CFP® Practice Standards
WHY CHOOSE A CFP® PROFESSIONAL
Most people think all financial planners are “certified,” but this isn’t true. Anyone can use the title “financial planner.” Only those who have fulfilled the certification and renewal requirements of CFP Board can display the CFP® certification trademarks which represent a high level of competency, ethics and professionalism. And because they are held to a fiduciary standard of care, a CFP® professional is required to act in your best interest.
THE FINANCIAL PLANNING PROCESS
1. Agree on how to work together
Your CFP® professional will explain the services he’ll provide and define each of your responsibilities. Along with compensation, you’ll discuss how long the professional relationship will last and how you and he will make decisions.
2. Gather information about your finances and set goals
You and your CFP® professional will talk about your current financial situation and gather any necessary documents. Together, you’ll define your personal and financial goals, including timeframes. You may also want to discuss your comfort level when it comes to taking financial risks.
3. Analyze and strategize
Your CFP® professional will take all your finances into account and determine how to meet your goals. Her analysis may cover your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.
4. Develop recommendations
Next, your CFP® professional will go over his financial recommendations, explaining the rationale so you can make informed decisions. He will address your questions and concerns and revise his recommendations if necessary.
5. Put plan into motion
You and your CFP® professional will need to agree on how the recommendations will be carried out. Your CFP® professional may carry out the recommendations herself or serve as your coach, coordinating the process with you and other professionals, like attorneys or stockbrokers.
6. Monitor progress and stay on track
As you work towards your goals, you and your CFP® professional will need to decide who will monitor your progress to make sure you’re staying on track. If the planner is in charge, he’ll check in from time to time, reviewing your situation and making any necessary adjustments to his recommendations.
CFP® CERTIFICATION REQUIREMENTS:
Unlike many financial advisors, CFP® professionals must develop their theoretical and practical knowledge by completing a comprehensive course of study at a college or university offering a financial planning curriculum approved by CFP Board. Applicants may also satisfy the education requirement by submitting a transcript review or previous financial planning-related course work. Or, they can show that they have attained certain professional designations or academic degrees that cover the important subjects in CFP Board’s financial planning curriculum.
CFP® professionals must pass the comprehensive CFP® Certification Exam, which tests their abilities to apply financial planning knowledge to real-life situations. The exam covers the financial planning process, tax planning, employee benefits and retirement planning, estate planning, investment management and insurance. This comprehensive exam ensures that a CFP® professional is highly qualified to develop a plan for your finances.
CFP® professionals complete several years of experience related to delivering financial planning services to clients prior to earning the right to use the CFP® certification trademarks. This hands-on experience guarantees that CFP® professionals have practical financial planning knowledge, so you can count on them to help you create a realistic financial plan that fits your individual needs.
When it comes to ethics and professional responsibility, CFP® professionals are held to the highest of standards. They are obliged to uphold the principles of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence as outlined in CFP Board’s Code of Ethics. The Rules of Conduct require CFP® professionals to put your interests ahead of their own at all times and to provide their financial planning services as a “fiduciary”—acting in the best interest of their financial planning clients. CFP® professionals are subject to CFP Board sanctions if they violate these standards.
CFP Board’s rigorous enforcement of its Standards of Professional Conduct— including releasing disciplinary information to the public—distinguishes the CFP® certification from the many other designations in the financial services industry. Everyone who seeks CFP® certification is subject to a background check, and those whose past conduct falls short of CFP Board’s ethical and practice standards can be barred from becoming certified. After attaining certification, a CFP® professional who violates CFP Board’s ethical and practice standards becomes subject to disciplinary action up to the permanent revocation of certification. Through diligent enforcement of its ethical and practice standards, CFP Board provides you with the confidence that your CFP® professional is both competent and ethical.
Learn more about CFP Board, CFP® certification and financial planning at letsmakeaplan.org.