Why you would want a CFP financial advisor — and 3 reasons it may not matter as much as you think

Sean talks about why you may or may not want to work with a Certified Financial Planner as your financial advisor. A CFP license holder might be the best advisor for you. But does it really make a difference?

Transcript

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Okay, you've probably come across the Certified Financial Planner Credential, the CFP. Kind of the gold standard in terms of personal finance advisors, financial advisors, financial planners, wealth managers, etc. I've been a CFP or had the designation since 2006, so for quite some time. I've supervised and worked with both advisors that have it and those that don't. So I feel somewhat qualified to talk about why I think it's a great thing to look for in an advisor, and then also a few reasons why it might not be the end-all be-all in your search. So I'll keep this fairly brief. I'll give you three reasons why I think it's a great designation, why it means a lot, and then three reasons why it may not be a dill killer for me if I'm helping someone find an advisor and they're not a CFP license holder. So, number one, kind of the obvious, it demonstrates some competency and knowledge when you receive the designation, when you earned it. It's like taking six college courses basically. So about a one-semester full load of college-level classes to have the educational requirement, which then allows you to sit for the exam, and then if you've had enough experience, only three years working with clients, then the you can use the designation. So I'm not going to get into the technical details of that. There's plenty of content that you can find to learn what's required. But number one, it's demonstrating some competency and education to earn the designation. Number two, it doesn't demonstrates some level of desire to go earn that credential. Because especially when I started doing this 20 plus years ago, you definitely did not have to have a CFP. You still don't to be an advisor, work in the profession. And so if you've had it for a while, or you have at all, it demonstrates that you have the desire to be professionally competent and knowledgeable. And I think that's very important when you're thinking about working with someone to help you with your life savings or the planning around your finances, that they're going to be willing and able to go learn things is kind of an obvious but sometimes not as common as I would hope a factor for an advisor. And then number three is there's the continuing education requirement. Every two years we have to get a 30-year 30 hours of continuing education that applies to the certified financial planner. So that's going to make sure that you're having some level of ongoing professional development. So now here's a couple reasons why I would not make it the only criteria in helping someone find an advisor. Number one, there's no ongoing test of someone's competency. So, like any profession, if you develop the knowledge and you master that body of knowledge to get a credential, that's helpful. But the longer we get away from that licensing, in my case, uh almost 18 years as I record this, what I learned then may or may not be as useful today. Uh best practices may have changed, uh some new technique or tool may have been developed, or account has been uh, you know, if you if you got the CFP before the advent of the Roth IRA in 1998, big deal to have the Roth IRA, and you weren't, you know, you didn't get smart, if you will, before that. So there's no ongoing test of competency. Um, and I do come across advisors, some that are CFPs and some that aren't, but that I'm a little surprised at the lack of sort of what I would think of baseline knowledge, or at least the ability to look it up before you uh give give uh some advice to a client. Um so when you're working with an advisor, if you're ever skeptical or want to double check something, don't hesitate to Google. Uh if you get an answer that's different, don't hesitate to point that out to your advisor or ask, hey, is is there another something else that applies here that I'm I'm missing? So uh number one, there's no ongoing test of competency. Number two, uh, the continuum education that we do take is not always directly useful. So there's a wide swath of topics that a certified financial planner can work with clients on. And if we if someone focuses only on retirement planning, um then having continuum education on complex estate planning may not be that useful, but it's still going to count the same in the in the uh continuing education requirement. So if I really like life insurance, I can take a lot of continuing education about that topic and completely avoid tax planning, for example. So it's great to have continuing education, but I find it's not that directly applicable all the time. Um so I end up to some degree studying the things I'm really interested in when I'm fulfilling my CE requirements. So that's number two. Number three, I think someone that works with a certain profile of clients and knows their problems inside out, we'd call that a niche, a niche practice, or uh sort of a the profile of someone, the challenges they face, whether that's broader like retirement planning or narrow like a profession or a certain subset of a profession. I think someone who really works with similar types of clients and can understand those prop those problems and challenges and opportunities that that group of people face can be way beyond anything a CFP could bring to the table, the value just because they have a very broad education. So a generalist CFP who's not real dialed into any particular group versus someone who works with um you know elementary school teachers in a certain state, so they so he he or she knows their their pension plan, knows the four or three Bs that you can use, knows um how to work around the ebbs and flows of the uh the calendar for an educator, understands the history of changes to pensions, understands dynamics that you know hit a profession during uh COVID uh era, so can speak the language. Any kind of niche like that where you really understand and can speak the language and understand your clients, I think that can be way more important than technical knowledge that covers uh potentially any kind of client. Again, ideally, if you have uh the niche focus and understanding a set of clients challenges and opportunities, and you have the CFP designation, even better. But if I'm having to pick between the two, I'd rather work with someone or really look closely at recommending an advisor who knows their uh client niche inside now. So that's the gist of uh what I wanted to cover today. Number one, so first, some three things that that are great um pluses for having the CFP, getting the competency it requires to get the designation, the desire it shows to get that get that credential, and then the the need for continuing education to keep up the credential, including uh an ethics attestation, which if we have to say we're gonna be honest and do the right thing, I'm not sure that's that valuable, but that's in there in the continuing education. And then three reasons I would not just blindly pick a CFP over a non-CFP. There's no ongoing test of competency. The continuum education is not always very specific to a part of the field that an advisor might work in. And then if we come across two potential advisors, one who's a just really focused expert, and one who's more of a generalist but has a CFP, I'm inclined to look real hard at the specific expert versus the generalized certified financial planner licensee. So that's all for today. Let me know if you have any other questions about the CFP or other designations, and if I can help you in your search to find a financial advisor. Thanks.