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April 30, 2015
Knowing who and what you are looking for to assist you with your finances is the first step to retirement planning — and meeting with the right financial planner (or advisor) has proven benefits.
Knowing that working with a financial planner can boost your confidence and preparations regarding retirement savings is one thing, but how do you go about choosing a financial advisor? For many, the myriad designations can seem a lot like alphabet soup.
“There are at least 100 financial designations, and many are just empty titles that don’t mean much,” writes CNN Money. For example, “retirement specialist,” holds little meaning as the title does not have backing from any industry group.
“The ones you want to look for are the ones that take a significant amount of time and expertise to master before the designation is awarded,” CNN Money says.
Quality advisers all have at least one professional designation, and some have many. The terms financial advisor, financial planner, retirement planner, and others are all general titles that do not necessarily define the education of that advisor and all mean generally the same thing.
To really understand the qualifications of an advisor, you must learn about the certifications they have passed.
“Ask financial advisors/planners about their education, credentials and experience to ensure that they are qualified to be providing the service that they are providing,” says El Dorado Hills, Calif.-based Scott Draper, a certified financial planner with Thrive Financial Planning.
“Ask about the compensation structure. If it is too complicated or the advisor avoids the topic, then it is probably not in the client’s best interest.”
Important designations among financial planners and personal advisors include:
Certified Financial Planner (CFP) — CFP and Certified Financial Planner marks are certification marks owned by the Certified Financial Planner Board of Standards, Inc.
“A certified financial planner must meet an education, examination, experience and ethics requirement in order to become certified,” Draper explains. “This includes a college-level program in personal financial planning, a rigorous two-day comprehensive examination, three years of experience in the financial planning process and adherence to high standards of ethics and practice. CFPs are trained in providing comprehensive services in the areas of financial planning, investments, retirement, insurance, taxes and estate planning.”
Chartered Financial Consultant (ChFC) — This designation is awarded by the American College. Advisors with a ChFC certificate means that the planner has passed exams in financial planning, taxes, insurance, investment and estate planning and have a minimum of three years of experience.
Registered Financial Planner (RFP) — To become a Registered Financial Planner (RFP), applicants must have two years of experience, complete 120 hours of coursework and agree to adhere to a code of ethics, says Wes Moss, chief investment strategist at Capital Investment Advisors (CIA), in a statement.
While the RFP title is significant, there is little difference between this title and the more commonly seen CFP, financial advisors agree.
Fee-Only Financial Planner — While credentials are important, those planning for retirement should also consider how financial planners are paid, Draper says.
“A fee-only planner is compensated through a fee for a one-time financial plan, ongoing financial consulting or a fee based on assets being managed,” Draper explains. “ A fee-only arrangement closely aligns the interests of the client with the interests of the planner and leads to a more productive long-term professional relationship.”
In addition to general financial planning certificates, there are also important designations for those who specialize in retirement planning. No matter your age, it can be in your best interest to find an advisor with retirement expertise.
Many advisors know how to help clients build wealth, but not all advisors know how to help clients drawn down their wealth in retirement.
Retirement planning specialists include :
Certified Senior Advisor (CSA) — “Anyone working with older adults needs the CSA certification,” says the Society of Certified Senior Advisors, which offers the designation.
A CSA title can be earned in three days of coursework, explains financial author Mark P. Cussen, in a statement.
“Many advisors who earn this designation work primarily with fixed or indexed annuities; however, there are also a number of non-financial professionals who carry this designation, including estate planning attorneys and healthcare professionals and administrators,” Cussen says.
Retirement Income Advisor (RICP certificate) — Some seasoned professionals who hold major designations, such as CFP, may also have the the Retired Income Certified Professional (RICP) designation, which is sponsored by The American College.
“The RICP curriculum may have the broadest curriculum of any of the designations, spread out among 18 competencies over three courses,” explains Wade D. Pfau, Ph.D., CFA, professor of retirement income at the The American College, in a statement. “Its deep and detailed curriculum includes video interviews and discussions with many leading practitioners and scholars. The three-course curriculum rolled out in 2012, and the first enrollees were able to complete the program in early 2013.”
Choosing a financial advisor is a big decision.
There are also other types of investment professionals that you may want to work with depending on your retirement goals and assets:
Brokers — “Brokers, technically known as registered representatives, buy and sell securities—stocks, bonds, mutual funds and other investment products—for their customers, including individual investors,” explains the Financial Industry Regulatory Authority (FINRA).
Investment Advisers — Investment advisers are individuals or companies that provide advice about securities tailored to the needs of their client. Common names for this type of professional include asset managers, investment counselors, investment managers, portfolio managers and wealth managers, notes the Financial Industry Regulatory Authority.
“Although the terms sound similar, investment advisers are not the same as financial advisors and should not be confused,” FINRA says in a statement. “The term financial advisor is a generic term that usually refers to a broker (or, to use the technical term, a registered representative). By contrast, the term investment adviser is a legal term that refers to an individual or company that is registered as such with either the Securities and Exchange Commission or a state securities regulator.”
Lawyers — Lawyers are licensed to give legal assistance to clients.
“Lawyers are trained to tell you about the legal impact one financial planning or investment decision might have on another—such as the tax implications of setting up a certain type of trust for your estate,” says FINRA
Accountants — Accountants are trained to provide professional assistance in areas including tax and financial planning, tax reporting, auditing and management consulting, says the Financial Industry Regulatory Authority.
To become a Certified Public Accountant (CPA), the accountant must pass a national examination administered by the American Institute of Certified Public Accountants (AICPA) and meet education and experience requirements set by the state Board of Accountancy where the accountant does business.
If you’re looking to speak with someone about the tax implications of financial decisions, a CPA can help you.
There are many questions to ask a financial planner.
However, one of the most important answers for you to ask and understand is to find out if the financial advisor is a fiduciary.
A fiduciary manages the assets for the benefit of the other person rather than for his or her own profit. The duty of a fiduciary is so important that President Obama is directing his administration to move forward with a proposed rulemaking that will protect families by imposing a “fiduciary standard” on a greater number of brokers and advisors.
The fiduciary standard ensures that advisors put the interest of average Americans ahead of their own profits. Learn more about the fiduciary standard in, “What does fiduciary mean? Should you care.”
But even finding an advisor that abides by the fiduciary standard is not the end all be all, writes Steve Vernon for CBS MoneyWatch.
“While the fiduciary standard is more rigorous than the suitability standard, it does not protect you from the potential incompetence of the advisor,” Vernon says. “So you’ll need to make sure they have the training and experience necessary to make recommendations that are appropriate for you.”
Ultimately, finding the right financial advisor by asking about education, credentials and skill set in addition to whether he or she is a fiduciary will help you to start seeing positive results almost immediately, experts say.
“People often don’t know exactly what their goals are, but financial planners can help clients realize their dreams beginning in the initial meeting,” says Founder and Principal at Las Vegas-based Belmore Financial, LLC Kate Holmes. “Financial planning isn’t all about numbers and calculations. It’s about honest conversations, embracing what makes us happiest, and creating a plan to go after that.”
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