regulated?
Many financial professionals are licensed on the state and federal levels in specific areas such as insurance or securities. However, they are not specifically regulated for their financial planning activities – with the exception of the CFP professional, who is certified by the CFP Board. CFP professionals are held accountable to the CFP Board’s Code of Ethics and must also meet its practice standards requirements. The CFP Board has the power to suspend or revoke the rights to use the CFP mark from an individual who violates the Board’s standards.
The Securities and Exchange Commission and/or state agencies also have requirements for ‘investment advisers’ – a role that most financial planners fulfill.If a planner is a registered investment adviser, or a representative of an advisory firm, FPA advises consumers to carefully review the Form ADV, which discloses a planner’s experience, education, credentials, licenses, manner of compensation and potential conflicts of interest.
PlannerSearch is a consumer service created by FPA to assist members of the public in finding a CERTIFIED FINANCIAL PLANNER® professional who meets their needs and goals. FPA believes that everyone needs objective advice to make smart financial decisions, and that when seeking the advice of a financial planner, the planner should be a CFP® professional. Keep in mind that only CFP professional members of the Financial Planning Association who have chosen to participate are listed on PlannerSearch.
To find a certified financial planner anywhere in the country, visit our Planner Search.
FPA’s National Financial Planning Support Center can provide a list of CFP professionals in your area, or you can call our toll-free phone number at 800.647.6340.
Check with the SEC, appropriate state agencies, your local Better Business Bureau and the CFP Board at 888.CFP.MARK (237.6275) to determine if complaints have been filed against the planner you are considering.
