If you need your home painted, you look for a painter. If you need your roof replaced, you hire a roofer. If you need help with your money, it’s not as straightforward. It’s hard to figure out what kind of professional you need. Not even the financial professionals themselves agree.

Do you look for somebody with a lot of letters after his or her name? When you’re shopping for a financial professional to help plan for retirement, should you limit your search to Certified Financial Planners (CFP), for example?

Is a CFP® the Same as a Financial Advisor?

This question has an easy answer – no. "Financial advisor" is a pretty general term. It can encompass anything from an accountant to a stockbroker to a financial planner.

Not all financial planners are the same, either. Pretty much anyone can hang out a shingle and get compensated for offering financial services. According to Kathryn Hauer, herself a CFP® in Aiken, South Carolina, Certified Financial Planners take college-level courses in various finances-related fields, including taxes and insurance, and undergo exams throughout their training, including a 10-hour final exam, to receive the CFP designation. They also need to have at least three years of professional financial-planning experience.

The CFP Board also requires those with CFP® designations to commit to the fiduciary standard if they’re managing money – a legally binding standard which subjects them to federal or state regulations, and requires them to put their client’s needs above their own (see What the 'Fiduciary Rule' Means for Investors).

So a CFP® Is Better?

Not necessarily. Many of the advisors we asked agreed that having a CFP® establishes that you have an education, but doesn’t necessarily make you good at what you do – “no more so than a person who has a college degree is the best candidate for a job," as Jeff Weeks, an Austin, Texas-based CFP®, puts it. Of course, "a degree, like the designation, does show a certain level of commitment and professionalism that establishes credibility.”

Matt Cosgriff, a Minneapolis-based CFP®, agrees. “The CFP® is the gold standard in financial planning, but it does not necessarily guarantee that one advisor is better than the next because experience and other factors are so important.”

Nor is it an indication of experience (beyond the aforementioned three years of practice). Tammy Johnston of Calgary, Alberta, in Canada, has been a financial planner for 22 years who doesn’t hold the CFP® designation. She says, “Some people get excited about initials behind a name, so in that case CFP® may make them feel more at ease. I have seen tons of business cards with a long list of designations, many of which meant absolutely nothing when put under the light of what the advisor was currently doing. If you have a complicated and specific need, dealing with a CFP® that specializes in your problem may be beneficial, but dealing with the right person is infinitely more important than a few letters after the name.”

What’s a Client to Do?

First, if you have a certain financial need, look for somebody who specializes in it. The CFP® designation is designed to ensure broad knowledge in all areas of financial planning. If you’re looking for somebody who specializes in a particular field (say, retirement planning), the designation alone doesn't mean much. Look at the person’s knowledge and experience in the areas that fit your need. If they’re a CFP®, then great, but that designation doesn't mean they're automatically the right choice. See Common Interview Questions for Financial Planners.

Second, your advisor should be a fiduciary. Fiduciaries are held to higher moral, ethical, and legal standards than non-fiduciaries. They have to disclose certain information, including how they are paid (from fees you pay? or commissions from insurance and brokerage companies?). CFPs® must hold themselves to a fiduciary standard; however, many professionals who are not CFPs® are also fiduciaries. Make sure you ask. See Choosing A Financial Advisor: Suitability Vs. Fiduciary Standards.

Finally, ask for and check references. Johnston says, “Talk to existing clients of your potential financial advisor. Find out how they work, what type of things they have done, how they maintain the relationship with their clients, how they handle problems, and what makes them special. You want someone that you can connect with on a professional and personal level.”

The Bottom Line

Getting professional help to plan for retirement can let you do a more professional job of setting goals and choosing investments. But limiting yourself to financial advisors with certain designations is probably not the best idea. A CFP® has gone through the rigorous requirements and expense of gaining the CFP® designation and could be an excellent choice. There’s no doubt that you should recognize that level of commitment when looking for financial expertise.

However, education alone doesn’t make someone an able professional. Or the right professional for you. Along with expertise and reputation, a financial advisor's personality should factor into your decision. Ultimately, you need somebody who cares about you (and is expert in retirement planning) more than you need somebody with letters after his or her name.

For more details, see Financial Advisor vs. Financial Planner.

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