Francis Xavier (FX) Bergmeister
If credentials are important for lifeguards, arborists, and airline pilots, shouldn’t it be the same for those offering financial advice?
It is nice to know the lifeguard at a swimming pool is certified by American Red Cross or the person cutting down a tree close to the house is certified by the International Society of Arboriculture. You probably want the person at the controls of that multi-engine aircraft to have her or his Airline Transport Pilot certificate.
Providing safety at a community pool, cutting down a big tree near our house, and flying any size airplane are risks we probably have no compunction outsourcing to a professional. But how can one be assured of the competence of the person? Swimmers, homeowners, and airline passengers are also interested in someone’s experience. Designations and certificates are important.
According to the Institute for Credentialing Excellence, “credentialing” is an umbrella term for professional certification and certificate programs. Credentialing validates competency, knowledge, and skills. There are usually experience and education components.
A “designation” is a recognition of professional knowledge and expertise in the subject matter. Designations require membership in a professional organization and usually require work experience.
So, what if you are looking for a financial planner? Anyone can declare himself or herself a financial planner. There is no crime in not having the appropriate education or relevant experience to back that claim up. Even if someone has several impressive financial planning titles, they may ring hollow. Not all financial planning-related designations or credentials are the same. Some financial certifications or designations are earned merely by attendance at a morning or afternoon seminar.
To further search for meaningful credentialed financial planners with experience and education you might want to pause in your quest and introduce the search terms fiduciary and continuing education.
Investopedia defines the fiduciary duty as “a relationship between two parties that obligates one to act solely in the interest of the other. The party designated as the fiduciary owes a legal duty to a principal, and strict care must be taken to ensure that no conflict of interest arises between the fiduciary and the principal.”
Continuing Education is an important consideration. It recognizes the reality that a professional field of expertise is dynamic. Ongoing changes in areas such as ethics, taxes, and legislation are addressed through continuing education.
If your expectations are for a fiduciary to have significant financial planning experience, education, and a commitment to continuing education then consider the following three credentials or designations. They are a Certified Financial Planner® (CFP®), a Certified Public Account (CPA), and a Chartered Financial Consultant (ChFC®). The women and men who hold these designations have demonstrated not only serious training but several years of practice.
CFPs® have a program of study taught at some institutions of higher learning and other venues encompassing financial planning, taxes, estate planning, and retirement. To earn that credential, they must pass a comprehensive test and have at least 6,000 hours of professional experience. The Board of Certified Financial Planners also requires members every two years to earn at least 30 hours of continuing education.
CPAs must have a bachelor’s degree in business administration, finance, or accounting and complete an additional 150 hours of education regarding finance or accounting standards and practices. They must pass a rigorous test and have two or more years of public accounting experience for this designation. Each state has its own continuing education requirements for CPAs. Additionally, members of The American Institute for CPAs must complete 120 hours or its equivalent every three years.
ChFCs® educational requirements are like the CFP® program of study but entail additional courses. They do not complete a comprehensive examination like the CFPs®. The designation requires at least three years of experience in the financial services industry. All ChFCs® need to complete at least 30 hours of continuing education every two years.
The financial planner you and your family deserve is someone whose education and experience demonstrate a serious commitment to the profession. But a financial planner may sometimes need an additional expert for your circumstances. The difference between a good and a great professional is one who understands certain conditions require a specialist to be called upon.
Bringing in another professional as a resource to address family members with special needs or cognitive decline planning should be welcomed as an acknowledgment that the plan is being customized for specific needs. When your physician seeks advice from specialists it is acknowledgment, she or he is an advocate looking out for the best medical care.
Financial planning is a detailed and comprehensive process. This is because of the duration of the risk we are entrusting to a financial professional. The time we are exposed to certain risks may be for no more than a few hours as is the case with the lifeguard, tree surgeon, or airline pilot. But what about the risks of preparing for decades of retirement including planning for an ensuing estate? A fiduciary with the proper credential can make a difference in producing the best outcome to serve several generations.
Francis Xavier (FX) Bergmeister, CLU®, ChFC®, CASL®, ChSNC® has been a Certified Financial Planner® for 30 years. He is a graduate of the Wharton School and earned a Doctor of Arts from George Mason University. He provides retirement seminars thru Federal Career Experts http://www.federalcareerexperts.com.