By Jake Preston, CFP®, CKA®

If you’ve ever considered getting financial advice, you’ve likely come across the acronym CFP®. But what does it mean and how might it be relevant to you?

First, what does CFP® stand for? It stands for CERTIFIED FINANCIAL PLANNER® and it’s a designation for financial advisors who wish to provide holistic financial planning to individuals and families. Today, about 30% of all financial advisors hold the designation. The CFP® is highly-regarded in the industry due to its rigorous certification process.

What are the CFP® qualifications?

Speaking of the rigorous certification process, what does a person have to do in order to obtain the CFP® designation? The qualifications are four-fold: education, exam, experience, and ethics.

First, CFP® candidates must both obtain a bachelor’s degree in any field and complete a CFP® Board-approved course of study in each area of financial planning: investments, tax planning, insurance, retirement planning, estate planning, among others.

Second, there is also an exam. The 6-hour exam, taken after the education component, tests the knowledge of the advisor in the areas of planning noted earlier.

Next, the advisor must accumulate at least 4,000 hours of professional experience directly related to financial planning before they are able to use the CFP® marks.

And finally, the advisor must agree to adhere to strict ethical and professional standards when it comes to the practice of financial planning. One of the most important and often discussed is the obligation to act as a fiduciary when advising clients.

Fiduciary Obligations

So, what does it mean for a CFP® professional to act as a fiduciary? It means that they are obligated to place the client’s interests above their own when providing financial advice. For example, if a CFP® professional would receive higher compensation for recommending a certain investment product over another, but the lower paying product is a better fit for the client’s needs, they are ethically and legally required to recommend the better-fitting product with the lower compensation.

You might read that and think, “Wait, aren’t all financial advisors required to act in my best interest?”, but they are actually not. Some advisors are only required to adhere to the suitability standard, meaning they can make recommendations to a client provided those recommendations are suitable for the client’s goals and financial situation, but the recommendations don’t necessarily have to be in the client’s best interest. It’s an important distinction.

Working with a CFP® professional

So, with all that said, should you consider working with a CFP® professional? While a number of advisors at Beacon Wealth have obtained the designation and we hold it in high regard, we do want to make it clear that there are great advisors in the industry who are not CFP® professionals and there are other designations whereby advisors demonstrate their qualifications. Ultimately, the choice of whether or not to work with a CFP® professional depends on your needs.

(It’s also important to note that Beacon Wealth Consultants and many other firms are organized as Registered Investment Advisors and advisors working for RIAs are already morally and legally obligated to act as fiduciaries. So for example, all Beacon Wealth advisors are fiduciaries whether they hold the CFP® or not.)

Do you own a business? Do you have a complex financial picture that requires advice in multiple areas like tax planning, retirement planning, and estate planning? Are you looking for an advisor that is obligated to abide by the fiduciary standard? If any of those questions apply to you, you might consider working with a CFP® professional.

If nothing else, we hope you recognize that “financial advisor” is a generic job title. The financial services industry, like many other industries, is filled with people of varying skill levels, qualifications, and specializations. Professional designations like the CFP® provide an opportunity for advisors to demonstrate their qualifications and expertise.

Regardless of if you are currently working with a CERTIFIED FINANCIAL PLANNER® professional or not, take the time and do the research to ensure that your advisor is qualified to help you develop a plan that integrates your values and enables you to achieve your goals.

Jake Preston is the Director of Financial Planning at Beacon Wealth Consultants.