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What Should I Expect from My Certified Financial Planner? Thumbnail

What Should I Expect from My Certified Financial Planner?


Keeping up with your responsibilities in the United States is going to be time consuming and stressful at times, leaving little room to manage your finances. It’ll be especially difficult if you don’t know much about finances to begin with. As a result, you may wish to hire a Certified Financial Planner (CFP) to take care of these tasks for you, as well as to give you some recommendations based on your financial goals.

CFPs are there to make sure that you have a plan for the life that you want. In this article, you’ll learn what a CFP is and what they do, as well as what to expect from one when you hire them to help you.

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What is a Certified Financial Planner?

A Certified Financial Planner, or CFP, is a professional who is licensed to help you manage your finances and make financial plans. They are held to strict ethical obligations so that they can assist you with these tasks. Many CFPs will act as fiduciaries, meaning that they are working in your best interest rather than the interest of themselves or their firm.

Their job is to help make sure that you meet your life goals through proper management of financial resources. They take the time to get to know you so that they can advise you on the best plan to achieve whatever you wants and needs are.

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What Can CFPs Help With?

CFPs are there to help you when you don’t have the time, willingness, or ability to manage your finances on your own. Sometimes, you’ll just want an extra set of eyes on your decision making.

Financial planning between you and your CFP can consist of the following:

  1. Financial statement preparation and analysis (including cash flow analysis/planning and budgeting)
  2. Insurance planning and risk management
  3. Employee benefits planning
  4. Investment planning
  5. Income tax planning
  6. Education planning
  7. Retirement planning
  8. Estate planning

Essentially, a Certified Financial Planner can help you with everything from completing paperwork to open a brokerage account and providing investment advice, to managing the execution of your orders and sales.

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What Should I Expect from a CFP?

Once you enter into a relationship with a CFP, you should expect to receive a financial planning letter of engagement. This clearly defines your legal relationship with the CFP in terms of who the parties are, the date and duration of the agreement, how the agreement can be termination, compensation, and what services you would like the CFP to provide.

Establishing and Defining Your Relationship

At the beginning of your relationship, your CFP will want to get to know you. You will be asked questions regarding your personal, professional, and financial life. Additionally, they’ll explain the services they offer as well as discuss the financial planning process. The goal of this discussion is to ensure that each party has clear expectations of their responsibilities. 

Gathering Information About You to Fulfill the Agreement

To better formulate a financial plan and recommendations for you, your CFP may have you fill out a questionnaire or conduct an interview. They will be aiming to understand your values, attitudes, expectations, and experience with financial matters through the use of open-ended questioning. This is also an opportune time to define and prioritize your goals, needs, and objectives.

Your CFP will also be looking to uncover the following about you to determine suitability:

  1. What phase of life you are in (age, marital status, dependents, financial status, special needs, etc.)
  2. What financial phase you are in (asset accumulation phase, conservation and protection phase, distribution and gifting phase)
  3. What your risk tolerance, risk exposure, risk perception, risk capacity, and loss aversion are. (to develop the right investment mix based on your responses)

They may also request to review the following documentation:

  1. Financial statements
  2. Tax and investments statements
  3. Insurance policies
  4. Education plan information
  5. Retirement and employee benefit details
  6. Estate planning documents
  7. Business documents

It’s important to be open and honest with your CFP. A question will never be asked unnecessarily. They are there to help you come up with the most suitable financial plan, and this is not possible without complete transparency and honesty.

Evaluating Your Current Financial Status

Your Certified Financial Planner will take all of the information you have provided them with to conduct an evaluation of your current financial status.

Here are a few examples of topics they will consider when putting together your recommendations.

  • General financial status: assets, liabilities, cash flow, budgeting, and debt management
  • Risk management and insurance evaluation: Insurance coverage, asset protection, and liquidity
  • Government and employee benefits: availability, participation, and coverage levels
  • Investment evaluation: asset allocation, investment strategies, types of investments
  • Tax evaluation:  income, estate, and gift tax issues; current tax strategies; tax compliance status
  • Retirement evaluation: current retirement plans and strategies, accumulation and distribution planning
  • Estate planning evaluation: documents, estate tax liabilities, asset ownership, beneficiary designations, gifting strategies
  • Business ownership: business form, employer benefits, succession planning, and exit strategy, risk management
  • Education planning evaluation: sources of financing, tax considerations
  • Special needs: divorce/remarriage reconsiderations, nontraditional family planning, charitable planning, dependent adult needs, disabled child needs, and terminal illness planning

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Developing and Communicating Their Recommendations

The ultimate goal of your CFP is to create recommendations that are tailored to meet your goals and objectives. They will base it on the analysis of your current financial status. Your values, temperament, and risk tolerance will all be considered.

Many times your CFP will come up with more than one method to achieve your goals, and will ask for your preference. They may even involve the input of other advisors. Most importantly, your CFP will provide you with a comprehensive plan that has detailed and well-documented recommendations.

Your CFP will present the financial plan to you and go over all of the information that lead them to their conclusion. They will collaborate with you by listening to your thoughts and addressing any concerns. After receiving your feedback, your CFP will take the time to revise the recommendations and provide you with documentation of such.

This will be the point where you need to confirm the acceptance of your plan. Your CFP will provide you with either paper or electronic means of agreeing to the recommendations.

Implementing the Recommendations

After receiving your confirmation, your Certified Financial Planner will prioritize an implementation plan with a timeline. They will assign responsibilities to themselves, you, and other professionals needed. You can choose to have the CFP take action to implement the plan or request that they help you do it yourself.

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Monitoring Your Financial Plan and Performance

At this point in the experience with your CFP, you will discuss the expectations as far as monitoring responsibilities are concerned. Will you monitor the progress of your financial plan or would you like your CFP to take care of it?

As time goes on, you will want to discuss and evaluate changes that occur in your life with your CFP. Examples of this include: birth/death, illness, divorce, retirement, changes in income or expenses, and different goal priorities.

You will have occasional meetings with your CFP where you will review the performance and progress of your financial plan. You will also learn more about any changes in the legal, tax, and economic sectors. Your CFP will make new recommendations to adapt to changed circumstances, if applicable. They will also want to review with you the scope of work, how engaged you would like to be, and continuing responsibilities of each party.

Look to Your CFP for Ongoing Support

Your Certified Financial Planner wants to see you succeed in achieving your financial goals. If you have questions or need to make changes, don’t hesitate to reach out to them. They are very useful for those who don’t have the time or desire to manage their own portfolio, but still want to put a strategy on auto-pilot. A CFP works to help you create the life that you desire for yourself and your family. Take advantage of the opportunity to work with and learn from their expertise.

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