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Does it Matter if Your Financial Advisor is a CFP®?

Growing up without a father after he passed away when I was 6, my mother worked full-time throughout my childhood (heck, she still works part-time today 50 years later). 

Since she was in retail, she often worked weekends and holidays. As a result of my mom’s hectic work schedule, I spent a lot of time with my amazing Greek (“yiayia”) grandmother, who lived with us. Aside from helping me learn to speak Greek fluently, her influence and guidance played an enormous part in my upbringing.  As a young boy, I remember her saying over and over that no matter what, going to college after high school was priority number one for me.

That said, I had my doubts about how it would work out. When I was 18, I wasn’t sure how we would pay for my college education—my mother was working overtime just to keep a roof over our heads. We had no college savings.

I was committed to making my mother and yiayia proud. I started a few businesses, worked several jobs, got the help of a great high school guidance counselor, secured several scholarships, and even borrowed some student loan money along the way.

My yiayia told me that going to college would prove to the world that I had put in the effort and energy to accomplish this milestone. It didn’t even occur to me at the time that I was the first person in my family to achieve a college degree. Perhaps that’s one reason it was so meaningful to my family.

Working my way through college also instilled in me an appreciation of education and self-development. It cultivated a love for continuous learning and the desire to develop and expand my horizons. That’s why pursuing the CFP® designation immediately after college came naturally to me.

I often wonder why consumers don’t view the CFP® designation similarly to how my grandmother looked at me achieving a college degree. I think the effort that one must put in to achieve this professional designation should be at least a baseline standard when entrusting someone to guide your financial future.

What is a CFP®?

The designation “CFP” stands for Certified Financial Planner, a certification awarded to financial planners who have completed industry testing, education, and experience requirements. The CFP® designation is overseen by the CFP Board, who has the following description on their website:

CFP® professionals take a holistic, personalized approach to bring all the pieces of your financial life together. As part of the CFP® certification, CFP® professionals also have made a commitment to CFP Board to act as a fiduciary when providing financial advice to a client. This means they have agreed to put your best interests first, so they can provide you confidence today and a secure tomorrow.”

When searching for a financial advisor, many individuals use the CFP® credentials as a criterion to help them find a well-rounded and experienced advisor who has committed to always act in their best interest.

People want to know that their advisor has the experience to handle their situation, and a CFP® is an excellent marker for expertise and experience.

To become a CFP®, advisors need to achieve the following:

  • Education. Before they can take the exam, advisors need to have completed the financial planning coursework (typically 12-18 months) from a Board Registered Program and hold a bachelor’s degree or higher from an accredited college or university.
  • Exam. The CFP® exam is a 170-question, multiple-choice test that consists of two 3-hour sessions over one day. The exam includes stand-alone and scenario-based questions, as well as questions associated with case studies. The pass rate in 2019 for first-time exam takers was 67%. Passing the CFP® exam demonstrates that an advisor has attained the knowledge and competency necessary to provide comprehensive personal financial planning advice.
  • Experience. To meet the experience requirements, an advisor must have either 6,000 hours of professional experience or 4,000 hours working directly as an apprentice with another CFP®.
  • Ethics. The ethics requirement includes a background check by the Board and a signed agreement that an advisor will adhere to high ethical and professional standards for the practice of financial planning and act as a fiduciary when providing financial advice to their client, always putting the client’s best interests first.

So, does it really matter?

Financial Advising as a profession is incredibly unique in that anyone can call themselves a Financial Advisor. Unfortunately, this means that the title “Financial Advisor” doesn’t guarantee any level of competency. This is not the case for other professions such as Accounting, Medicine, or Law, where specific qualifications are needed to hold each respective title. 

That’s why it’s imperative to understand the qualifications that your advisor has and ensure they have the expertise to provide impactful financial advice.

As a rule of thumb, knowing your Financial Advisor has achieved the CFP® designation offers the assurance that they’ve achieved specific education, exam, experience, and ethics requirements. 

Next Steps

My grandmother felt so strongly about me achieving a college degree, which I did in 1984, making her very proud. Should you hold the person you rely on for financial guidance up to some similar level of achievement and commitment?  If you’re already working with an advisor, it may be beneficial to ask them if they’ve achieved the CFP® designation or not and hear their reasoning why.

Many advisors do great work, despite not being a CFP®. That said, knowing your advisor has achieved the CFP® designation allows you the peace of mind that they are a legitimate financial advisor and have agreed to high ethical standards.

If you’re shopping for a financial advisor, consider using the CFP® designation as a baseline requirement to ensure that you’re working with someone that can meet your needs. 

If you’re interested in a complimentary introductory call with a CFP® that is focused on helping you deliver your best life through academically sound financial planning that meets your unique needs, you can schedule time with me at ScheduleTimeWithSteve.com.

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