Don’t know who to trust financially? New CFP campaign helps clear up confusion | submitted by Brent Lindell
Following the decline in the economy and an increase in the discovery of Ponzi schemes, many are finding it difficult to put their trust in some people in the financial services industry. Many individuals know they need help in meeting their financial goals, but they don’t know who they can trust.
The Certified Financial Planner Board of Directors has launched a new campaign to help the public understand the important role CFP professionals play in educating Americans on their financial well-being and helping people meet their life goals. The campaign will help provide clarity to consumers who are looking toward designations and certifications to provide guidance on choosing a financial planner or advisor.
The new campaign, “Let’s Make a Plan,” includes national television, online, and print advertising promotions. A public service website – LetsMakeaPlan.org – will serve as a core feature of the campaign. There, consumers can learn about financial planning, the personalized approach CFP professionals provide, and find a local CFP professional through a search function.
The CFP certification is a meaningful professional credential that continues to evolve and be strengthened by new education, ethics, and examination requirements. There are now more than 63,000 such professionals in the United States, but according to the Bureau of Labor Statistics, there are more than 149,000 “personal financial advisors.” It’s no wonder consumers are confused about where to turn for help.
This professional designation mark truly serves as the gold standard for personal financial planning. Just about anyone can use the term “financial planner,” but only those individuals who have passed a rigorous set of criteria and meet the strict ethical qualifications can call themselves certified financial planners.
Unlike other financial advisors, CFPs must develop their theoretical and practical knowledge by completing a comprehensive course of study at a college or university offering a financial planning curriculum approved by the CFP board.
Certified financial planners must pass the comprehensive certification exam, which tests their ability to apply financial planning knowledge to real-life situations. The exam covers the financial planning process, tax planning, employee benefits and retirement planning, estate planning, investment management, and insurance.
The test is a tough one, too. The average pass rate for this difficult exam is only 56%. This comprehensive exam ensures that financial planners are highly qualified to successfully develop a plan for your finances.
The CFP Board also enforces a set of professional standards and holds professionals accountable for any misconduct. Consequences can be severe up to and including public suspension or revocation of certification.
Holding this designation also means agreeing to a true fiduciary standard of care that places clients’ interests first.
What is a fiduciary?
In practical terms, a fiduciary has the highest standard of customer care imposed by either equity or law. A fiduciary owes a duty of loyalty to the client and is expected to be above reproach in carrying out its duties. A fiduciary must not put its personal interests before its clients, and may not profit from the position as a fiduciary without the knowledge and consent of the person to whom it has pledged these fiduciary duties.
While investors often assume their advisor is held to such a standard, in reality most in the brokerage and insurance industries are not. This confusion has stirred up a visceral debate that has reached the halls of Congress.
Most brokers follow the “suitability standard.” Simply put, they are not required to recommend the most appropriate investment in any given situation. While they cannot make unsuitable recommendations that they know to be inappropriate for you, they have no duty to seek out the “best” recommendations for you.
Creating a financial plan is not about selling anything, especially financial products. Creating a financial plan helps you see the big picture and set long- and short-term goals, a crucial step in mapping out your financial future. When you have a strategy, it’s easier to make financial decisions and stay on track to meet your goals.
Working with a certified financial planner can secure your financial well-being and give you peace of mind. People are pulled in so many different directions when it comes to their finances, but a CFP is uniquely qualified to pull all these pieces together and provide a comprehensive evaluation that looks at the whole picture of a person’s financial life.
Brent Lindell is a financial advisor with Savant Capital Management.
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