Tuesday, March 10, 2015

The Value of the CFP® Certification

by David Clark, CFP®, CPA with Bridgeworth, LLC

When receiving recommendations from your financial advisor, do you often wonder if a conflict of interest might exist? Why is this particular recommendation being made? How much compensation is my advisor receiving?

For years now, Hollywood movies have cast a negative light on the financial industry (Wall Street, Boiler Room, The Wolf of Wall Street, just to name a few). In the real world, however, these movie-generating stories are not indicative of the industry as a whole. Unfortunately, with these extreme events receiving plenty of headline-grabbing attention, a level of skepticism towards the financial industry has developed among the general public. The basic way in which many advisors structure their business might contribute to this as well.

Commission-based advisors are compensated whenever activity occurs. Additionally, the commission to be collected by the advisor can vary depending on which product is eventually sold to the client. This structure can sometimes give the appearance that a conflict of interest might exist. For these advisors, however, as long as their recommendations meet the suitability standard (which simply requires the recommendation to fit the client’s investing objective, time horizon, and level of investing experience), their actions are viewed as acceptable. Even though most investors might not realize it, credentialed financial planners, specifically CERTIFIED FINANCIAL PLANNER™ professionals, are held to a much stricter standard of care, the fiduciary standard. This standard states that these advisors are legally required to place their clients’ best interests ahead of their own.

Just like certification within particular specialties of the medical profession is required to ensure that patients are receiving the quality of care that they need and deserve, other professional industries have put in place recognizable certifications, not only to protect the public, but also to uphold the standards and integrity of the profession. In the accounting industry, the CPA designation is widely recognized as the gold standard. When it comes to financial planning and wealth management, working with CERTIFIED FINANCIAL PLANNER™ professionals, who are held to a high level of ethical standards, helps to ensure that recommendations are being made in the client’s best interest.

The CFP® certification mark indicates a high level of competency, ethics, and professionalism. In order to obtain this designation, the financial advisor must have completed extensive course study, approved by the CFP Board, at a college or university. Following this, a comprehensive certification exam must be passed. A minimum of three years’ of experience is also required in the financial planning industry before being able to use the CFP® certification marks. The final step required before earning the CFP® designation involves a thorough background check, which is performed to verify that those seeking certification meet the expected ethical and practice standards put in place by the CFP® Board. Once certified, any violations of these standards could lead to disciplinary action, which might also include having the certification revoked. In addition to all of this, and as mentioned earlier, the CFP® Board’s Code of Ethics holds the CFP® professionals to the fiduciary standard of always acting in the best interest of their clients.

The world in which we live today is faster-paced than ever before, with plenty of complexity in all financial-related areas: budgeting, saving for retirement, estate planning, saving for children’s college, while also taking into consideration taxes and possible insurance needs. Finding the time, energy, and knowledge to not only develop a comprehensive financial plan, but also to implement and monitor it on a regular basis going forward, can be a daunting task. Fortunately, working with a CERTIFIED FINANCIAL PLANNER™ professional can give you the peace of mind that your best interests have been placed above all else.

I am proud to work at Bridgeworth, LLC, an independent Registered Investment Adviser (RIA). We are first and foremost a wealth management firm providing a holistic financial planning experience and as an RIA, we are a fiduciary. We have a fundamental obligation to act in the best interest of our clients when providing financial planning and investment advice. Furthermore, we have 23 members who have obtained their CERTIFIED FINANCIAL PLANNER™ certification, making Bridgeworth one of the largest groups of CFP® practitioners in the region.

Do you know what types of credentials or certifications your financial advisor holds?

Bridgeworth, LLC, is a registered investment adviser.

The CFP® certification trademark is owned by the CERTIFIED FINANCIAL PLANNER™ Board of Standards, Inc., in the United States and is awarded to individuals who successfully complete the CFP® Board’s initial and ongoing certification requirements.


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