Complete Guide: How to Find a CFP You Can Trust
Finding a Certified Financial Planner (CFP) you trust can be a daunting task. It’s not as easy as typing how to choose a CFP into a search engine. After all, there are tens of thousands to choose from in the United States alone.
Luckily for you, we’ve compiled a comprehensive list of tips and tricks to help you narrow your choices and find a CFP that is right for you.
But first, before you start your search to find a CFP, it’s important to understand what it means to be certified and the requirements needed. This understanding will help you know how to choose a CFP that aligns with your specific needs. In order to become certified, financial planners must complete the requirements of the CFP Board.
These requirements revolve around the “four Es” of financial planning: education, examination, experience, and ethics. Candidates for certification are required to complete studies on over 100 topics related to financial planning. These topics range from taxes to stocks and bonds to estate and retirement planning. Once a planner completes requirements in each of these areas, they are then allowed to use the trademarked CFP certification mark.
When it comes to financial planning, certified means qualified. Find a CFP that is certified so you know they are held to the highest ethical standards
So, now that you know what it means to be certified, here’s how to find a CFP that’s right for you.
What to Look for in a CFP
Check for a CFP Certification Logo
First and foremost, always check for a certification logo when you need to find a CFP. There are plenty of financial planners and advisors that aren’t certified, and this is the easiest and fastest way to narrow your search to those who are. Though this is an important step in narrowing your search and knowing how to find a certified financial planner that’s right for you, it’s just the beginning.
Ask Friends and Family for References
Asking friends and family for references can also be a good starting point to find a certified financial planner. Doing so can quickly narrow your CFP search. It can also give you a sense of security since these people have your best interest in mind.
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In addition, you can also ask people outside of your circle to assist you in knowing how to find a certified financial planner. Often, accountants, attorneys, bankers, and other financial professionals can be good sources to ask because they work directly with planners to help carry out a client’s plan. Of course, you’ll still have to search their credentials and do some digging on their background to find a CFP that matches your needs, so keep reading.
Do Your Research
According to the CFP Board, there are over 74,000 people in America who meet the requirements to be a certified financial planner. So how to you narrow that number down and find a CFP that is right for you? Simple. Perform a background check by entering the planner’s basic information in the CFP web form.
This way, you can see whether or a planner has ever been disciplined by the board or if they have filed for bankruptcy at any point in the past 10 years. Knowing this information can help you find a CFP you can trust. A search like this can also help you identify individuals who aren’t currently certified but have been in the past.
The board also recommends asking potential candidates a series of questions to help you know how to choose a CFP that is right for you. They include:
1. How many years of experience do you have? Typically, CFPs should have at least three years of experience. Ask how that experience relates to the financial planning you’ll be needing.
2. Are you held to a fiduciary standard? Asking this can give you a sense to whether or not a planner will have your best interest at heart, an important thing to consider when you find a CFP. If they aren’t held to a fiduciary standard, ask if they would be willing to sign a fiduciary oath that commits them to putting your financial interests first.
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3. Do you have other clients that are in similar positions to me? Even if a planner has multiple years of experience, it’s important to know what type of experience he/she has. This can help you find a CFP with experience most relevant to your needs.
4. What other licenses do you have? Financial planners aren’t allowed to sell stocks or insurance without having the proper licensing. Without proper registration, they also can’t give any investment advice.
5. What strategies do you use in your financial planning practices? Philosophies can vary from planner to planner, and it’s important to make sure they align with yours. Ask them if they’re aggressive or conservative and take some time to think about where you fall within that spectrum. This is an important step to find CFPs that align with your thinking.
6. What type of clients do you work with? Knowing the type of clients a planner works with can give you a better feel for their experience and whether or not their previous work is similar to your current needs. Find a CFP that has worked with people in the same stage of life.
7. What price do you charge for your services, and how do you handle payment? Are services charged by the hour? Is there a commission percentage? Or a flat fee? These are important things to take into account when you consider how to find a CFP. And as a rule of thumb, you really shouldn’t pay more than 1.5% per year for advisors who charge based on commission.
8. Can I see a sample financial plan? This will help you determine how much detail a planner will give his clients, an important thing to consider in your search to find a CFP. If you’re the type of person who wants to know every in and out, a 5-page snapshot might not be enough. On the other hand, if you only want a general overview outlining the plan, a 50-page report isn’t right, either.
9. How much communication do you have with clients who are similar to me? There are some advisors who only talk to their clients once a year and others who check in every quarter. Determine what is best for you and your needs and find a CFP who matches up.
10. Why should I choose you over other advisors? What is it that sets you apart? The process to find a CFP can be a long, confusing path. This answer can give you a sense for an advisor’s values and outlook on financial planning in general.
These questions are all important in your search to find a CFP that is right for you.
Consider other Financial Service Credentials
There are a number of other licenses and credentials to look for when you need to find a CFP. For example, a CFA (Chartered Financial Analyst) is a qualification for professionals who focus on investment management. The program primarily focuses on portfolio management and financial analysis.
Another common certification among financial professionals is a CPA or PFS. CPA stands for Certified Public Account, and PFS stands for Personal Financial Specialist. Both of these certifications are centered on individual and personal financial planning. In order to become certified, holders have to fulfill education and examination requirements.
In addition, a ChFC (Chartered Financial Consultant) is someone who focuses on the finances of professionals and small business owners. They have extensive knowledge in the areas of insurance, investments, estate planning, and income taxation.
Determining the other credentials a planner has can help give you a greater sense for their experience and background, both important pieces needed to find a CFP you can trust.
Determine What Type of Financial Planning You Need
Where are you in life? This is an important question to ask yourself when you need to find a CFP. Financial planning is often broken up by categories depending on your age, career, and family size. These categories include:
- Starting Out — for young professionals
- Settling Down — for families
- Entering MidLife — for Baby Boomers
- Near Retirement — for those toward the end of their careers
- Enjoying Retirement — for those already in retirement
There are also advisors who specialize in certain types of clients, including business owners, people in retirement, or executives. Others specialize in specific areas of planning. These areas can range from asset management to divorce to retirement. These are important pieces to consider to know how to find a certified financial planner that is right for you.
Utilize the Power of the Internet
If none of the leads your friends or family gave you are working out, there’s still a variety of options out there. A good way to find these options is through a simple search. The National Associate of Personal Advisors (NAPFA) is a good place to explore other advisors. NAPFA is currently the country’s leading associate of Fee-Only financial advisors.
Another trusted site is GarrettPlanning.com. Here. you can find CFPs based on a specific city or zip code. All of their financial planners can provide advice to people of all stages of life, without minimum account requirements, sales commissions, or long-term commitments.
Think About What You Want in Life
What are you goals? What do you hope to gain from having a professional plan your finances? These are things your financial planner will need to know, so it’s good to spend some time thinking about them before dedicating time to find a CFP.
A lot of times, your planner will ask you to prioritize your goals, so take the time to consider both your short-term and long-term goals. Being honest and realistic is necessary when it comes to talking with your financial advisor. A lot of times this requires a considerable amount of openness. The more information you can give your planner, the better they’ll be able to advise you.
Pick Your Top 3
Once you’ve done your research and confirmed certifications, it’s time to start talking. This is an important step to find a CFP that is right for you. Set at time to sit down with your potential planners and have a conversation. Ask any other questions you have related to your specific case and really listen to answers given.
This is a good time to get a sense for the type of relationship you might have with an advisor. Think of it like a job interview or a trial run. Make a list of pros and cons for each person and prioritize those pros and cons based on what’s important to you.
Be Prepared When Meeting
When meeting with potential planners, you’ll need to bring a number of documents. These documents will help the planner get a general sense for your financial situation and save you time and money.
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Documents that you should bring to the first meeting when you want to find CFPs include: pay stubs, credit card statements and balances, bank statements, loan payments, mortgage payments, check registers, a list of assets, a list of liabilities, wills, healthcare information, business agreements, retirement account statements, investment statements, Social Security statements, stock options, pension benefit statement and booklet, life insurance policies, tax returns, tax estimates for next return, and a list of employee benefits.
In the end, we can all use a little help in knowing how to choose a Certified Financial Planner. The process to find a CFP takes time and, more often than not, can be pretty confusing. These recommendations are a good way to find a CFP that is right for you and your financial situation.
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