"Financial Planning" is an actual legal term defined by the SEC, which regulates the financial services industry. Only specific certifications are allowed to do financial planning, which was formerly called 'estate planning'.
Confusing the issue entirely, one can be called a "financial planner" which means absolutely nothing legal – just someone who works in the industry.
There are well over 14,000 different financial industry titles, most of which are absolutely worthless. Stick with the certifications that really mean something in Financial Planning. NONE of these are government regulated; national associations regulate their own membership under SEC rules.
CFP = Certified Financial Planner. Can be independent, or work for a financial services company (like TIAA-CREF or Schwab)
ChFC = Chartered Financial Consultant
CPA/PFS = CPAs with a Personal Financial Specialist certification
What's the difference? Legally, quite a lot. Only specific certifications are required to have fiduciary responsibility to their clients, meaning they MUST act in the client's best interest, not their own or the firm they work for/with. Think of hiring a lawyer – he is required to be your fiduciary, and can be disbarred or indicted for not fulfilling his duty. That's what you want for a financial advisor.
The non-certified advisors, no matter how fancy the title or impressive the string of unintelligible initials on their business cards, only have to fulfill a 'suitability' standard. "Suitability" is essentially worthless; it means the advisor is free to put his/her interests ahead of yours, whenever and however they wish.
• Locate a financial planner in your area at www.fpanet.org
• Find advisers who work for fees, rather than commissions, at www.feeonly.org
• Get a list of CFPs who charge only by the hour at www.garrettplanningnetwork.com
• Check that an adviser is a certified financial planner at www.cfp-board.org
• Check their record for complaints at www.sec.gov/investor/brokers.htm (but be warned, records are easy to 'scrub clean'.)
Only CPAs with an additional Personal Financial Specialist designation can do the same financial planning as CFPs and ChFCs. Find one at: American Institute of Certified Public Accountants' Personal Financial Planning Division (800 862-4272), or the LINC Society of C.P.A. Financial Planners (615 782-4240) (fee only).
Planners can be paid in three ways. Fee-only planners commonly charge $75 to $200 an hour, or a flat fee of $2,000 to $5,000. Commission-only ones are paid percentages of the products they sell. Fee-and-commission planners receive income both ways; with these, low fees often are come-ons.
NAPFA: the National Association of Personal Financial Advisors, is the nation’s leading organization dedicated to the advancement of Fee-Only comprehensive financial planning. Website is http://www.napfa.org/. This is one source for planner referrals.
Garrett Planning Network is an international network of fee-only financial advisors and planners. Website is http://www.garrettplanningnetwork.com/. This is your second source for referrals.
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