2009 marks the 40th anniversary of the financial planning profession. It was back in 1969 when pioneers such as Loren Dunton voiced their desire to differentiate between financial salesmen and genuine financial planners. While many important steps have been taken recently to more clearly define the roles of various financial professionals, there’s still an overwhelming sense of confusion among consumers about who is legit and who isn’t within the financial planning profession.
Of the many associations which now exist to train financial professionals and provide business card credentials, the CFP is probably the most well-known. To achieve the CFP designation you have to pass a series of modules covering topics such as investments, estate planning, taxes and insurance. Upon completing the modules, you must also pass a 2-day comprehensive exam which reviews all the content from the modules.
While being a Certified Financial Planner (CFP) doesn’t ensure that you’re the smartest and most well-informed financial planner around, it should provide some relief to clients that their planner is well-versed in a number of different topics. The same can’t be said of some other credentials which can be earned in a matter of hours over the Internet.
Besides credentials, you can also learn a lot by asking an advisor how they are compensated. Pure financial planners generally earn fees, either hourly or based on a percentage of your assets. Some financial planners earn a mix of fees and commissions. If your advisor earns a living purely on commission, that might imply they are more of a ‘broker’ or salesperson of financial products rather than a planner. It’s tricky because many traditional brokers call themselves financial advisors because it’s a more professionally accepted thing to call oneself. However, many stockbrokers aren’t well qualified in retirement and estate planning.
The point is, figure out what you’re looking for when choosing an advisor to work with. If you like to trade securities, you might be looking for a traditional broker. If you’re looking to create a strategy for distributing your assets during retirement, you probably want a well-qualified planner.
Please feel free to e-mail me with questions or comments.
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Securities and certain investment advisory services offered through: First Allied Securities, Inc., a registered Broker/Dealer. Member: FINRA/SIPC. Premier Financial Advisors, Inc. is a Registered Investment Advisor. First Allied Securities & Premier Financial Advisors are not affiliated entities.