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How Certified Financial Planners Work

Choosing a Certified Financial Planner
The right CFP can help make your home-buying dreams a reality.
The right CFP can help make your home-buying dreams a reality.
Scott Olson/Getty Images

So you've decided to look for a certified financial planner. Where do you start? First, get recommendations from people you trust: family, friends, colleagues. Also, organizations like the Certified Financial Planner Board of Standards list qualified CFPs in your area. When you have some candidates, it's time to interview potential CFPs [Source: MacDonald].

You may have anywhere from zero questions to a million for every CFP you interview. There are a few things, however, that should be your highest priority to learn:

­­Qualifications. Almost anyone can call himself a "financial planner." Make sure the person across the table from you is really qualified to help with your finances. Check for degrees, certifications, membership in professional organizations and the like.

You also want to know if this CFP has been in business for 20 years or is just starting out. Find out who they've worked with, if they've done planning for individuals rather than businesses, and what types of planning they've done. If you're unsure how to start saving for retirement, a CFP who has mostly worked in estate planning is probably not a good fit [Source: Board of Standards].

Approach to planning. Everyone approaches finances differently. Find out what kind of planning work this CFP most enjoys. If you're looking for advice on a specific problem, you shouldn't work with a CFP who's partial to comprehensive plans. Likewise, if you relish the thrill of aggressive investing, you probably don't want a very cautious CFP.

Services. Finding out what services a CFP provides is critical. If you want a planner who can sell you insurance, mutual funds or other financial products, make sure your candidate is licensed to provide those services. CFPs also need licenses to give investment advice. Make sure your CFP can work in the financial areas that are most important to you.

Also, find out who, exactly, will be providing these services. You might be working with other people in the CFP's office, too. Make sure you know about all of their backgrounds [Source: Board of Standards].

Payment. Make absolutely sure you know how your CFP gets paid. Does the CFP you're interviewing work on a fee-only or commission-only basis? Is there some other payment arrangement? Remember, some CFPs have business relationships that could create conflicts of interest. Make sure such relationships are disclosed upfront.

If you're paying, find out how much you're paying. Until he or she examines your finances, a CFP may not be able to say how much you'll be charged. However, you should be able to get an estimate before any work begins [Source: Board of Standards].

After the interviews, look into the candidates' records. Check with the professional organizations they belong to -- state and federal agencies -- for any ethical or legal violations. Once everything is squared away, ask the CFP you've chosen to put everything you've discussed into a written agreement that you can keep.

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