A CFP, or Certified Financial Planner, is a professional who has taken their dedication to helping individuals identify and work towards meeting their financial goals up a notch by earning the CFP certification. The CFP certification is earned by meeting demanding ethical and educational requirements necessary to gain expertise in helping clients meet their financial goals.

A CFP stands apart from other financial planners and advisors because of their thirst for knowledge, devotion to financial planning, aspirational character, and tenacity.

Thirst for Knowledge – There are two educational requirements that must be met in order to earn a CFP certification. The CFP Board has approved two years of coursework specifically designed for the CFP certification which must be completed through a registered program. In addition, all CFPs need to have earned a bachelor’s degree or higher.

Devotion to Financial Planning – In addition to six years of required education, another 2-3 years of full time financial planning experience is required to earn a CFP certification. This can be achieved one of two ways, either through a two year apprenticeship (4,000 hours), or with three years of on-the-job financial planning experience (6,000 hours).

Aspirational Character – A CFP adopts the highest ethical and professional standards surrounding seven Principles: Integrity, Objectivity, Competence, Fairness, Confidentiality, Professionalism and Diligence. Certified Financial Planners are fiduciaries – they act in a manner that is in the best interest of their client.

Tenacity – The CFP exam is rigorous and difficult to pass. It takes approximately seven hours, broken down into two three-hour sessions. It consists of 170 multiple-choice questions, including both stand-alone and scenario-based questions designed to test one’s ability to apply and integrate knowledge utilizing problem-solving and critical thinking skills. It is not for the faint-hearted – in 2013 the average overall pass rate was a mere 63.3 percent.

A CFP certification is the highest standard a financial planner can be held to. Exceptional knowledge of the financial planning field must be demonstrated in order to earn the CFP certification, knowledge that will continue to grow as bi-annual continuing education requirements are met. Certified Financial Planners are uniquely qualified to help individuals meet their financial goals.

Before you choose a financial advisor, it helps to know what services you are looking for. You may want someone solely to handle your investments. Maybe you’re looking for assistance with multiple aspects of your financial life (investments, insurance, gifting, legacy planning). Or you could need someone to help manage your investments specifically for tax planning. Start by making a list of the services that apply to your sitatuion. Once you have an idea of what services you need, you can weigh the benefits of financial planners vs financial advisors.

Next, start the interviewing process.  You should meet with several potential advisors and take notes.  You want someone you feel comfortable with. A good advisor should be someone you feel free to talk to about both personal and financial issues (there are a lot of family dynamics that play in to what you do with your money) and the advisor should be trustworthy.

Finally, there is an oath you should be aware of as you choose a financial advisor: the fiduciary oath.

Definition of ‘Fiduciary’

1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets for the benefit of the other person rather than for his or her own profit.
   
   
2. A loan made on trust rather than against some security or asset.

Not all financial advisors have taken this oath. A financial advisor who has taken the fiduciary oath has sworn to put your best interests first, to always do what is right for you. Most financial advisors who have agreed to the fiduciary oath cannot accept commissions on any financial products offered to their clients.

To choose a financial advisor – find someone you trust and who has obligated themselves to put client interests ahead of their own.

With hundreds of retirement calculators available online, it can be a daunting task trying to find one that is comprehensive. What features should a retirement calculator have to ensure it will provide an accurate summary of your retirement plan’s probability of success? Online retirement calculators share characteristics and ask common questions in order to gather basic data such as:

• Ideal retirement age
• Social Security benefits
• Contributions to retirement savings account(s)
• Current age
• Marital status
• Current income
• Percent of investments held in stocks, bonds, and cash

A more advanced retirement calculator will factor in tax rate changes, life expectancy probabilities, and varying investment rates of return. It will also calculate success probabilities after running your data through multiple scenarios.

Why does a retirement calculator need to factor in taxes? Taxes need to be paid on withdrawals made from most retirement accounts, and the tax rate can vary depending on current tax law and the state you live in. A quality comprehensive retirement calculator will give the option to account for changes in tax brackets during retirement, utilizing one that does not can result in misleading success probabilities.

Misleading success probabilities can also occur if you outlive the age span the retirement calculator assumes. According to the social security administration, in 2015 the average 65 year old American male will live to age 84 and the average 65 year old American female will live to age 86. Data such as this is utilized by many retirement calculators. An exhaustive retirement calculator will be able to calculate how your success fluctuates with varying retirement ages and retirement time horizons.

Additionally, a comprehensive retirement calculator can check your success probability against varying rates of return. The rate of return needs to be plausible and the calculator should show how your account will fare with differing rates of return over time.

Finally, a quality comprehensive retirement calculator should be able to run data through multiple scenarios to check the probability of success under the best, worst, and most likely outcomes.
Retirement calculators are helpful tools, but to truly know if your retirement plan is on track set up a meeting with a financial advisor. Spending time talking with an advisor who specializes in retirement planning will provide a more comprehensive review of what you have, what you need, and how to proceed to attain your retirement goals.

When asked what is the most desirable trait in a prospective financial advisor, most investors say trustworthiness.  Trust is not earned in a single meeting, but there are steps you can take to streamline the vetting process.  Once you have created a short list of prospective financial advisors to interview schedule an appointment.

Before your meeting – do your homework.  Go online and familiarize yourself with the advisor’s website and read any commentary the advisor has authored.  Put together a list of questions you want answered.  Trust isn’t built overnight, but the answers to the following questions will help point you in the right direction.

1. What services do they offer? The advisor’s answer will tell you where they focus their time.  Are they focused mostly on investments or do they try and integrate financial planning and investment strategy? It is important to find an advisor that offers services tailored to your needs (investing, retirement planning, legacy planning, tax planning, etc.).

2. What professional credentials have they earned? Widely respected credentials related to financial planning and investment management include:

• PFS (Personal Financial Specialist) – A personal financial specialist is a certified public accountant (CPA) who has passed a comprehensive exam covering financial planning and investments. The PFS desgination is very similar to the CFP.|
  
  
• CFP (Certified Financial Planner) – To become certified, a financial advisor must complete the four “Es”:  Education, Examination, Experience and Ethics.  To maintain the certification, the advisor must complete 30 hours of continuing education every two years and remain in good standing within the profession.
  
  
• CFA (Chartered Financial Analyst) – The curriculum involved in this designation is focused exclusively on investment management.  In order to earn the CFA credentials, one must pass three difficult tests.
  
  
• College/Graduate Degrees – Good financial advisors adhere to a logical process when designing retirement plans or investment strategies.  Academic degrees that lend themselves to logical thinking as it relates to wealth management include finance, accounting and math/engineering disciplines.
  
  

3. How do they get paid?  Financial advisors use one or a combination of the following pay structures:

• Fees (either a flat fee or a percentage of the assets under management)
• An hourly rate
• Commissions

Each compensation model has its own advantages and disadvantages, but historically commission models have been the most abused.  In the end, advisory expenses should be fair and transparent.  Insist that all fees be clearly labeled on account statements and all quoted investment returns be shown net of investment expenses.

4. Will they commit in writing to act as a fiduciary? A fiduciary is someone who puts clients’ interests in front of their own.  It might be surprising, but not all financial advisors are required to act as a fiduciary.

5. What are their checks and balances? With all of the turmoil surrounding the financial industry over the past few years, it is vital that you verify your wealth is where your advisor says it is. Below are a few steps you can take to protect yourself and your money.

• Confirm you will be getting monthly statements from a third party custodian (i.e. Charles Schwab or Fidelity Investments).
  
  
• Call the third party custodian directly to verify they work with the investment advisor.
  
  
• Write checks to the third party institution only. Never write a check directly to your advisor or anyone they work with.
  
  
• Ask a financial advisor who their auditor is. Do they have someone who does an independent audit of their practice on an annual basis? Is the auditor credible (for example, an accountant)?

6. Who is the advisor’s typical client? Oftentimes financial advisors will work with a specific type of client (55 and nearing retirement, entrepreneurial women, young families, divorcees, etc.).  Some advisors only accept new clients who possess a minimum net worth or investable asset balance.  Understanding the advisor’s clientele will help you understand if the advisor has experience in working with individuals similar to you.

7. What is the advisor’s philosophy to managing money?   Does their investing philosophy align with yours (are they aggressive, passive, or moderately conservative)? You want to confirm that your investment advisor will manage your investment portfolio to fit with your risk tolerance and goals. Additionally, you want an advisor that will be open and upfront with you as you look at the success probabilities for your financial plan. Is the investment return that they are assuming in your financial plan realistic? Will the advisor research how your financial plan plays out in the real world? If the advisor promises consistent returns, be wary. No advisor can guarantee a static rate of return because rates of return vary annually.

8. Who will you be working with? Set up realistic expectations for how often you will meet with a financial advisor and whom you will be directly working with. Ask a financial advisor if you will work with them directly or if they have a team that you will work with. Ask them to go through the average agenda of a client portfolio review.

9. What is in the advisor’s background? There are many online resources that you can utilize to find out if the financial advisor you are interviewing has had any customer complaints filed against them, if they have a criminal history, and any other relevant financial disclosures (for example, if they have filed for bankruptcy). For a one-stop-shop, go to BrightScope – they pull their information from all regulatory bodies.  As you do your research, be sure to keep an eye out for advisors who change the custodian or the firm that they work with frequently, as that can be a sign of trouble.

10. Finally – How well do they listen?  It seems listening is a lost art these days.  Advisors who talk incessantly about their own accomplishments and try to impress their audience with the vastness of their investment knowledge might be missing something important: how you feel about things and what you want to accomplish.  A good advisor needs to understand what you want to accomplish before jumping into the proverbial investment weeds.

Once you have settled on a financial advisor, be sure to get a written advisory agreement including the fees to be charged. Remember, this is your money and you are ultimately the one in charge of it. Go in to the interview thinking “I COME FIRST!”