How A Certified Financial Planner Helps With Managing Finances
A Certified Financial Planner (CFP) possesses one of the most rigorous certifications for financial planning knowledge. CFPs are held to a fiduciary standard, unlike some other financial advisors, meaning they are legally and ethically obligated to act in their client's best interest. CFPs help their clients in many areas, including retirement planning, estate planning, investments, insurance, and education.
What a CFP Does and How It’s Different From Financial Advisors
Managing finances often means a lot more than investing and budgeting, and it can get challenging to handle. A Certified Financial Planner helps clients (individuals, families, and businesses) create programs to reach their long-term financial goals. Partnering with a CFP can put your mind at ease knowing that they've met specific requirements for education and experience and have passed a rigorous exam.
A financial advisor is anyone who helps you manage your money. The U.S. Bureau of Labor Statistics (BLS) describes the typical duties of personal financial advisors. They determine the investments that best match the clients' financial goals, Inform clients about investment options and potential risks, among other investment-related tasks.
While it's a given that financial advisors should have a background in finance, they don't have to be specially licensed or certified for the job. CFPs mainly consider themselves financial advisors as well, with the ability to provide more financial planning services.
A CFP can help you figure out how much life insurance you need and how much money you should be saving for your children's college fund, along with investments and other financial planning.
How CFPs Are Regulated
The CFP Board governs Certified Financial Planners, and they must meet their standards with regard to the four E's: education, examination, experience, and ethics. CFPs are obligated to undergo 4,000 - 6,000 hours of training before becoming CFPs. The CFP Board, the Financial Industry Regulatory Authority (FINRA), and state insurance and securities regulators are good sources for checking an advisor's credentials.
How Affordable Are CFPs
CFPs distinguish themselves as fee-only or fee-based. Because some product recommendations may provide them with more financial gain, some financial advisors don't think fee-based financial planners can work only in your best interest. Still, whether or not you choose fee-based or fee-only CFPs, both types are held to fiduciary standards whenever they are giving financial advice.
Financial planners charge an average of $235 per hour according to a 2018 survey, or they can opt for a comprehensive plan with a yearly fee. CFPs can also charge clients a fee based on the value of the assets in their accounts. According to a study by Advisory HQ, these annual fees range from 0.59% to 1.18%.
CFPs are obligated to work in your best interest because of the regulatory board and because they earn more by keeping a client happy. Managing an estate year after year and helping it grow will result in stable income for the CFP and a possible increase in fees depending on their agreement.
Hiring a CFP is a small cost to pay for someone who can potentially help you plan every part of your life, financially safeguarding you and your family's future. Different people have different needs, and it is essential to choose one that works for you.
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