The Certified Financial Planner ™ Professional: What Can He Or She bring To The Party?

By Christian Koch, CFP®

Often a Financial Advisor is a mere sales representative who is masquerading as a financial expert. Consequently, individual investors are exposed to a major financial risk when they select a financial advisor. The Certified Financial Planner ™ takes a deeper role and has the education, experience and resources to advise individuals on making solid financial decisions.

Continuing, he or she has a diverse skill set to advise individuals on a range of topics from debt management, tax consequences of investments, divorce, educational planning, retirement planning and charitable transfers to name only a few.  

It is my belief that the Certified Financial Planner ™ professional should be the chief resource person for a corporate organization in addition to individuals. For example, The Gallup Organization who created the Gallup Poll believes that there are five essential elements of “Well Being.” One of those elements is Financial wellbeing. As Certified Financial Planner ™ professionals work with Human Resource (HR) departments to offer financial perspective and advice for employees, as an employee benefit, their financial peace of mind and productivity should improve. In this role, he or she could participate as a knowledge source in employee retirement, profit sharing and 401K plans with a vital focus on weighing the economic consequence of each major financial investment decision for an employee. He also can ensure that the employee is aware of alternatives and acts with logic and discretion by maximizing their financial options available from an employee benefits perspective.

A great example of this can be seen in today’s current market. The Certified Financial Planner ™ professional has been trained to understand different investments, noting that certain characteristics occur at the peak or a trough in the business cycle. Over the last 220 years, the stock market 10-year average return has been between a range of zero to +15%. History suggests that there is a real business cycle pattern of 10-15 years of returns moving up and 10-15 years moving down. The past decade is one characterized by very low returns. Using this context and professional judgement, we would expect market returns to move higher over the next 10-years. A good source for this historical perspective is Richard Sylla, economic historian and professor of economics at New York University's Stern School of Business. Given this framework, we continue to recommend building a customized portfolio of individual stocks with attractive valuations.

As the Certified Financial Planner ™ Professional asks the right questions continually, he or she can bring an immense understanding, insight, tools, and professionalism to the party and can be a major participant in the financial decision making process to ensure success and “financial wellbeing” for both businesses and individuals.