RS provides cafeteria plan relief for the pandemic
In response to the COVID-19 pandemic, Congress enacted temporary special rules for health flexible spending arrangements (FSAs) and dependent care assistance programs under Sec. 125 cafeteria plans.
The new rules were put in place as part of the Consolidated Appropriations Act, 2021 (CCA), P.L. 116-260, enacted in December 2020. The IRS has now provided these plans with more discretion in 2021 and 2022 to make adjustments to help employees meet the unanticipated consequences of the public health emergency (Notice 2021-15). The IRS anticipates that, because of the pandemic, employees are more likely to have unused health FSA amounts or dependent care assistance program amounts at the end of 2020 and 2021.
The changes enacted in the CCA allow flexibility for carryovers of unused amounts from the 2020 and 2021 plan years; extend the permissible grace period for plan years ending in 2020 and 2021; provide a special rule regarding post-termination reimbursements from health FSAs; provide a special carryover rule for dependent care assistance programs when a dependent ages out during the pandemic; and allow certain midyear election changes for health FSAs and dependent care assistance programs for plan years ending in 2021.
Notice 2021-15 permits employees who are eligible to make salary reduction contributions under a cafeteria plan to make a new election prospectively if the employee initially declined to elect employer-sponsored health coverage; revoke an existing election and make a new election to enroll in different health coverage sponsored by the same employer prospectively; and revoke an existing election prospectively, as long as the employee attests in writing that he or she is enrolled, or immediately will enroll, in other health coverage not sponsored by the employer.
The notice also provides relief for the effective date of amendments to Sec. 125 cafeteria plans to implement the expansion under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, which allowed expenses for health FSAs and health reimbursement arrangements to include over-the-counter drugs without prescriptions and menstrual care products. The rules allow those expenses to be reimbursed for any period beginning on or after Jan. 1, 2020, without disqualifying the plans.
— Sally P. Schreiber, J.D., (Sally.Schreiber@aicpa-cima.com) is a JofA senior editor.
Financial Planning: 10 Opportunities for 2021
How can you optimize your financial plans for 2021? Financial experts think these 10 ideas have potential for success—if you get started soon.
Photo courtesy of Getty Images
Have you set specific financial, investment, estate and philanthropic goals for 2021 and beyond? If not, these ideas can get you started. If so, fantastic—these 10 opportunities can enhance your plans.
1. Rebalance Your Portfolio
A volatile 2020 that favored specific industries over others, along with the potential buildup of cash at year-end from investments, means portfolios are likely in need of review. Now is a good time to compare current portfolio exposure to strategic targets and determine if changes are warranted. Be attentive not just to bond and stock mix, but also to underlying asset classes (for example, growth versus value).
2. Evaluate Your Cash Management Strategy
With yields close to zero (and likely to remain at that level for the foreseeable future), it’s important to maintain a prudent cash-management strategy. Evaluate balances relative to short- and intermediate-term needs to determine appropriate levels. Ensure cash balances respect FDIC/NCUA limits, and seek alternatives where warranted to provide protections.
3. Consider RMD/QCD Planning
Required minimum distributions (RMDs) are back after the CARES Act waived them last year. Evaluate the role RMDs will play in cash flow and tax planning. Consider the use of year-end RMD withholding as a replacement for quarterly estimates if RMD will be in excess of required tax payments. Remember that qualified charitable distributions (QCDs) remain a viable option for the charitably inclined to partially or fully offset RMDs. For those considering QCDs, it may be wise to wait for clarity on tax policy and the resulting impact on itemized deductions.
4. Review Insurance Policies
With record-low yields, dividend crediting rates on whole life policies may be negatively impacted. Without proper management, this trend could place certain policies at risk of lapse over time. Reviewing your policies now and developing a plan to protect your coverage allows time to make appropriate changes. It’s important to assess whether the current structure remains appropriate for your situation as well.
5. Develop Your Family Education Plan
Now is a great time to refocus on your family’s financial future. Developing a proper plan to bring the next generations into the fold isn’t only a good complement to sound financial planning, but actually critical to its execution. Developing the next generation to operate as sound stewards of your legacy is a high-impact activity that magnifies the benefits of prudent wealth planning.RELATEDReputation Management: Why Is It Important for Financial Services?
6. Use Low Rates to Your Advantage for Wealth Transfer
This environment is still extremely conducive for intrafamily wealth transfer. Utilizing notes between families or entities, selling assets to grantor trusts, or using grantor-retained annuity trusts (GRATs) all remain attractive strategies. For existing debt in place, consider refinancing given the current low interest rate environment.
7. Consider Freezing GRATs
After strong performance since the March 2020 lows, many GRATs hold significant appreciation. Consider the merits of locking in that appreciation via asset substitution with lower-risk, less volatile assets. New GRATs can be restarted to continue transferring upside if the markets cooperate, while the frozen GRATs can preserve value for intended beneficiaries.
8. Review Your Estate Plan
2020 highlighted the importance of planning for the unexpected, and that lesson extends to your estate plan. Review the key tenets of your plan and confirm that they still align with your wishes. This includes trustees, personal representatives, financial and health care powers of attorney, guardians, distribution provisions, among others.RELATEDWhy Financial Literacy Will Unite Americans
9. Don’t Forget the Estate Planning “Freebies”
While this remains a favorable environment for advanced wealth transfer strategies, keep in mind the simpler options. The annual exclusion gift limit remains at $15,000 per person. You have the ability to pay for medical expenses, with no limit, as long as you pay the medical provider directly. And you can still pay for education expenses, also with no limit, and again, as long as you issue payment to the institution, not the individual.
10. Plan for Philanthropic Giving
Donor-advised funds and family foundation balances have swelled in recent years, due to both accelerated gifting for tax purposes and market performance. This is a great time to take a step back and develop or confirm your strategic plan for the funds available for grants moving forward.
As with many financial topics, these planning concepts shouldn’t be viewed in a silo. Your advisory team can work with you to tie those pertinent to you to your broader plan. Feel free to contact your financial advisor to discuss further.
Jim Baird, David Stahl, Dawn Jinsky, Mike Lopus Published on February 16, 2021
Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.
Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment.
CBA publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Any analysis non-factual in nature constitutes only current opinions, which are subject to change at any time. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from CBA for referal to a Certified Financial Planner for investment advice regarding your own situation.
5 Must Haves in Your 2021 Financial Plan
Start the new year with a plan, but don't leave out these important considerations.
A new year offers everyone an opportunity to revisit their financial priorities and to document them in a written financial plan. In an effort to keep your own financial life simple and manageable, it's advisable to have a list of core tenets that comprise its foundation. The list should be short but effective -- the hope is that it will remain relevant regardless of how the market performs in 2021. Below you'll find five must-haves in your 2021 financial plan.
1. Commit to low -- or no -- fees
It's 2021 -- access to financial markets has never been easier or more convenient. As a result, investing is now free or very close to it. It's difficult to think of many valid reasons to hold high expense ratio funds or to pay commissions to a broker when free alternatives exist. Try to build a portfolio of high-quality stocks at zero cost by using a discount broker, or consider the time-saving approach of holding only broad market index funds.
2. Open a Roth IRA
A Roth IRA -- assuming you're within the income limits to contribute -- allows you to deposit up to $6,000 ($7,000 if you're over 50) of after-tax money every year and invest it tax-free, forever. You won't pay tax on any dividends or growth going forward, even when you finally withdraw the money in retirement. If you are above the income limits to contribute directly to a Roth IRA -- a good problem to have -- you can investigate a backdoor Roth IRA contribution.
Given the perils facing Social Security and the uncertain future existence of defined benefit pension plans, you should plan to take full responsibility for the cost of retirement. The Roth IRA is at the core of taking such responsibility. Also important to mention is that tax rates in the future are not likely to remain as low as they are now, providing further reason to pay tax today and allow money to grow tax-free into the future.
3. Adequate insurance
What has the potential to go wrong almost certainly will, sooner or later. The beginning of the year is an ideal time to revisit all of your insurance coverage -- health, auto, home, and pet, among others -- and determine if you are receiving the right amount of coverage at appropriate value. Generally speaking, you have insurance to protect against catastrophe. This means that relatively small out-of-pocket amounts are acceptable if you have high-deductible insurance coverage. Just make sure you'll be covered in worst-case-scenario events.
4. An asset allocation
In the most basic terms, an asset allocation is another way of saying "division of assets." For example, a 90/10 asset allocation generally refers to a portfolio containing 90% stocks and 10% bonds. Your asset allocation is a guiding benchmark that helps you manage financial risk. An 80/20 portfolio, for instance, will have greater risk than a 30/70 portfolio. Finding the appropriate ratio of stocks to bonds (and/or other assets such as real estate) is one of the keys to creating a sound financial plan but understandably might take a bit of time to refine.
5. A general sense of your tax situation
Without spending the month of January with your head buried in federal income taxation books, it's at least useful to know some of the basics of your tax situation. Do you know approximately what bracket you'll be in once the year is over? Do you know if you use the standard deduction or itemize? Knowing the answers to these questions, among others, is undoubtedly useful in interpreting your broader financial picture. Furthermore, your actions within your investment portfolio will ultimately affect your tax return the following year, so it's helpful to know and understand the consequences of your investing actions before you take them.
Know the basics
It stands to reason that those who will lead financially successful lives in 2021 do not need to know every last detail about financial planning. But they will know the basics and get them mostly right. This means having a written plan covering the above steps and mostly sticking to them -- perfection isn't the point here. Financial planning is also as much art as it is science, and being a little bit wrong is fine. At the same time, having some direction and knowing the fundamentals will go a long way in making your financial life a successful one.
Sam Swenson, CFA, CPA Jan 10, 2021 at 7:32AM
The Young Person’s Guide to Investing
Narrowing down all the options and figuring out where to turn can be paralyzing. We’ve got you covered.
Investing doesn’t have to be that complicated.
But when you’re just starting out, it can be hard to knock it off your to-do list because you have so many competing demands — a budding career, rent and student debt, to name just a few. You also need at least some basic knowledge, which probably wasn’t covered in any of your classes in high school or college.
The good news: There are more attractive options for entry-level investors than ever before. Many mutual funds cost just fractions of pennies for every dollar you invest, and some firms are dangling them for free. Even getting advice from professionals is easier than it was for previous generations. And after you go through the motions once, you can set your plan on autopilot for a while.
But narrowing down all the alternatives and figuring out where to turn? That can be paralyzing.
This guide can help — consider it your road map to investing.
There are a couple of items you want to deal with first: preparing for a financial emergency and creating a plan to attack any high-cost debt you might have.
Building a financial cushion will help soften the blow should your money situation change, whether that’s because of the loss of a job or because of a giant unexpected expense. Most financial planners suggest keeping at least three to six months of living expenses in cash — to cover the basics like rent, food, utilities, loan payments, student loans, etc. — in a traditional bank account that’s backed by the Federal Deposit Insurance Corporation. That means your savings are insured by the federal government, up to certain limits, if the bank fails.
You can find the best interest rates at online banks, and the easiest way to get started is to set up regular, automatic transfers from your checking account. (Capital One 360, for example, lets you set up different savings accounts, which you can label for different purposes — emergency fund, annual vacation and so on).
If you have really high-cost debt — like credit card debt — you want to deal with that before investing significant amounts of money. If you’re earning 7 or 8 percent over the long term in the stock market but paying 15 percent on a card, you’re better off tackling the debt first.
That logic doesn’t necessarily apply to your student loans. Depending on the type of person you are — maybe you detest debt or like to tackle one big task at a time — it might feel better to pay down your loans first. But there’s a strong case to be made to both invest and pay down your loans simultaneously, if you can. (People with piles of high-cost student debt should seek help.)
Investing early and often puts you at a huge advantage, thanks to the magic of compounding numbers, which is illustrated below. Need we say more?
How much to save and invest, and where?
So you have some money to invest or are working and want to set up a plan for your long-term goals. Many financial experts recommend saving at least 12 to 15 percent of your salary to achieve a secure retirement, and others suggest even more.
But even 10 percent might seem like a laughable notion at this stage. There are ways to inch closer to that goal, however, without doing all of the savings on your own.
Much of how you get there will depend on whether you have access to a retirement plan through your employer, typically a 401(k) at for-profit organizations and often 403(b) plans at nonprofits.SMARTER LIVING: A weekly roundup of the best advice from The Times on living a better, smarter, more fulfilling life.Sign Up
If you do, then much of the hard work is done for you. Employers must vet and assemble the plan’s menu of investment options. On top of that, you contribute money that hasn’t yet been taxed, so it lowers your tax bill. The money then grows tax-free over time, and you pay tax on the money when it’s withdrawn in retirement.
The best part? Some employers will also provide a matching contribution for your savings. They might match every dollar you contribute, say, up to 4 percent of your salary. That matching money is a guaranteed return, regardless of what the stock market is doing. Save as much as you can to grab all of that free money.
Then, each subsequent year, you might crank up your savings by one percentage point (some plans have tools that can automate this), so within a few years you will be closer to that respectable goal of 10 percent of your salary (which includes what your employer kicks in).
Just remember: Not all employer-provided plans are good ones. Some are downright awful, stuffed with high-cost, low-quality investments. How do you know whether your plan is a winner? The costs you pay for the plan are typically a telltale sign — and paying too much can cost you tens of thousands of dollars, if not more, over the course of your career.
“If you see a bunch of funds that are charging more than 1 percent a year, that is a red flag,” said Christine Benz, director of personal finance at the investment research firm Morningstar, referring to investments that charge more than 1 percent of your total money invested. You can also ask human resources (or the person coordinating the plan) to see a copy of the summary plan description, which should list any other administrative fees that aren’t immediately obvious. (BrightScope also has a tool that ranks thousands of plans.)
If you’re in a high-cost plan, save enough to get any company match, but consider investing anything extra into another type of account.
For younger people, Roth I.R.A.s are often the preferable choice. That’s because you deposit money that has already been taxed, and you’re probably in a lower tax bracket now than you will be later in life when you’re earning more. In contrast, with a traditional I.R.A., investors get a tax deduction now, but pay taxes when the money is withdrawn. Your Roth I.R.A. balance is what you will actually have to spend; in a traditional I.R.A., it will be reduced by the amount of tax you will owe later.
Another upside to a Roth: In an emergency, you can withdraw contributions — but not any investment earnings — without penalty. (Not that you want to do that!) However, there are income ceilings that determine who can contribute, as well as other rules around withdrawals.
For a more comprehensive look at the various other types of plans, including traditional I.R.A.s, read our retirement guide here.
Why you should use index funds
Resist the temptation to use the latest slick app promoting its ability to invest in single stocks or cryptocurrencies. You want to do the opposite: Own a collection of cheap and boring mutual funds that invest in different kinds of stocks from all over the world, with a helping of safe bond funds to cushion the inevitable swings of the stock market. That way, if anything goes wrong with a particular stock or sector of the market — say, technology or emerging markets — you’ve hedged your bets.
That’s why you’re better off in what’s called an index fund, whose investments simply mirror big sections of the stock market — the S&P 500 Index, for example, tracks the 500 largest publicly traded companies in the United States.
Investors paid an average cost — known as the expense ratio — of 0.48 percent of their assets, meaning 48 cents for every $100 invested, for mutual funds and exchange-traded funds in 2018, according to a Morningstar study. That’s down from 0.51 percent in 2017. (Exchange-traded funds, or E.T.F.s, are similar to index funds, but trade on an exchange like stocks. For most investors, the difference between a mutual fund and an E.T.F. is negligible. Since many providers have waived trading commissions on E.T.F.s, the ultimate decision on which to invest in might come down to whichever has the lowest expense ratio. But if you’re investing in a regular taxable brokerage account, E.T.F.’s might be preferable because they are more tax efficient, experts said.)
Funds that are actively managed by human pros often cost 1 percent of your assets annually or more — that’s $1 or more for every $100 invested.
That might not seem like a lot, but consider that index funds that track the entire stock market can be had for mere pennies for every $100 invested. Fidelity has gone even further — it offers four index funds that are free and do not require any minimum investment (More on that here.)
Paying rock-bottom prices can add many tens of thousand of dollars, or more, to your balance over the course of your career.
Picking the right mix of investments
One of the more important decisions you will make — besides how much you pay for investments — is how you decide to divvy up your investments among stock, bond and other funds, something known as your asset allocation.
Younger people can generally afford to take more risks and invest more heavily in stocks — which have the potential to generate more growth over time — because they have many working years ahead of them. If the market tanks, their portfolio has time to recover.
But how much you ultimately decide to dedicate to stocks overall should also depend on the strength of your stomach to tolerate market swings.
One way to figure this out is to ask yourself a question: The stock market tumbled nearly 50 percent during the Great Recession. If you had most of your money in stocks at that point, how would you have reacted?
If the answer is, “I probably would’ve sold more stocks,” well, that means you probably had too much to begin with. Then you’ll need to figure out when to get back into the market — and you will most likely be wrong. You want an allocation that will allow you to stay the course, even if it’s a bumpy ride. But if you’re too conservative, you’ll have to save more because your portfolio probably won’t grow as fast.
Also consider the following: An investment portfolio evenly divided between stocks and bonds would have lost nearly 29 percent of its value in the Great Recession, but it would have taken only about a year to recover, according to an analysis by Vanguard. A portfolio that was 100 percent stocks — and lost about 55 percent — would have taken about three years to recoup its losses.
So how do you figure out what stock-bond mixture will work for your situation? One type of mutual fund, known as a target-date fund, does that job for you.
You pick a fund based on the year you hope to retire — so if you’re 40 years from retirement, you’d chose the 2060 retirement fund. As that date draws closer, its mix of investments slowly becomes more conservative.
A couple of 2060 funds — including Fidelity’s and Vanguard’s — now allocate about 90 percent of their portfolios to stock index funds (with roughly 55 percent in United States stocks and 35 in international) and the remainder in bonds. Schwab’s version is a bit more aggressive: it has 95 percent of assets in stock funds. Be sure to look under the hood so you know what’s inside: When markets plummeted in 2008 to 2009, many target-date funds with the same target date had returns that varied widely.
Another benefit of target-date funds: If you put all of your retirement money into one fund, you won’t have to worry about routine portfolio maintenance known as rebalancing. That’s when investors sell investments that have ballooned beyond their initial target (of, say, 90 percent in stocks) and reinvest the proceeds into the side of the portfolio that has shrunk, relatively speaking.
Other services, known as roboadvisers, can also do much of this work for you. More on those in a minute.
Saving for goals besides retirement
Shorter-term goals — buying a condo or a car or saving for a wedding — generally require a less risky approach.
If you’ll need to use the money in three years or less — say, for an emergency fund or a vacation — the answer is easy: Shuttle your savings into a high-yield savings account each month, one with a competitive interest rate, said Matt Becker, a certified financial planner in Florida. With such a short time frame, the amount of money you save is more important than any return you may earn — and you don’t want to risk losing anything.
If your goal is anywhere from three to 10 years away, you might take more of a hybrid strategy. If you want to buy a home in five years but can be a little flexible on timing, you might invest one half in a savings account and the remainder in a fund balanced between stocks and bonds.
“A good rule of thumb is to expect that in any given year you could lose half of whatever money you have in the stock market,” Mr. Becker said. “Of course, you would also expect to recover that over time, but over shorter time periods that may be harder to do.”
If you want to buy a home in five years from now or longer and know you’ll need at least $60,000, he said you might put half of your monthly savings into a savings account or a certificate of deposit, while the other half goes into a taxable brokerage account that holds something like Vanguard’s LifeStrategy Moderate Growth Fund, which is 60 percent stocks and 40 percent bonds. That means you’d have about 30 percent of your money in stocks — in other words, 15 percent of your savings could vaporize in a down market. For absolutely certainty your money will be there by a certain date, use a high-yield savings account.
Where should I go to get started?
Outside of a solid employer-sponsored retirement plan, the best place to get started is at one of the brokerages where you can gain access to index funds with ease — Fidelity, Schwab and Vanguard all provide solid options for entry-level investors, for example, depending on your personal preferences.
You might also consider a so-called roboadviser, which will ask you a series of questions before formulating an automated investment plan for a specific goal. Several of them also offer help from human advisers for an extra fee.
The Robo Report, which tracks and analyzes roboadvisers, ranked Betterment as its top pick for entry-level investors.
“Their platform is intuitive and simple, has a $0 minimum balance and has a high-interest savings account for cash reserves,” said Ken Schapiro, president at Backend Benchmarking, which publishes The Robo Report. “They have strong online features, and a client can easily graduate from their digital-only service to their service with live advisers as their needs grow.”
Professional help can also be found for less money these days, though it will obviously cost more than a robot adviser.
A warm-blooded professional may be worth it, particularly if you’re having trouble getting your debt under control or need more hand-holding with a specific issue.
But you’ll need to find someone who is truly working in your best interest and not lining their pockets at your expense.
To increase your chances of finding someone like that, ask if they are acting as a fiduciary. The pros most likely to be fiduciaries are “certified financial planners” who are also “registered investment advisers.” Then, you probably want to find one of these individuals who charge you an hourly rate for their time or another type of flat fee; you want to avoid financial advisers who only earn money when they sell you a product.
Here’s where to find them: XY Planning Network; Garrett Planning Network; The National Association of Personal Financial Advisors.
But most younger investors really don’t need all that much help. If your situation is relatively simple and you’re just looking to become more knowledgeable about money and investing, there are plenty of materials that can provide a solid foundation: “I Will Teach You to Be Rich, Second Edition,” by Ramit Sethi; “If You Can,” by William Bernstein; “Broke Millennial Takes On Investing,” by Erin Lowry; and anything by John Bogle or Helaine Olen.
Tara Siegel Bernard covers personal finance. Before joining The Times in 2008, she was deputy managing editor at FiLife, a personal finance website, and an editor at CNBC. She also worked at Dow Jones and contributed regularly to The Wall Street Journal. @tarasbernard
A Financial Planner Is Important Now
After a pandemic rattles the economy, professional advice can be crucial for investors.
Investors must navigate a global pandemic that resulted in unemployment, market volatility, and crushing economic losses.(GETTY IMAGES)
ON A COLD DAY IN Chicago in December 1969, 13 people met to discuss a better way to provide financial advice. They recognized that Americans would benefit from the counsel of a financial planning professional who integrates the knowledge and best practices of an often fragmented financial services industry.
Financial planning has evolved since then and will continue to change, but one constant remains – the need for competent and ethical financial planning advice.
Fifty years after that fateful night, those 13 individuals never could have imagined that the country would face a global pandemic that resulted in unemployment, market volatility and crushing economic losses.[
No matter your net worth, seeking the advice of a financial planning professional will help you navigate COVID-19 fallout and today's mercurial markets, taking into account the dynamic financial planning process.
Financial planning services are more accessible than ever before. A financial planner will take a holistic view and help you feel confident in your financial future, even during times of uncertainty and evolving goals, from paying down student loans, to raising children to funding retirement.
Working with a financial planner is very personal. Knowing how to identify the right person who will be the best fit for you and your financial needs can feel overwhelming. But don't let your search for professional advice intimidate you. As you talk to advisors in your area virtually, here are five areas to focus on to guide your pursuit of a prospective financial planner:
- Personal financial goals.
- Financial planner experience and credentials.
- Commitment to a fiduciary standard.
- Establishing a relationship.
- Long-term success.
Personal Financial Goals
Before connecting with prospective financial planners, you need to identify your own personal goals and financial milestones.
Speak with the Right Financial Advisor For You
Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with top fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is legally bound to act in your best interests. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
While a focus on holistic financial planning is key, financial planners often have specialties. Identifying your own goals will help you narrow your search and work with someone that can help turn your goals into a reality. It will also strengthen your relationship early on as one of your first conversations will focus on your top short- and long-term goals.
Financial Planner Experience and Credentials
There are many credentials that financial professionals can hold, and it often seems like an alphabet soup of designations.
It's important to confirm that the professional you're considering has the verifiable expertise you need and is operating in your best interest. A certified financial planner professional is an individual who has been rigorously trained, has accrued significant experience and is committed to putting clients' interests first under a fiduciary standard.[
You can confirm someone's CFP certification through the CFP Board website's "Verify a CFP Professional" tool. You can also learn more and verify other designations through the Financial Industry Regulatory Authority BrokerCheck website or the Securities and Exchange Commission Investment Advisor search feature on its website.
Commitment to a Fiduciary Standard
A fiduciary is someone that works in the best interest of their client. When searching for financial planners, working with someone who is a fiduciary is critical, as nonfiduciaries only need to offer advice that is suitable even if it is not the best option for you.
CFP professionals are held to the CFP Board's Code of Ethics and Standards of Conduct, a higher standard of competency and ethics. They are required to act in a client's best interest to benefit and protect the public. They are subject to discipline if they do not uphold the Code and Standards.
Establishing a Relationship
The relationship you have with your financial planner is one of the most important relationships in your life. Because their guidance impacts your money, you need to understand what that might look like in practice.https://fe216110efed31ec72551108d888335e.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
For example, how often will they communicate with you? Will they communicate mostly through email or phone calls? Or will you work directly with that individual or other members of their team?
Ask for client testimonials or examples of a similar client relationship during your vetting process. Understanding how the financial planner works with other clients will help you better understand what a potential relationship will entail.
While it is important to look for a financial planner that will help you navigate COVID-19, also look for financial planners that are focused on holistic financial plans. The creation of a holistic financial plan will take your financial goals and milestones into consideration, creating a long-term road map that looks beyond the coronavirus.
Measuring success through the achievement of your long-term goals will be a stronger indicator of accomplishment than other investment benchmarks.[
Financial planning is a relatively new practice. In fact, the first video game "Tennis for Two" is older than the financial planning profession. In your search for financial advice, focus on the above areas to help you narrow your search for a financial planner that exhibits key traits of a good advisor and is also the right match for you.
Kevin Keller, Contributor
17W220 22nd St.
Oakbrook Terrace, IL 60181