So you need a CFP. Great resources and experience.

So you need a CFP. Great resources and experience.


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After learning that you need a CFP you might have some questions or unsure of how to find one. This post is for you!

 

*** DISCLAIMER****

The following post is personal opinion and is NOT financial advice.  Please see a professional with a certification to create a financial plan and make financial decisions.  The purpose of this post is to share opinions and experiences.

Let’s start with the basics.  What is a CFP?

Think of a Certified Financial Planner (CFP) as an architect for your financial house.  Most people start building their financial house by just starting to add various pieces of wood and metal, tying them with zip ties.

shack
Average financial house

A CFP can help you redesign the house so it is sturdy and will last you for retirement.

well designed
Well designed financial house

At least the good ones.  Some of them rake people over the coals by selling them things like whole life policies and annuities when those financial vehicles might not make the most sense. Usually due to the commissions they get from those sales.  An annuity can give a $10-15K kick back as soon as the customer money has been transferred to the Annuity seller. If you follow this blog and the associated links, hopefully you will avoid this pitfall.

I prefer to use a “Fee Only” CFP.  This is a situation where  typically you pay an hourly rate for their opinion and experiences.  And typically some sort of deliverable.

So do you need a CFP? I highly encourage you to read Clark Howard’s post on it.

I recommend holding off until you have at least a net worth of somewhere around $150-200K.

Before then get a book from someone with great advice to get started.  Something like I will teach you to be rich by Ramit Sethi.

Quick self promotion:

I also provide Personal Financial Coaching for a reasonable cost.  See my page here for additional information.

Resources

Once you have decided you need one I would utilize the following resources during your search:

Finra Brokercheck – This is a site the helps you look up the background of potential CFP’s

CFP Board verification from cfp.net – Another set to check CFP backgrouns.

Garrett Planning Network – This is a group of CFP’s that require a vetting process for their members.   Not required for the CFP to be on this list.  I just used it as one of my filters.

 

CFP meeting time!

So you have selected a CFP to meet.  What are the expectations? Well I would recommend first going through their website to see if you have any questions from that.

Then I would recommend you read several online questionnaires out there and pick the questions that are most valuable to you.

Here are a few to try out.  There will be some overlaps.

Clark Howard questions

Let’s make a plan questions

Nerdwallet questions

Marketwatch questions

Investopedia questions

It is up to you if you want to provide data to the potential CFP.  If you do provide anything, PLEASE ensure that you either use a secure upload site or encrypt the file with something like 7zip.  And do NOT send the 7zip password in the same email as the file.  I would recommend calling or texting the password if you use that.  I usually prefer to do businesses that have a secure file upload site.  By providing this information the CFP will be better determine if they are a good fit for you or not.

The CFP should ask questions as well. Be honest and direct with them. It is recommended to use this time to determine your comfort level with the person.

Ultimately this should be a long term relationship and you want someone you feel comfortable with and you feel listens to you.  I plan to use my CFP for 20-30 years.

 

What does a CFP offer?

This can vary quite a bit.  I used the CFP to do the following:

Simplify my investments ( I was investing in dozens of stocks, ETF’s, and mutual funds with a lot of different brokerages)

Determine if I was saving enough to retire

Verify I had enough insurances to cover me

Determine if I should be doing Roth or Traditional 401k

Discuss what a Backdoor Roth is (Not applicable to a lot of people).

Discuss HSA investments

Come up with a long term investment strategy that i will follow for the next 20 years.

Experiences

Initially I had not read any books and educated myself to the point I am at now.  I wish I had done a little more reading before my first interaction.  Also really wish I knew about index funds before I even started this journey.  I would be so much wealthier at this point if I had.

Ask for samples

The first CFP I met with was a decent guy.  He didn’t cost a lot but I also didn’t know what to expect.  Through our discussion I wanted his advice on how to move away from actively managed funds to buy the stocks myself.  I wasn’t aware of index funds at the time.  Again, really wish I knew about those.  I paid him roughly $1500 at the time and for that he emailed me a word document and an excel document.  Both 1 page in length.  Neither one of them had headers or anything.  For all I know he spent about 20 minutes only getting the information. I blame myself for this one.  I was ignorant of what the standard deliverable should be and the fact he didn’t even mention index funds should have warned me too.  Going forward I knew now to always ask for a sample deliverable.

They want me to pay how much?

The second CFP was someone that was recommended by someone at work.  The CFP came in and did a free 1 hour session to cover some of the basics of personal finance. I could tell he was educated and he answered a lot of questions and was not pushy. I met with him about four or five times without any cost to me. I ask a LOT of questions and he answered them all.  His deliverable was a solution that involved some actively managed mutual funds and an annuity.  The Expense Ratio (E/R) of the Mutual funds came to between 4.5% and 5.0%. With him getting 2.5%.  If he had not tried to sell me an Annuity I would have taken this just from his knowledge and time he spent with  me.  He never lied and he never was pushy.  I don’t feel he was dishonest other than I personally do not agree an Annuity was a good financial vehicle for someone in my age/salary/family dynamics.  I started doing research on what an annuity is.  Prior to this I had no clue what they were.  Once I found out they can get a kick back up to 10-15k I realized this wasn’t the best solution for me. I don’t consider it stealing, but I am big on investing as much of my money for my retirement and minimizing how much others make off me.  This person also didn’t even mention index funds.

Just right!

Based on my last two experiences I decided to do a lot more reading and learning before picking the next one.  I read a little over 20 books on personal finance.

Now I knew what index funds were and was actually upset that no one in my life and neither of the previous two CFP’s had mentioned them. I discovered the resources above and knew some of the things to watch out for now.  Using the Garret Planning network I located a local CFP.  I liked his website and his rates being posted.  Submitted my paperwork to him via his online portal and setup a meeting. This time I ensured to ask for a deliverable example as well.

The one down side of the person I used is he took like two months for the first meeting.  And another two or three to have my deliverables.  Not sure how standard that is.

During the initial meeting I pulled out my list of questions and we interviewed each other.  He actually impressed me because he had me slow down and repeat a few things so he could write the questions down fully.  This earned him a lot of my respect.  Very rarely has that happened.  After the session he provided an a la carte solution with a quote on the price. This was a rough quote based on how many hours he expected it to take.  In the end he charged me exactly that amount.

Two months later we met to go over the deliverables.  We spent about two hours. After he went through the deliverable he then pulled out his sheet of questions from our first meeting and made sure he covered everything.  Super impressed with that.

Since that point I have met with him only once more.  We have exchanged some emails with questions I had.  I now have a long term plan to follow.  I know that I am saving enough and things I can do to retire earlier if I need to.  The piece of mind of knowing all of this was very much worth the cost for me.   Feel free to comment any questions you have on this experience down below.

 

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