How and Why to Choose a Certified Financial Planner (CFP)

Did you realize almost anyone can call themselves a financial planner?  With so many choices and voices, there are important questions you can ask to assure you’re choosing the right professional and right relationship for you and your family.

There are many types of financial advisors, including Certified Financial Professional (CFP), Robo-advisors, Brokers, and Wealth managers. When choosing a financial planner, it’s important to confirm the certifications they hold and their experience.

Per the Certified Financial Planners (CFP) Board, “when it comes to your financial security, it’s all about partnering with someone who is committed to putting your interests first. CERTIFIED FINANCIAL PLANNER™ professionals have attained the standard of excellence in financial planning by meeting education, experience, and ethical standards, and as part of their certification, they have made a commitment to the CFP Board to serve your best interests today to prepare you for a more secure tomorrow.”

To obtain a Certified Financial Professional designation, a combination of Education, Examination, Experience and Ethics must be satisfied. CFP® professionals commit to high ethical standards as part of their certification. In addition, they must acquire several years of experience related to delivering financial planning services to clients and pass the comprehensive CFP® Certification Exam.

Qualifications for Certified Financial Planners

To meet the standards for achieving the Certified Financial Planner designation:

  • The candidate must past a CFP Board-conducted background check.
  • The candidate must hold a bachelor’s degree from an accredited college or university.
  • The candidate must have 6,000 hours of professional experience in the field before becoming certified.

Following successful certification, CFPs must complete 30 hours of continuing education, including two hours of ethics to renew their certification every two years.

How Much Does a Financial Plan Cost?

Not all CFPs provide the same services or charge fees in the same way. Most CFPs also sell investment or insurance products or manage your investment assets. In my instance, I am one of a few who provide advisory services but do not sell or manage any investment or insurance products, accept any referral fees or commissions, or charge based on a percentage of your assets.

Preparing a financial plan can be time-consuming. It depends on the depth of the financial plan, various goals and items to include in the plan. Fees can vary widely depending on the type of fee charged and whether or not the financial advisor manages your money. The following chart provides average fees, but a planner can provide an estimate specific to your situation.

Comparing Financial Planning Fees

Fee Type Type Cost
% of Assets under management .25% – .50% annually for a Robo-advisor
0.59% – 1.18% per year
Fixed Fees $7,500 for portfolios under $500k
Hourly Fees $120 – $400 per hour
Per Plan Fee $1,000 – $3,000
Flat annual retainer fee $2,000 – $7,500

The figures above are examples only and used to illustrate what typical fees for financial advisors and their structure look like. Please carefully review fee structures with your investment advisor and review your advisor’s firm ADV and CRS.

When working with a CFP that does not sell products or manage your assets, you know they are there to serve your best interests. They are there to help you with your financial goals, not their own, and do not rely on what they sell you to make money.

Where Can I Find a Certified Financial Planner?

You can always start by asking family and friends for recommendations before searching online. You can also go directly to the CFP Board website to find an advisor in your area and  verify the advisor’s certification. If you find an advisor elsewhere and want to verify their certification, you can also use resources available on the CFP board website.

Questions to Ask a CFP Before You Engage Services

What are the fees and how are they paid?
Financial advisors charge fees in different ways. Fee-only and Fee-based are two common ways. Fee-only can either be a percentage of assets under management, or a flat or hourly fee. Fee-based CFPs make money through client fees as well as commissions or brokerage fees. Your advisor should be able to provide a cost estimate before providing services.

What type of clients do your work with – do you have a specialty?
CFPs often have specific areas of focus, such as tax planning, estate planning, insurance planning, retirement planning, investing and more.

What happens during the planning process and what is the timeline? 
These questions can help you narrow down the list of advisors to find one that best matches your needs and budget.

As you begin to consider how best to achieve your financial goals, you should feel confident knowing that a CFP® professional will act as a “fiduciary.” Fiduciaries act in their client’s best interests at all times when providing financial advice. While the CFP Board doesn’t guarantee a CFP® professional’s services, the CFP Board may sanction a CFP® professional who does not abide by this commitment.

In the first of this three-part series on financial planning, I discussed reasons why having a financial plan or meeting with a financial advisor may be in your best interest. Next week, I will provide personal examples from clients on their financial planning experiences.

The information contained in this article is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional for your specific situation.

Filed under: Dollars & Sense, Life, News
Profile photo of Penny Wasem, CPA, CFP, PFS, owner of Lifetime Financial Planning Solutions in Lancaster, Ohio.

By Penny Wasem, CPA, CFP, PFS

Penny L. Wasem is the owner of Lifetime Financial Planning Solutions, LLC. A summa cum laude graduate of Ohio University, Penny earned a Bachelor of Business Administration with focus in accounting and mathematics. She serves on the board of The Fairfield Medical Center Foundation, is a member of the Investment Committee of The Fairfield County Foundation and has been active on many non-profit boards in the community. Penny lives in Lancaster with her husband Eric Hubbard and is parent to Clark and Olivia Hubbard.