Not all financial advisers can be called certified financial planners
Designation means planners must act in best interests of clients in big-picture way.
According to Steve Starnes, anyone can say they are a financial adviser, but not every adviser can say they are a certified financial planner.
Financial advisers and CFPs often are thought of interchangeably. That is not the case, however. Starnes, a principal at Grand Wealth Management, said they both allow advisers to provide different services to their clients in the financial industry.
One of the most striking differences between the two is that a certified planner is held at a higher ethical standard imposed by the Certified Financial Planner Board of Standards Inc.
The board requires all CFPs to act as a fiduciary by putting the interest of their clients’ financial planning needs first.
“If you are in a different organization, you may very well mean that you have another standard, and what that means for me is instead of having an obligation to the client to do what is in the best interest of the client, you may not have that obligation,” said Douglas Voisard, president of Voisard Asset Management Group. “You may be able to put your own company’s interest first, and there are still standards in trying to find out what the client needs, what their objectives are and things like that, but that doesn’t mean that you have to do what is best for them.”
In addition to adhering to the fiduciary standard and acting in the best interests of their clients, there are a slew of requirements that need to be met before an individual can become a CFP.
Starnes said CFP is a hard designation to earn. Apart from the typical degree that is needed to become a wealth manager, he said there is additional coursework, such as estate planning, tax planning, retirement planning, insurance planning and investment planning. Also, advisers need a minimum of three years of experience in a financial services firm before an individual can sit for the examination and potentially receive the designation.
“We see (passing the CFP examination) as a minimum level,” he said. “It practically takes a lot more than three years of experience to get really good at it. There is a lot more knowledge to gain. Just passing the CFP exam tells us that you have a good foundation of knowledge and also we know how hard it was to get to that point. So, it tells us that you are probably pretty motivated to learn more.”
Jordan Buffum, a wealth manager at Voisard Asset Management Group, recently earned his CFP designation. He said he knew he wanted the designation once he started working at Voisard, where he started learning about the areas a CFP covers and the educational value it provides.
“CFP focuses on all the different elements of someone’s financial life,” he said. “CFA (chartered financial analyst) is investment related. So, while a CFP covers investments, a CFA goes into much (more stringent) investment, but that is all it covers. It doesn’t go into financial planning or it doesn’t go as far as estate planning, risk management or things like that.”
While the CFP designation allows planners to address various aspects of a client’s life, Starnes said it depends on the client’s real-life circumstances, whether they are planning for retirement, ensuring that they can afford the lifestyle they’d like to live. Other clients may need a certified financial planner to help them plan for their children’s college costs.
“The certified financial planner designation has multiple parts and essentially you have to walk through a study discipline that will take you a year and a half to two years, plus the exam,” Voisard said. “CFP is very comprehensive. It covers a lot of topics, and I think that is why it is one of the most well-known and one of the most respected (designations) in this industry. Others are just less; not that they are not good, but I don’t think it is as comprehensive as the certified planner designation.”