Finding a good financial planner is similar to finding a good family doctor in terms of time and study. After all, you’re searching for someone to whom you can entrust your financial well-being. But where do you begin your search? There are 69 different financial credentials that you can encounter, according to the National Association of Securities Dealers (NASD). Before you pick up the phone and start contacting potential planners, this article will attempt to help you narrow down your search. Kansas City Financial Planner Association is one of the authority sites on this topic.
Referrals from friends and family, as with a family doctor, are the best place to start the quest. Also, ask who they work with. The best planners would inform you that referrals account for the majority of their new company. You may also search for planners in your region on the internet. There are a few websites that can help you get started. Fee-only, fee-based, and commission-based planners are all listed on the Financial Planning Association (FPA) website. Only those planners who follow a strict fee-only compensation model are listed on the website of the National Association of Personal Financial Advisors (NAPFA). Below, we’ll go over each of the three compensation models in detail.
There are four factors to consider when determining which type of planner is best for you and your family’s finances: qualifications, experience, compensation, and compliance with regulatory requirements.
The four most popular credentials in the financial world are CFP, CPA-PFS, ChFC, and CFA.
1. Certified Financial Planner (CFP) – This designation is given by the Certified Financial Planner Board of Standards, or CFP Board, to persons who meet the CFP Board’s education, review, experience, and ethics criteria. A CFP specialist should be well-versed in all areas of financial planning, such as finances, estate planning, retirement planning, insurance, and taxes. The classification denotes that the person has passed stringent tests and met certain criteria.
2. Certified Public Accountant – Personal Financial Specialist (CPA-PFS) – CPAs have a broader understanding of tax issues due to their profession. The American Institute of Certified Public Accountants awards a PFS designation to CPAs who have completed additional training or already hold a CFP or ChFC designation.
3. Chartered Financial Consultant (ChFC) – This designation is awarded by The American College in Bryn Mawr, Pennsylvania, and designees usually work in the insurance industry. A ChFC specialist should have a comprehensive understanding of all facets of financial planning, including finances, estate planning, insurance, and taxes. The classification denotes that the person has passed stringent tests and met certain criteria.
4. Chartered Financial Analyst (CFA) – The CFA Institute awards this designation to experienced financial analysts who pass three exams in economics, financial accounting, portfolio management, securities analysis, and ethics. Mutual fund providers, retail wealth management firms, and pension funds are more likely to employ CFAs. CFA charter holders must reaffirm their adherence to high ethical standards every year.