In picking a financial planner, first look for CFP credential

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Dollars & Sense

November 28, 1999|By Liz Pulliam | Liz Pulliam,LOS ANGELES TIMES

In choosing a financial planner, how much weight should I place on his or her membership in professional associations? I've discovered that a planner I had intended to go to is not a member of the National Association of Personal Financial Advisers, or a CPA-PFS. Would you advise looking elsewhere?

Oops, you're mixing associations and credentials.

NAPFA is a professional association for fee-only planners -- those who do not take commissions for their recommendations and who are compensated solely by their clients.

Its membership is quite small, about 600 members, largely because most of the financial-planning profession accepts commissions.

The PFS, or personal financial specialist, is a financial-planning credential available only to certified public accountants who have met certain experience and knowledge requirements in financial planning. Although many CPA-PFS holders are fee-only, that is not a requirement of the designation.

It's easy to get confused with the alphabet soup out there in financial planning today. Every profession and group insists that it's the best or the only, but in fact there is no one golden standard.

The most common financial-planning credential, and the first one I'd look for, is that of certified financial planner, or CFP. (In the interests of full disclosure: I completed the CFP training program two years ago.)

The PFS is another good starter credential, as is the ChFC, which stands for chartered financial consultant.

Notice I said "first" and "starter." Anyone who has finished the course work would say that the training helps you know more, but it also shows you how much more you need to know. More important is what education and experience the planner has had since gaining the credential, what his or her ethical standards are and whether you and the planner are a good match.

Membership in certain professional organizations is a good sign, but, again, it can't be considered a guarantee of excellence. CFPs who are members of the Institute of Certified Financial Planners, a membership organization, are required to maintain certain ethics standards and to continue their educations.

Active CPAs and ChFCs have membership organizations with ethics and education requirements. You can check out these organizations on their Web sites: www.icfp.org, www.cpapfs.org or www.financialpro.org/sfsp. You'll find NAPFA's standards at www.napfa.org.

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