Don’t trust what you see in the news about financial investments? Brian Conroy, of Savant Capital Management, offers advice on why a CFP designation can help you find a reputable financial planner.
Following the decline in the economy and an increase in the discovery of Ponzi schemes, many people are finding it difficult to put their trust in some members of the financial services industry. Many individuals know they need help in meeting their financial goals, but they don’t know who they can trust. One trustworthy source of information is the Certified Planner Board of Standards Inc., which offers Certified Financial Planner (CFP®) status. Founded in 1985, the nonprofit group’s mission is to establish and uphold professional and ethical standards for financial planners and offer public advocacy to ensure competent financial advice to all.
The CFP Board of Directors has launched a new campaign to help the public understand the important role that CFP professionals play in educating Americans on their financial well-being and helping people to meet their life goals. The campaign will help to provide clarity to consumers who look for designations and certifications as guidance when they choose a financial planner or adviser.
The new campaign, called Let’s Make a Plan, includes national television, online and print advertising promotions. A public service Web site, LetsMakeaPlan.org, will serve as a core feature of the campaign, where consumers can learn about financial planning and the personalized approach CFP professionals provide. They also may search for local CFP professionals.
The CFP certification is a meaningful professional credential that continues to evolve and be strengthened by new education, ethics and examination requirements. There are now more than 63,000 CFP professionals in the United States, but according to the Bureau of Labor Statistics, there are more than 149,000 “personal financial advisers.” There’s no doubt that consumers are confused about where to turn for help.
Unlike many financial advisers, CFP professionals must complete a comprehensive course of study at a college or university that offers a financial planning curriculum approved by the CFP Board. CFP professionals must pass the comprehensive CFP Certification Exam, which covers the financial planning process; tax planning; employee benefits and retirement planning; estate planning; investment management; and insurance. It’s a tough one, too; the average pass rate is only 56 percent. Passing this comprehensive exam ensures that Certified Financial Planner professionals are highly qualified to successfully develop your financial plan.
The CFP Board enforces a set of professional standards and holds CFP professionals accountable for any misconduct. Consequences of misconduct can be severe, and include public suspension or revocation of CFP certification. Holding the CFP designation also means agreeing to a true fiduciary standard of care that places clients’ interests first.
What is a fiduciary? In practical terms, a fiduciary has the highest standard of customer care imposed by either equity or law. A fiduciary owes a duty of loyalty to clients and is expected to be above reproach in carrying out his or her duties. A fiduciary must not put personal interests before clients’, and may not profit from the position of fiduciary without the knowledge and consent of the person to whom these fiduciary duties are pledged.
While investors often assume their advisers are held to such a standard, in reality, most in the brokerage and insurance industries are not. This confusion has stirred up a debate that has reached the halls of Congress. Most brokers follow the “suitability standard.” Simply put, they are not required to recommend the most appropriate investment in any given situation. While they cannot make unsuitable recommendations that they know to be inappropriate for you, they have no duty to seek out the best recommendations for you.
Creating a financial plan is not about selling anything, especially financial products. Creating a financial plan helps you to see the big picture and set long- and short-term goals, crucial steps in mapping out your financial future. Working with a CFP professional can secure your financial well-being and give you peace of mind. People are pulled in many different directions when it comes to their finances, but a CFP professional is uniquely qualified to pull all these pieces together. ❚
Brian Conroy is a financial advisor at Savant Capital Management, a fee-only wealth management firm in Geneva, Ill. Savant is a Registered Investment Adviser.