ST. CROIX INSIGHTS

Certified Financial Planner vs Fiduciary – What’s the Difference?

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Navigating the landscape of financial advisors can be overwhelming, especially when trying to discern between various titles and certifications. Whether you’re seeking guidance on investments or long-term financial planning, understanding the role of a Certified Financial Planner (CFP®) and fiduciaries is important prior to making informed decisions about managing your money.

Are all financial advisors, financial coaches, financial planners, wealth advisors, and brokers CERTIFIED? The answer is no.

What is a Certified Financial Planner (CFP®)?

Knowing whether your financial professional is certified lies in the designation of Certified Financial Planner. CFPs undergo a rigorous education process, including extensive training and passing comprehensive exams. It typically takes a year or two to obtain this certification, highlighting the commitment to professionalism and expertise within the field. Plus, ongoing continuing education is required on a yearly basis.

Does my financial professional need to be certified to help me?

While certification is not a legal requirement for providing financial advice, working with a certified financial professional, such as a CFP, can offer added assurance of their competence and dedication to upholding industry standards. Certification demonstrates a commitment to ongoing education and ethical practices, which can be beneficial when seeking guidance on complex financial matters.

What is a Fiduciary?

While many financial advisors operate under a suitability standard, where recommendations must be suitable for clients at the time of sale, fiduciaries adhere to a higher standard of care. Acting as fiduciaries means putting the client’s best interests first on an ongoing basis, disclosing any conflicts of interest, and ensuring ongoing accountability in managing investments. Fiduciaries are held to an ongoing standard of care, continuously monitoring and adjusting investments to meet specific targets.

Differences Between Financial Advisors and Fiduciaries

Financial advisors can range from those who simply offer guidance on budgeting to those specializing in comprehensive retirement planning. However, not all advisors operate under fiduciary duty. It’s essential to differentiate between advisors who prioritize client interests and those who may have conflicts of interests. One item I value is fiduciaries have to place their conflicts of interests in writing for clients. Here are few other differences.

Financial Advisors:

  • Offer a range of financial services and products.
  • Required to provide suitable recommendations that align with client’s needs and risk tolerance at the time of recommendation.
  • Can work for a variety of financial firms from insurance companies or brokerage firms or banks, for example.

Fiduciaries:

  • Enter into a written contract outline services and expectations of the advisor and client.
  • Have a legal obligation to act in the client’s best interest at all times.
  • Typically provide comprehensive financial planning services.
  • Held to a higher standard of care than financial advisors.
  • May include Certified Financial Planners (CFPs), Registered Investment Advisors (RIAs), and some wealth managers.

Is a certified financial planner the same as a fiduciary?

Again, CFPs have a more ongoing duty to their clients. A fiduciary has a higher standard to meet. It’s an ongoing standard. They have to ensure that your investments are hitting certain targets on a regular basis.

Choosing the Right Financial Advisor

When selecting a financial advisor, asking the right questions is important. Inquiring about their fiduciary status, how they make money, their approach to financial planning, and any potential conflicts of interest can provide clarity on their suitability for your financial needs. Additionally, verifying certifications such as CFP credentials or checking registration with regulatory bodies like the Securities and Exchange Commission (SEC) can offer further reassurance.

Cost Considerations

Financial advisory services can come with various fee structures, including hourly rates, flat fees, or a percentage of assets under management (AUM).

By asking the right questions and verifying credentials, you can ensure that your chosen advisor aligns with your financial goals and values, providing peace of mind in your financial journey.

Learn about our work philosophy and how we make money.

 

Navigating the landscape of financial advisors can be overwhelming, especially when trying to discern between various titles and certifications. Whether you’re seeking guidance on investments or long-term financial planning, understanding the role of a Certified Financial Planner (CFP®) and fiduciaries is important prior to making informed decisions about managing your money.

Are all financial advisors, financial coaches, financial planners, wealth advisors, and brokers CERTIFIED? The answer is no.

What is a Certified Financial Planner (CFP®)?

Knowing whether your financial professional is certified lies in the designation of Certified Financial Planner. CFPs undergo a rigorous education process, including extensive training and passing comprehensive exams. It typically takes a year or two to obtain this certification, highlighting the commitment to professionalism and expertise within the field. Plus, ongoing continuing education is required on a yearly basis.

Does my financial professional need to be certified to help me?

While certification is not a legal requirement for providing financial advice, working with a certified financial professional, such as a CFP, can offer added assurance of their competence and dedication to upholding industry standards. Certification demonstrates a commitment to ongoing education and ethical practices, which can be beneficial when seeking guidance on complex financial matters.

What is a Fiduciary?

While many financial advisors operate under a suitability standard, where recommendations must be suitable for clients at the time of sale, fiduciaries adhere to a higher standard of care. Acting as fiduciaries means putting the client’s best interests first on an ongoing basis, disclosing any conflicts of interest, and ensuring ongoing accountability in managing investments. Fiduciaries are held to an ongoing standard of care, continuously monitoring and adjusting investments to meet specific targets.

Differences Between Financial Advisors and Fiduciaries

Financial advisors can range from those who simply offer guidance on budgeting to those specializing in comprehensive retirement planning. However, not all advisors operate under fiduciary duty. It’s essential to differentiate between advisors who prioritize client interests and those who may have conflicts of interests. One item I value is fiduciaries have to place their conflicts of interests in writing for clients. Here are few other differences.

Financial Advisors:

  • Offer a range of financial services and products.
  • Required to provide suitable recommendations that align with client’s needs and risk tolerance at the time of recommendation.
  • Can work for a variety of financial firms from insurance companies or brokerage firms or banks, for example.

Fiduciaries:

  • Enter into a written contract outline services and expectations of the advisor and client.
  • Have a legal obligation to act in the client’s best interest at all times.
  • Typically provide comprehensive financial planning services.
  • Held to a higher standard of care than financial advisors.
  • May include Certified Financial Planners (CFPs), Registered Investment Advisors (RIAs), and some wealth managers.

Is a certified financial planner the same as a fiduciary?

Again, CFPs have a more ongoing duty to their clients. A fiduciary has a higher standard to meet. It’s an ongoing standard. They have to ensure that your investments are hitting certain targets on a regular basis.

Choosing the Right Financial Advisor

When selecting a financial advisor, asking the right questions is important. Inquiring about their fiduciary status, how they make money, their approach to financial planning, and any potential conflicts of interest can provide clarity on their suitability for your financial needs. Additionally, verifying certifications such as CFP credentials or checking registration with regulatory bodies like the Securities and Exchange Commission (SEC) can offer further reassurance.

Cost Considerations

Financial advisory services can come with various fee structures, including hourly rates, flat fees, or a percentage of assets under management (AUM).

By asking the right questions and verifying credentials, you can ensure that your chosen advisor aligns with your financial goals and values, providing peace of mind in your financial journey.

Learn about our work philosophy and how we make money.

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Ask yourself- can my portfolio support my lifestyle in my retirement? 

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