Certified Financial Planner

The Complete Guide to What We Do

7 Reasons to Choose a Certified Financial Planner for Your Long Term and Retirement Financial Planning

Plus: 11 Questions to Ask Your Financial Advisor Before Hiring Them

financial plannerPretty much anyone can file a business license and call themselves a financial advisor. But only with a certified financial planner (CFP) can you have the assurance that you’re working with a trained and knowledgeable professional you can trust.

That trust refers to their ability to deliver the services, performance, and financial security you need, with honesty, fairness, and credibility.

There are a lot of terms in the financial services business, and many of them overlap. So while you will hear terms like financial advisor, wealth manager, wealth advisor, investment manager, and financial planning consultant,

it is the ‘certified’ element that gives you at least one external criteria with which to verify that you are dealing with a professional.

Pillar Wealth Management is owned by two elite financial planning’s advisor, Hutch Ashoo and Christopher Snyder, and we serve high net worth and ultra-high net worth families and investors who have at least $5 million in liquid investable assets.

If you have less than that, use this free resource anyway, because it will answer a lot of your questions about your personal financial planning.

You will also find a treasure trove of insight in our free guide, The Ultimate Guide to Choosing the Best Financial Advisor, for Investors With $5 Million to $500 Million in Liquid Assets.

Use the topic list below to click to the sections you most need to know, or read it all and find out everything you can about certified financial planning.

What Is a Certified Financial Planner?

Certified Financial Planner (CFP), is the title earned by financial advisors who have passed a rigorous set of additional training, coursework, and field-based work in financial planning, tax planning, insurance, estate planning, retirement planning, and other financial planning related specialties.

This certification provides an assurance of trust and industry skill for investors, consumers, businesses, and foundations who need help managing their investments and making financial decisions about their future long term growth, stability, and security.

Why Choose a Certified Financial Planner?

The most obvious reason to choose a cfp is confidence. While just about anyone could call themselves a financial advisor, only a certified financial planner professional has met the standards required to earn that title.

And those certified financial planner board of standards are indeed rigorous, as you’ll see in a bit.

That’s why over 10,000 firms around the country employ only certified financial planners. It’s a recognition of trust and comprehensive expertise, and these firms know their customers will expect and demand it. As should you.

Another reason to choose a CFP is because, to get certified, financial planners must commit themselves to the fiduciary standard. This means all their recommendations and actions are in their clients’ best interests. It is a standard of honor, service, and trust.

How important is it to get a fiduciary planner, and how seriously does Pillar take this commitment? See how a non-fiduciary can leave you stressed, frustrated, and financially constrained.

And while it’s true that a non-certified financial planner can still commit to the fiduciary standard, you have no guarantee that they possess the knowledge and expertise it will take to deliver what actually is in your accounts best interests.

What else can a certified financial planner professional do for you?

Here are seven ways the wrong financial advisor can injure your finances accounts and cripple your future well-being, for you as well as your family even after you die.

  1. Poor Investment Performance

Poor performance can go in two directions.

One on hand, your financial planner can cause you to miss out on rewarding investment gains by recommending too conservative an approach.

This sort of approach can sound appealing, especially if you are talking to financial planners during a recession.

When the markets are crashing, conservative investing seems smart. But a certified financial planner should be working to help you achieve your long term goals – even if they are decades away.Even if they won’t be achieved until after you die.

Some investors, including high net worth ones, exited the stock market after the 2008 crash, and either never came back, or waited many years to do so. They missed out on huge gains that began in 2009. 

But on the other hand, and frankly, far more common, investors get stuck with a financial planner who is far too aggressive and reckless.

It is disturbingly common to see advisors recommending things like an 80% stock, 20% bond asset allocation (we’ve even seen 90% and 100%!), annuities that benefit them more than you, and overly excessive buying and selling.

We have seen some high net worth friends working with other advisors lose 70%, even 80% of their wealth in a short time because of horribly misguided investment planning that didn’t fare well in a recession.

Can you imagine losing so much? And no one is immune. Ted Turner famously lost over 80% of his wealth in one year when AOL-Time Warner fell apart.

He lost over $8 billion. Many would blame the merger. We would blame his financial planning team.

  1. Unwise and Risky Asset Allocations

Asset allocation is the most important factor in investment planning. By far. But it changes over time. What works for you when you’re 45 might not be appropriate when you’re 55, and certainly not at 65 or 75.

Does your financial advisor manage this? Or do they just set it and forget it?

The best financial advisor know better. More than that, they should take a proactive approach to keeping you informed and involved in any key changes and decisions that need to be made as time goes on.

  1. No Reliable Process for Achieving Long Term Financial Security

Too many financial advisors use the same processes as Wall Street. You need to find a certified financial planner who has developed their own process – with data to back up its efficacy – for achieving what you care about most financially.

What’s wrong with Wall Street? They live and die by booms and busts, fast and furious trading, margin calls, and the delusion that they can ‘time’ the market and outperform it. They can’t.

Almost no one who tries to do this succeeds. And those who do can’t repeat their success.

Demand a detailed explanation from any financial planner or wealth manager – certified or not – for how they will deliver the assurance of performance and security that you seek.

What is Pillar’s process? You have two ways to see it in enough detail to really get your mind around how different it is from every other wealth manager or financial planner.

First – get our free eBook, Improving Portfolio Performance, The Shifts Multi-Millionaires Must Make to Achieve Financial Security and Serenity.

Second, give us a call if you have a minimum of $5 million in investable assets.

Talk to an Ultra-High Net Worth Certified Financial Planner

Schedule a Call with CEO and Co-Founder Hutch Ashoo

  1. Scaled Down Lifestyle with No Time to Make Up Losses

This is the ultimate cost of choosing the wrong financial planner. Your accounts portfolio falters or implodes at the worst possible time, usually after you’ve retired, and you have to downsize your lifestyle and your dreams.

Imagine losing 70% of your wealth when you’re 70 years old, because your financial advisor had you in a 60% stock 40% bond asset allocation and the market collapsed. See why a 60/40 split failed in the Covid Recession.

At age 70, you will likely never make up those losses in time. You, and your heirs after you, will be forever hurt by them. Don’t make the mistake of choosing the wrong financial advisor.

How to choose the best certified financial planner for you? We offer again the best resource we have ever seen for this purpose: The Ultimate Guide to Choosing the Best Financial Advisor, for Investors With $5 Million to $500 Million in Liquid Assets

  1. Pay More Taxes than You Should Have

The wrong financial planner will fail to consider the enormous amounts of money you can save simply by minimizing or avoiding certain taxes.

Suppose an irresponsible advisor earns you 12% growth one year, but you have to pay 40% of that in taxes. Then, suppose a certified financial planner earns you 10%, but you only pay 20% in taxes.

For the first advisor, your net growth will only be 7.2%, because you lost the rest in taxes. The CFP, even with lower overall growth, earned you a net increase of 8%. That’s how big a deal taxes are.

And that’s just one year. In years the certified planner outperforms the other one, your net gains will be far greater, regardless of what fees you’re paying the advisor.

And by the way, taxes are just one avoidable cost of high net worth financial planning. You can learn about some of the others in both the eBooks we’ve recommended in this article.

Beyond just taxes on investments, you also will also be subject to estate taxes. This means your heirs and wherever else you want your money to go after death will get shortchanged – by a lot,

if you have an advisor who doesn’t plan for this well in advance. Think in terms of canyons.

The wrong advisor can cost you millions – tens of millions if you have it – by not planning ahead properly, as a fiduciary is supposed to.

Fiduciary is critical, but hopefully you’re starting to see why there’s little to gain from having an incompetent fiduciary.

  1. Your Heirs Can’t Access Your Records

Simple tasks have to be done when you’re still alive, or your heirs will have a much harder time with life than they should.

If your financial planner doesn’t set things up properly for your insurance, your heirs can be locked out of your financial records and have to waste massive and frustrating amounts of time trying to navigate the system and pick up the pieces.

In some situations, this even forces them to go to court, costing them time AND money that should have been theirs to keep.

The best certified financial planners will not assume you are taking care of estate planning issues. And the very best ones won’t charge extra for doing it for you.

Pillar includes that service and all others as part of our base fee, because for high net worth families, this is not an optional service.

  1. The Wrong Beneficiaries Receive Part of Your Estate

Even if your cfp helped create an estate plan for you, or if you did it yourself, you have to keep it current.

Things change. Divorce, early death, a child falling into trouble and deemed not responsible enough to handle receiving a large sum from you without conditions – these things happen all the time.

If you don’t keep your current personal estate plan, large portions of it may end up in the wrong hands, with disastrous consequences. The best certified financial planners don’t let this happen.
Wealth Management Napa

 

What’s Required to Become a Certified Financial Planner?

If you’re curious how a cfp, financial advisor or wealth manager becomes a certified financial planner, you’ll get a quick overview here and in the next section about the exams they have to take. They have to prepare for higher education from cfp board of standards inc.

The financial planning certification process is structured around four E’s – Education, Ethics, Experience, and Exams.

Education

All CFPs are required to have at least a four-year bachelor’s degree in any field from an accredited school, college or university, and they also must complete a comprehensive extra layer of financial planning coursework and exams through a CFP Board or certified financial planner board of standard inc. So they can get their cfp certification.

All coursework must be completed before they take the exam, and they must earn continuing credits afterward. You have just five opportunities to take the exam – during your entire life.

What do new CFP’s candidates learn?

  • Tax planning
  • Retirement savings and income planning
  • Estate planning
  • Professional conduct and regulation
  • General principles of financial planning
  • Education planning
  • Risk management and insurance planning
  • Investment planning
  • Financial plan development

Every two years, certified financial planners must renew their certification from certified financial planner board of standard inc from washington dc.

Ethics

All certified financial planners must agree and commit to following the fiduciary standard when giving any advice to a client.

They must also adhere to a set of ethical and professional standards. These include ‘fitness standards’, a Code of Ethics, and Standards of Conduct.

Some of the fitness standards say you can lose your certification if you are convicted of perjury within the last five years, or if you experienced two or more bankruptcies, whether business or personal.

Makes sense, right? Would you trust a financial planner who had gone bankrupt themselves? See more fitness standards

Some of the codes and standards include avoiding or disclosing all conflicts of interest, conducting all your financial planning professional services with integrity and honesty, and “not be subordinated to personal gain or advantage.”

Certified planners must have the knowledge and skill to deliver any service they offer, and may not accept gifts, gratuities, entertainment, non-cash compensations, or any other benefits or extras that might compromise their judgment or objectivity.

Certified planners must comply with the laws and rules of the land. They must keep all client information confidential except in specific situations, such as a lawsuit.

There are many more of these. You can view the complete list of codes and standards here

Experience

To get certified, a financial planner must complete 6000 hours of professional experience related to financial planning. Yes, that’s six thousand hours for the new cfp candidates studies and examination program.

Or, they can do 4000 hours of apprenticeship that comes with additional program requirements.

What does “professional experience” mean? It means working directly with clients, supporting the financial planning process with another planner, such as an employer, or teaching financial planning courses.

The financial planning process includes duties like helping clients clarify their goals, understanding their financial circumstances, and developing financial planning recommendations.

It does NOT mean things like marketing, writing software, administration, or working in corporate finance. Your experience has to be actual experience in financial planning. Not just working for Wells Fargo.

The experience requirement takes several years to fulfill. Working 40 hours per week for 50 weeks is only 2000 hours, so you’re looking at a minimum of three years, for most people.

Details on the CFP Exam

The last ‘E’ refers to the cfp exam that all financial advisors take in order to get certified.

The cfp exam courses features 170 questions and takes six hours to complete. As of this writing, it costs $725 to take, not something to take lightly or wish to do twice when you’re just starting out in a career.

It requires a very high level of knowledge and competency. Many questions are ‘scenario-based’, meaning the question describes a hypothetical family or investor who is dealing with a particular challenge, and the test-taker is required to answer questions related to it.

The 7 topic categories tested in the CFP exam include:

  • Investment
  • Income
  • Retirement
  • Insurance
  • Estate planning
  • General principles
  • Professional conduct and fiduciary responsibility

Another reason you as an investor can put some confidence in the financial planner exam is that it continually updates as laws and regulations change. Recent exam courses versions, as of 2020, included questions about the 2019 SECURE Act.

About 60% of those who take the CFP exam pass it on the first try.

 

11 Questions to Ask Your Financial Planner

So, if you research for the best certified financial planner in your areas, what do you do? For the most understanding of the industry you will find in one place,

we provide our free guide, The Ultimate Guide to Choosing the Best Financial Advisor, for Investors With $5 Million to $500 Million in Liquid Assets.

But once you’ve narrowed down your search, you’ll want to meet with a few and see if they are the right fit for you. Here are 11 questions to ask of a prospective financial planner.

  1. What is your minimum asset requirement?

In other words, what types of clients do you work with? Some financial planners have ranges of investible assets they work with, such as from $250,000 to $1 million.

Pillar Wealth Management works with high net worth and ultra-high net worth investors who have between $5 million and $500 million.

For a deeper understanding into how high net worth financial planning looks and what it entails,

read our signature written work, The Art of Protecting Ultra-High Net Worth Portfolios and Estates, Strategies for Families worth $25 Million to $500 Million.

Other financial planners might specialize in another area, such as businesses, or foundations, or a particular age group.

And still others might specialize in a branch of financial planning, like tax planning or retirement planning.

  1. What are your qualifications and credentials?

If they’re a certified financial planner, this question is how you can check them out. If you want to verify their claim, the best place to go is the Securities and Exchange Commission website.

Just type in their account name or the name of their investment companies, and see what comes up. You can see complaints that have been filed against them, if any.

You can also verify a planner’s CFP status here

  1. How long have you been a financial planner?

Get a sense of their experience level and background check. But remember that while years of experience matter – particularly for high net worth financial planners like Pillar Wealth Management – being certified tells you quite a lot about this person and gives you assurance they are competent and trustworthy.

  1. How long do your clients stay with you on average?

This question reveals client loyalty. While it’s hard to verify their answer, it nevertheless provides another element of confidence in their abilities.

However, this question will reveal more if you ask it a year or two after a recession than it would eight years into a bull market. Remember – every financial planner is a genius when the market is doing well.

  1. What do you do to minimize my costs, besides your fees?

You want to know what you’ll be paying, and how, for your certified financial planner’s services. But beyond that, realize that the fee is just one of many costs you could be paying.

For instance, investing three million in a mutual fund with a 0.9% cost is very different from investing it in one with a 0.2% cost. That more expensive fund will need to outperform the other fund by 0.7% just to break even with it.

That’s a cost that has nothing to do with your financial planner’s fees.

There are many other costs like this, including additional ones that some planner’s charge. For instance, #6 on this list.

  1. Will anyone else gain from how you advise me?

If your financial planner’s recommendations also benefit others with whom they have a business relationship, you need to know that.

This is another personal cost you could be paying. For instance, maybe your financial planner doesn’t charge commissions.

But, they might be recommending particular mutual funds or insurance products that earn commissions for someone else business.

A fiduciary must disclose this, and must also be able to explain how it is still in your best interests, free from conflict of interest on their part.

And it might be. But the point is – this is another cost you could be paying, separate from the base fee.

Many, many other costs, that add up to far more than the base fee, can cost a high net worth investor tens of millions of dollars over your lifetime.

If you ask questions 5 and 6, and don’t feel like the cfp gives you a very full picture of these other costs, you should regard them with skepticism.

  1. Will you be the only certified financial planner I’ll be working with?

When you call with a question, who will you speak to? Some financial advisors practice alone or with a partner or two, and they directly manage the relationships with their clients.

Others have teams of people working with them. You want to know who you’ll be dealing with, and when the key people on that team change.

You especially want to know who is developing your financial plans and making recommendations for your portfolio.

If you only talk to the main planner at a firm, but the details of the plans, the analysis, and the ongoing management is handled by an underling, you want to know this.

Pillar Wealth Management features two wealth managers who directly manage all their client relationships, and each individual investor’s 100% customized financial plan.

  1. Have you ever been publicly disciplined?

If a cfp has been found guilty of anything unlawful or unethical, any public reprimands should show up on the SEC website.

But it’s good to ask and then verify, because then you’ll know if they were telling the truth.

  1. How often do you update my financial plan?

This is a big one. What you don’t want is a ‘set it and forget it’ financial planner. You need someone who continually pays attention to your portfolio,

and how it is being affected by world events, market forces, changes in your life, and its investment management performance.

Pillar Wealth Management updates every client’s financial plan four times per year.

  1. Do you believe you can outperform the market?

This is a self-awareness question for your financial planner. They should tell you something about how few active traders or fund managers are able to outperform the market.

Over any period of three or more years, fewer than 10% of money managers are able to beat the market. Over longer periods, like for how long you’ll probably be working with your advisor, it is even lower.

If your financial planner tries to convince you they have figured out a system that consistently outperforms the market, you should regard them with extreme skepticism.

They were either very lucky for a year or two, or ignorant of history, or are over-promising.

You would hope that no certified financial planners would behave in this path or designations. But that’s why you ask the question.

  1. How can you help me feel secure that my money won’t run out?

In other words – what is your approach to personal financial planning? For that, we’ll move to the next section.

But first – if you are a high net worth investor, you might want to use these 4 additional questions about tax and estate planning links.

If a high net worth financial planner can’t satisfy you with good answers to those four questions test, search elsewhere.

Wealth Management San Francisco

How to Start Planning with a CFP Professional

Once you’ve chosen the best certified financial planner, hopefully using the questions above and the guide we’ve referred to several times, you’ll be ready to get started.

The initial process of financial planning begins with what you’re trying to achieve in your life. Almost every major goal, dream, or desire you have eventually relates to money.

The best certified financial planners start here, and build out your plan from there.

However, not every cfp practice truly 100% customized plans for their clients. Many offer a variety of options menu you can choose from, and they look at which one seems to fit you best.

They may then tweak it a little to help you. So you could call that a semi-customized planning approach. But it’s not truly customized to your specific life goals and desired lifestyle outcomes.

Here are the 8 foundations of any truly customized financial plan

How to Find a Certified Financial Planner Professional

First and most important information, consider your best personal financial life’s needs and preferences. If you don’t know what you need or want in terms of financial security and future goals, then every financial planner will seem great. You need to know what you want, so your cfp professional can please your individuals financial needs.

certified financial planner

If you are a high net worth investor with $5 million to $500 million in liquid assets, you have, not to be too blunt about it – already found a financial planner right here. Click below and schedule a call with us.

 

Talk to an Ultra-High Net Worth Certified Financial Planner

Schedule a Call with CEO and Co-Founder Hutch Ashoo

 

If you are in a different situation, begin by talking to family, friends, and co-workers who are in a similar financial situation as you.

If you don’t find much help there, doing a quick online search will open up many more possibilities.

Then, look for expertise and authority. Have they written any books, done any speaking, or have a loyal and devoted following? While none of these things on their own necessarily means anything, what you’re looking for is a strong reputation.

You should also look through their website. A site with large quantities of in-depth resources is a strong indication this financial planner knows what they’re doing and is committed to doing it for many years.

Years of experience is very important, because you also don’t want to get stuck with someone who burns out in a few years.

Next, visit the SEC site and verify everything is as it should be, as mentioned earlier.

Finally, reach out and contact a few of your multiple choice candidates. You might want the best financial advisor near you. Or, you might feel that location doesn’t matter, which in most cases, it does not.

Talk to your final list of advisors professionals. Ask the questions given earlier. Learn their legal processes. See if you get along. And then make your decision!

Pillar Wealth Management’s co-founder have over 60 years of delivering custom tailored financial planning services to high net worth and ultra-high net worth families. For a free no obligation consultation just drop us a quick note here.

Wealth Management San Jose