Who is a Certified Financial Fiduciary (CFF) & What Can They Do?
There are a range of professionals in the world of finance. From advisors to tax professionals, from brokers to planners- some specialists can take care of every financial need of a client. Needless to say, what separates one financial professional from another is their specialization and how well they perform their duty to their client.
While all financial professionals have the best interest of their clients at heart, some might work on a fee-based model that allows them to follow a suitability standard and might endorse or recommend a certain service just to earn a commission on them. In such a case, it becomes imperative to explore the possibility of hiring someone who will only work for your benefit and not their own. This is where a Certified Financial Fiduciary designation can be beneficial. If you’re looking for financial advice made in the best interest of your unique financial needs and requirements, consult with a fiduciary financial advisor.
Read on to know more about the CFF designation and why it might be beneficial for you to hire an advisor who is a CFF.
What is a fiduciary?
A fiduciary advisor is obligated to act in the best interest of their client. Under the fiduciary responsibility, an advisor is mandated by law to only make the decisions that are in the best interest of his/her client. A decision taken by a fiduciary must not benefit them in any manner. A fiduciary advisor manages the wealth, finances, and property of their clients on their behalf. Any breach of fiduciary duty and non-fulfillment of duty can lead to legal action and damages to the reputation of the advisor. There are several types of fiduciaries – one of them being Certified Financial Fiduciary.
Who is a Certified Financial Fiduciary (CFF)?
A fiduciary is bound by ethics and law to act in the clients’ best interest. A Certified Financial Fiduciary is a professional designation given by the National Association of Certified Financial Fiduciaries (NACFF). It is used for financial professionals who have completed the certification and training protocol established by the NACFF and the American Financial Education Alliance (AEFA).
Certified Financial Fiduciaries are taught to always uphold the highest moral and ethical standards in addition to obeying their fiduciary duty to their clients. For instance, a fiduciary will never consider his/her own interest ahead of him while giving financial or investment advice to their new/old clients. The fiduciary never earns a commission or even a brokerage fee for recommending or endorsing a certain financial scheme or product. They will not tie-up with the providers of financial products and services to earn a quick buck – in contrast to fee-based financial advisors. Certified Financial Fiduciaries must disclose how they are being compensated for their services and avoid making recommendations that could generate a conflict of interest.
Certified Financial Fiduciary (CFF) is a professional designation that was created in 2018 after the Department of Labor felt there was a need for more financial professionals in the country – especially those who would work on retirement plans for people approaching the retirement age. Most Certified Financial Advisors are generally accountants, Certified Public Accountants, financial advisors, or even brokers. Anyone who has professional experience or a college degree in finance can become a Certified Financial Fiduciary.
Certified Financial Fiduciaries (CFF) vs Financial Advisors
Not all financial advisors are legally bound to act in the best interest of their client. They might choose to have a fiduciary duty or not have one. With Certified Financial Fiduciaries, the fiduciary duty is not a choice but a compulsory duty that comes with their job as a CFF.
One might have a financial advisor but not a fiduciary. Financial advisors not bound by a fiduciary duty may work on a fee and commission basis. They may charge their clients their hourly rates and recommend financial products or schemes that they have a stake in. They also might earn a commission or brokerage from the financial service provider on every product they sell to a client. While financial planners and advisors can make a quick buck using this method, they might confuse their client who places their full trust and faith in them.
Any financial planner can give financial advice and manage their clients’ wealth. However, financial advisors that do not have the CFF designation may be held to a lower legal standard of care than CFFs. It is important to remember that not all financial advisors and planners are fiduciaries. Certified Financial Planners (CFPs) are generally fiduciaries; however, it is always good to double-check their credentials.
How to tell if a Financial Advisor is a Fiduciary
The key responsibilities that define a fiduciary include putting the client’s needs first and acting with utmost good faith. A fiduciary will never mislead their clients. They will always make conscious attempts to avoid any conflicts of interest, and lay them out in the open in unavoidable circumstances (such as unprecedented events that arise between two clients), and provide full disclosure of all facts in the recommendations.
The easiest way to find out if your financial advisor is a fiduciary or not is by asking them directly. If their explanation is not satisfactory enough, taking a look at their fee structure will help. A CFF will always make full disclosure of their fees. A complicated fee structure is a red flag that may indicate a non-fiduciary financial advisor.
Another way to ensure this is by looking for a certification. Certified Financial Fiduciaries are only certified by the NACFF. This is the gold standard for clients to know if a certain financial advisor has your best interests in mind.
People must also be cautious of different types of advisor titles in the market. For instance, tax professionals and brokers will not be bound by a fiduciary standard. Investment advisors, especially those working in retirement planning are held to the fiduciary standard by the Department of Labor, but not all adhere to it, and maybe part-time fiduciaries. Fee-only financial advisors and planners generally adhere to the fiduciary protocol put in place.
Why Should I Hire a Certified Financial Fiduciary (CFF)?
- CFFs meet all the ethical and educational requirements in addition to stellar credentials and experience. They will help you maximize your savings without spending too much time on research.
- A CFF is a kind of holistic financial advisor that will dictate all the pros and cons of a certain move to their clients. They will disclose all relevant facts and materials before the client decides so you can make the best-informed decision possible.
- They will not mislead you or use your assets for the benefit of other clients or themselves.
- For major life-altering events like retirement, divorce, or children’s education; a CFF will ensure you have the right information and guidance to adjust financially.
- You can expect unbiased, comprehensive, and objective answers to all your financial queries from a CFF.
How to Choose a Certified Financial Fiduciary (CFF)
The fundamental thing one must do before choosing a CFF is to underline your immediate and long-term financial goals. One must figure out if they need help in retirement planning, asset management, investment, children’s education, mortgages, or all of them. Some CFFs have expertise in a certain area while some may have experience in a range of subjects.
The best way is to research reputed CFFs. It is a profession where word-of-mouth is extremely crucial. Look out for potential prospects from friends & family as well. It is also important to review potential CFFs, verify their credentials and fees before locking on a certain CFF.
That said, meeting with a potential CFF is the most important thing to know if he/she understands your goals. Being able to build a relationship with a CFF is crucial to the success of your engagement and your money since the CFFs will guide you in some of the most important decisions in your life. As it goes unsaid, double-check to make sure the CFF you’ve picked has NACFF certification and is a verified fiduciary.
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Certified Financial Fiduciary Code of Conduct
The NACFF has set the following code of conduct to be practiced by a Certified Financial Fiduciary:
- Duty of Loyalty: A CFF has to remain loyal to the interests of their clients and put their interests always first.
- Holistic Approach: Make sure that all aspects of a recommendation have been considered before offering any suggestion to the client.
- Duty of Good Faith: Since the client is putting all their trust and faith in one, CFFs must also treat all their clients fairly.
- Confidentiality: Like any responsible advisor or planner, all the communication between a CFF and their client must remain confidential at all times. This also includes the clients’ personal information and their financial information.
- Duty of Good Care: CFFs are obligated to only make suggestions and give advice to their clients where they have expertise. CFFs must avoid making recommendations about products or services where they aren’t skilled to do so.
- Full Disclosure: Before starting the job, a CFF must fairly and honestly disclose all biases or conflicts of interest they might have. Full disclosure must also be made about their fees.
- Educate First: A person will trust their CFF to do the best. To ensure the same, a CFF must first educate its client about a product or scheme they are recommending. The client must understand the product, its pitfalls, and its advantages.
- Professional Practice Management: CFFs are obligated to practice the highest standard of professionalism via proper documentation and processes set by the governing bodies. They also must undergo frequent audits to ensure that they are thoroughly following their fiduciary duty well.
- Comparison: To be unbiased, CFFs must always give comparisons of one product against another one and explain why one is better than the other one.
How to become a Certified Financial Fiduciary
The CFF certification is given by the NACFF after which, a financial professional can designate themselves as a CFF. Candidates are required to possess great knowledge of financial planning and financial services.
Pre-requisites:
- A professional financial license or
- Professional financial certification or
- Education and expertise in the field are deemed satisfactory by NACFF. Work experience of at least 10 years in the industry is a must.
- Relevant bachelors or graduate degree along with at least 5 years of work experience.
- Pass the NACFF’s background and criminal check and audit of the business office of the candidate.
Candidates will then have to mandatorily complete the 1-day in-person training at a NACFF facility or the online course. The candidate will then have to appear for NACFF’s CFF examination and pass it with at least 75%. Remember, studying as a CFF does not end after passing the exam. Candidates will have to adhere to continuing education requirements by studying for at least 10 hours per year.
CFFs will also have to swear to adhere to the NACFF’s code of conduct and uphold its principles. In the future, CFFs are expected to exhibit the highest standards of moral, ethical, and fiduciary values.
The 1-day training and the NACFF exam costs $1,895 in-person and $1,695 online. Applicants also need to pay a non-refundable fee of $250.
To conclude
A CFF designation indicates that the advisor is bound by law to put the benefit of their client first. Clients who want impartial financial advice can look for a CFF advisor since they are financial professionals who have committed to fiduciary standards. However, a fiduciary standard is not a hard and fast rule of law. Make sure that the CFF that you hire has excellent credentials and a good referral portfolio. More importantly, make sure that they can guide you suitably for your unique financial requirements.
If you are looking for an experienced and certified fiduciary financial advisor who can help you with financial planning, retirement planning, tax planning, wealth creation or preservation, estate planning, etc., use Paladin Registry’s free advisor match tool. Find and compare vetted financial advisors that are best suited to your financial needs and goals.
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