7 Important Tips You Need to Know Now About CFP® Professionals
Please note that this article was originally featured by our CEO, Marguerita Cheng, on CFP Board’s Let’s Make A Plan Blog.
As a CERTIFIED FINANCIAL PLANNER™ professional, I get a lot of questions about financial topics. Some, like whether you should have a budget and why your net worth matters, are simple to answer. Other questions require a more in-depth look into your situation and the guidance of a qualified financial professional.
If you’ve never worked with a financial advisor before, you might have a lot of questions about CFP® certification itself. Here are seven important answers to the most frequently asked questions about CFP® professionals.
1. When should I hire a CFP® professional?
When to hire an advisor is one of the most-asked questions about CFP® professionals. The answer is different for everyone. For some people, a specific event could trigger the need for a CFP® professional, such as:
- A life change or desire to make a life change
- Approaching retirement
- An inheritance or unexpected financial windfall
- A financial crisis such as a layoff or illness
Generally, a good time to hire a financial professional is when you don’t have the expertise, time or desire to manage a plan on your own.
2. Is hiring a CFP® professional expensive?
No. It’s more affordable than you might think, though your fee can depend on what services you need.
An hourly fee might be appropriate if you need a one-time consultation or help with a short-term financial project. A monthly or annual fee can make more sense for ongoing financial planning.
3. Does a CFP® professional receive commission?
Some advisors charge by the hour or project while others earn commission from selling products or services to their clients. Another option is to use a combination of the two. Whichever they choose, there are only three options for a CFP® professional to receive compensation:
4. Are all CFP® professionals fiduciaries?
Yes. A CFP® professional is required to act in the best interest of the client at all times. Being a fiduciary includes a duty of care and loyalty to all clients. The standard serves to promote ethical and competent financial planning.
Whether an advisor is a fiduciary should be a frequently asked question, but many people aren’t aware of the difference a fiduciary can make. CFP® professionals commit to CFP Board to act at all times as a fiduciary when providing financial advice to a client.
5. How often does a CFP® professional recommend updating a financial plan?
A financial plan guides you to your long-term financial goals.
It’s good practice to review your plan once a year. However, more frequent updates to your strategy are often necessary if you:
- Get a raise
- Have (or plan to have) children
- Experience a financial setback
- Change your career goals
- Want to pursue a new financial goal
6. Will a CFP® professional stay with a client long-term or rotate them among other advisors in the firm?
When hiring a financial advisor, some clients prefer to meet with the CFP® professional directly. Larger firms may have a team of people to handle your account. If you prefer to work one-on-one with a specific CFP® professional, make your expectations known during your initial meeting.
7. Does a CFP® professional provide more than investment advice?
CFP® professionals are excellent at analyzing financial information. Giving investment advice or managing your portfolio can be an everyday role for a CFP® professional. However, a CFP® professional provides financial planning that extends far beyond investment advice.
Your financial plan should include a sound strategy to support you through retirement and even death. Retirement planning, tax reduction strategies, risk management and estate planning are part of the comprehensive financial plan that a CFP® can provide.