Recently, I read Suze Orman’s The 9 Steps to Financial Freedom. At several points during the book, Suze refers to herself as a “Certified Financial Planner” several times, with the words in capitalized format. At the time, I somewhat brushed this off and kept plowing through her advice, but I kept wondering what exactly is a “Certified Financial Planner”?
So what is it? Basically, a “Certified Financial Planner” is an individual who has been certified by a group called the Certified Financial Planner Board of Standards Inc. The certification process involves going through an educational program (offered through various universities), pass an examination, work for a period of time in the financial planning process, and pay a certification fee. In other words, it’s a similar process to the certifications found in other industries.
Great, but what good is it? In general, a person that is a “Certified Financial Planner” has at least gone through some form of training and passed an exam that indicates at least some knowledge of basic personal finance issues. Obviously, a financial planner who has managed to get certified will want to use this credential as part of their advertising.
The real question is whether or not a financial advisor is more valuable if they are a “Certified Financial Advisor.” The simple answer is “to a degree.” If you’re looking for professional financial planning, a reputation as a “Certified Financial Planner” is certainly a positive, but as with any field, some lemons do make it through the certification process.
In short, a “Certified Financial Planner” is just a financial planner with a certification; the presence of this certification should be just one criteria in the process of choosing a financial planner. If you’re interested in hiring a financial planner, this certification is worth noting, but there are many other vital factors to look at including references, personal recommendations, and your feelings after asking some careful questions. If a “Certified Financial Planner” raises red flags for you but a non-certified planner does not, the certification isn’t worth the difference.
As for the ins and outs of whether to choose a financial planner at all, that’s an entirely different story. Financial planners are usually useful for individuals with a significant income who have difficulty organizing that income. Plus, you can usually rely on the advice of a financial planner, whereas reading sites like The Simple Dollar are more for entertainment purposes and jumping-off points rather than serious financial advice. They tend to be expensive, but they often can help you get your finances in order.
As for me, I’m not a financial planner, though the thought has crossed my mind recently.