Looking to hire a financial planner? Read on to learn the differences between professional financial planner designations, and how to choose the best adviser for your financial needs.
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by Marcia Layton Turner
Marcia Layton Turner writes regularly about small business and real estate. Her work has appeared in Entrepreneur, B...
Updated on: March 14, 2023 · 5 min read
If you've been thinking about putting some of your savings into investment vehicles capable of giving you a better return than your bank's savings account, consulting with a qualified financial adviser can help you implement a sound financial plan with the best investments for your financial situation. How should someone new to investments choose the right financial planner for their needs?
During your search for the right professional, you may come across a number of acronyms after a financial adviser's name, such as certified financial planner (CFP), registered investment adviser (RIA), chartered financial consultant (ChFC) or retirement income certified professional (RICP). Another credential is an IRS enrolled agent, a federally-authorized tax practitioner. Faced with so many credential options, choosing the right financial planner can seem daunting. After all, you want to hire a professional who will be the best fit for your unique financial needs since the quality of the investment advice you receive can have a significant impact on your financial future.
According to Angela Rabatin, a retired professor of finance and an authority on the 50-plus age demographic, "financial adviser" is a catchall term. "Anyone can hang out a shingle as a financial planner," she cautions. "Unlike lawyers, doctors, or engineers, there are no legally mandated education requirements."
Leibel Sternbach, founder of Yields4U, agrees. "'Financial planner' and 'financial adviser' are not regulated terms, so it's important to find out from your financial adviser exactly what services they are providing and why they are qualified to perform those services," he says. One or more regulatory bodies license many financial planners. In some states, such as New York, financial advisers who, for example, carry only an insurance license, are not permitted to hold themselves out as a financial planner unless they have a specific certification like CFP or RIA, Sternbach adds.
With a large number of credentials a financial professional can obtain, how do you narrow down your list of potential advisers before you commit to meeting with them? Rabatin suggests consumers check the professional-designation page on the Financial Industry Regulatory Authority (FINRA) website, FINRA's BrokerCheck, or the Securities and Exchange Commission's Investment Adviser Public Disclosure database. FINRA is a government-authorized nonprofit with oversight of securities brokers and dealers.
FINRA's professional-designation page, for example, lets you search specific credential acronyms to see what they stand for. You can also see if the organization that issues the credentials has continuing-education requirements can take public complaints or provides a way for consumers to confirm whether an individual actually holds a particular credential.
Understanding what a professional-designation acronym means is crucial when selecting a financial advisor. For example, Andy Panko, a CFP and owner of Tenon Financial LLC, notes that CFP, which is issued by the Certified Financial Planner Board of Standards, provides evidence that the professional has a minimum level of experience and education, including passing the board's exam. However, it is a general credential, so he suggests that consumers in need of more targeted financial advice look for a professional with a relevant, targeted designation, such as RICP for retirement planning or IRS enrolled agent for taxation issues.
Once you've narrowed your list of potential financial planners, you'll want to meet with them before committing to their services. The following are some questions to help guide you through the selection process:
Your initial meeting with a financial adviser is important because it will provide you with the information you need to make a reasoned decision. In addition to the questions noted above, here are some guidelines for that initial meeting:
Once you've met with a few advisers, you should have obtained enough information to make an informed choice. Choose an adviser who has experience with people in your specific financial situation and, above all, trust your gut. "If you just aren't feeling it with this adviser, then find another one," Sternbach says. "Your financial adviser is someone who will become your closest professional relationship, and a good adviser can make the difference between living with worry or having peace of mind."
Finding the right adviser for your needs may seem like a challenge, but a bit of research ahead of time and the right set of questions during your first meeting will go a long way toward helping you determine which financial planner will be the best fit for your financial life.
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