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How a Financial
Planner Can Help You
...And How to Choose the Right One
Making
Your Financial Dreams Come True
Like most people,
you have hopes and dreams and life goals for yourself and your family.
These might include buying a home or business ...saving for college
education for your children ...taking a dream vacation ...reducing
taxes ...retiring comfortably. Financial planning is the process
of wisely managing your finances so that you can achieve your dreams
and goals-while at the same time helping you negotiate the financial
barriers that inevitably arise in every stage of life.
Managing your
personal finances is ultimately your responsibility. However, you
don't have to do it alone. A qualified financial planner, such as
a CERTIFIED FINANCIAL PLANNER™ licensee, can help you make
decisions that make the most of your financial resources.
Financial
planning can help you.
- Set realistic
financial and personal goals
- Assess
your current financial health by examining your assets, liabilities,
income, insurance, taxes, investments and estate plan
- Develop
a realistic, comprehensive plan to meet your financial goals by
addressing financial weaknesses and building on financial strengths
- Put your
plan into action and monitor its progress
- Stay on
track to meet changing goals ...changing personal circumstances
...changing stages of your life ...changing products ...markets
and tax laws
Do
you need the services of
a financial planner?
How do you
know if you could benefit from the services of a qualified financial
planner? You may not have the expertise, the time or the desire
to actively plan and manage certain financial aspects of your life.
You may want help getting started. You may benefit from an objective,
third-party perspective on what are often emotional, difficult decisions.
And in today's hectic world, it can be beneficial just to have a
financial expert looking over your shoulder to double-check your
planning efforts and make sure you stay focused and follow
through with your financial plans.
Events
that might prompt you to seek
the services of a planner.
- Often a
specific event or need will trigger the desire for professional
financial planning guidance. These might include:
- Saving
enough for retirement, or rolling over a pension or IRA
- Handling
the inheritance of a large sum of money or other unexpected financial
windfall
- Preparing
for a marriage or divorce
- Planning
for the birth or adoption of a child
- Facing
a financial crisis such as a serious illness, layoff or natural
disaster
- Caring
for aging parents or a disabled child
- Coping
financially with the death of a spouse or close family member
- Funding
education
- Buying,
selling or passing on a family business
Aren't
all financial planners the
same?
No! Be
wary of people who call themselves financial planners but who appear
more interested in pushing specific financial products at the expense
of your real needs and goals. A genuine financial planner can help
you address a variety of financial needs, not just investments,
just insurance or just taxes. Moreover, not every financial planner
is a CERTIFIED FINANCIAL PLANNER™ professional. CFP® professionals
have an ethical obligation to act in your interest.
Aren't
financial planners regulated?
No! People
who call themselves financial planners are not currently regulated
as financial planners by either state or federal government. Many
financial planners are regulated by states through subsets of financial
planning, such as insurance and taxes, but not for their overall
financial planning activities.
The Securities
and Exchange Commission (SEC) and most states have requirements
for people who give investment advice, which would include many
financial planners. The FPA encourages you to ask whether the planner
you are considering is a registered investment adviser or is an
agent of a company that is registered.
CFP® practitioners
are licensed and regulated by the Certified Financial Planner Board
of Standards, Inc. (CFP Board). By virtue of their CFP license,
granted by the CFP Board, CFP professionals are held accountable
to the CFP Board's code of ethics for their financial planning activities.
Why
a CFP professional?
Most CFP professionals
are dedicated to using the financial planning process to serve the
financial needs of individuals, families and businesses. Most CFP
professionals have earned a four-year college degree in finance-
related areas, and have completed a course of study in financial
planning approved by the CFP Board.
To earn the
prestigious CFP® designation and remain licensed as a CFP professional,
individuals must meet four main requirements.
Examination
-They must successfully complete the CFP Board's comprehensive
certification examination, which tests the individual's knowledge
on various key aspects of financial planning.
Experience
-They must acquire three to five years' financial planning-related
experience before receiving the right to use the CFP marks.
Ethics
-They must voluntarily ascribe to the CFP Board's code of
ethics and additional requirements as mandated. CFP licensees
who violate the code can be disciplined, including the permanent
loss of the right to use the CFP marks.
Education
- They must complete 30 hours of continuing education every two
years to stay current in financial planning knowledge, including
ethics.
Compliance
with these four all-important areas assures you that an individual
who holds the CFP® license is well prepared and qualified to
give you sound, professional advice.
As a result
of its established recognition and credibility as a symbol of educational
competence and continued commitment to financial planning excellence,
FPA recommends the use of a Certified Financial Planner licensee
for your financial planning needs. There are also other credible
designations such as the Chartered Financial Consultant (ChFC) and
the Personal Financial Specialist (PFS) which have their roots in
financial disciplines such as insurance and accounting.
How
should I start looking for
a planner?
Ask for names
from friends or business associates who may have used a financial
planner. Attorneys, accountants, insurance agents, bankers and other
financial specialists also can be good sources because planners
often work with them to carry out a client's plan.
The FPA can
provide a list of CF®P professionals in your area. Go to www.fpanet.org
or you can request planner information by calling our toll-free
hotline at 800.282.PLAN (7526).
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.
How
do I choose the right financial planner
for me?
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. You want a planner who will put your needs and interests
first.
Also, 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 we
recommend that you interview at least three planners in person to
find the right one to serve your needs.
What
information should I ask for?
First, request
a written disclosure document from the planner. This will either
be what's called a Form ADV or an equivalent brochure. This should
answer many of your questions. You may then want to follow up with
a personal interview, which many planners will do for free.
Some
of the basic information you
want to gather
- What financial
planning and other financial designations the planner holds
- Educational
background and work experience
- Licenses
to sell certain financial products, such as life insurance or
securities
- Services
the planner provides
- The planner's
basic approach to financial planning
- Areas of
specialization
- Types of
clients the planner serves, and any minimum net worth or income
requirements
- Professional
affiliations, including membership in the Financial Planning Association
- How the
planner prepares a plan
- How the
planner might address your particular needs
- Whether
the planner or others will implement recommendations from the
plan
- Business
relationships the planner has that might present a conflict of
interest
- How the
planner is paid for services, and the typical charges
A face-to-face
interview also should give you a personal sense about the planner.
Does the person seem forthright in their answers? Do you have a
sense of trust and rapport? Is the person focused on your needs,
not selling products?
Why
is 'full disclosure' vital as I pick a planner?
At the heart
of any working relationship with a financial planner is trust. Trust
is built on two factors: the planner acting in your best interests,
and full disclosure of the planner's background, business practices
and other issues.
Full disclosure
means the planner is forthright in providing answers about the planner's
work experience, compensation, methods of planning and so on.
For example,
what business relationships does the planner have? These might be
relationships with companies whose products the planner sells, or
referral fees the planner earns by referring you to certain professionals.
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.
Fee-offset:
Commissions from the sale of financial products are offset against
fees charged for the planning process.
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
can I contact a CFP professional?
To find a
CFP professional in your area, log on to PlannerSearch the FPA's
online consumer assistance service. Go to www.fpanet.org or call
our toll-free hotline at 800.282.PLAN (7526).
Copyright
©2000 The Financial Planning Association
The Financial
Planning Association (FPA) is the membership organization for the
financial planning community. Its 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 informed financial decisions and that when seeking the advice
of a financial planner, the planner should be a Certified Financial
Planner® licensee.
To locate
a Certified Financial Planner professional in your area, log on
to www.fpanet.org or call 800.282.PLAN {7526).
CFP® and
CERTIFIED FINANCIAL PLANNER™ are federally registered marks
of the Certified Financial Planner Board of Standards, Inc.
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