Q. - Is getting financial advice from a Certified Financial Planner (CFP) necessary?

A. - The financial services industry tries to convince us that a certification such as the Certified Financial Planner (CFP) is necessary to provide expert advice. But a CFP certification is only one of many certifications, and by itself it does not include the most important factor: whether the individual puts in writing that they will act as a fiduciary, meaning they will provide only unbiased advice in the client's best interests. Being upfront, I have never sought out a CFP or paid for financial advice because I have spent time learning and doing my own research when necessary. But for you, is personalized financial advice necessary?

Choosing a CFP or financial advisor is not that different from choosing a medical doctor. A doctor will spend years learning the science of disease and the practice of medicine, while weighing other factors such as a patient’s ability to take medication consistently and whether intervention is warranted. Good doctors juggle all of this when deciding on a course of action. Some doctors are more aggressive with treatments, while others wait to see before risking making things worse. A financial advisor is also highly educated. Some are overconfident that their prescription will fix the client’s problem, while others are less aggressive, pursuing a conservative path and considering the client’s needs more carefully. In either case, the good ones are good not because of the certificate hanging on the wall, but because of their ability to listen and apply years of experience to determine the best option and do what’s best for the client.

But remember, with a medical doctor or a financial advisor, the outcome can’t be guaranteed because of factors they don’t or can’t see, including history yet to be written. They might also hold biases or have hidden incentives that affect their decision-making and won’t be obvious to you. Today, the education required to become a CFP can be gained through web searches, books, and even AI. Achieving CFP certification demonstrates an individual’s dedication to financial knowledge and allows them to present it to potential clients as an indicator of their competence.

My issue with the financial advice industry, beyond the high cost and focus on certificates, is that they are only replacing a portion of the responsibilities we all have regarding managing our money. A CFP can explain the tax implications of retirement withdrawals, but you must be the one to buy a car you can afford, not the car you would like. A CFP can correct fund allocations, but you must stop buying every streaming service that you end up not watching.

Consider this. Just $10 a month in wasteful spending could otherwise be worth $2,000 a year in retirement income*. I doubt many financial planners are reviewing your monthly receipts for an extra $10 to invest, but they should, because it’s an easy way to ensure a better retirement.

It’s human nature to hand off the challenging issues, decisions, and responsibility to the “expert.” We can easily convince ourselves that the expert will truly understand our needs, provide the right advice, and not take advantage of us. After all, their offices look nice, and they dress for success, so they must do well for their clients, right? When we put others in charge of something as important as our financial future, we’re still taking a risk that the decisions made on our behalf will be worth more than the cost of the advice. Certainly, a CFP will be needed by some people in some circumstances; thus, paying $5,000 to $20,000 or more per year to ensure they don’t make big financial mistakes that will cost more than the fees is the right decision. But the fact remains that only you are responsible for all your finances.

Before assuming you need to hire a CFP, sit down and put on paper the three things you want the CFP to accomplish for you. Be specific. “Select the correct investments for retirement savings” vs. “plan retirement savings.” Or, “save for child’s college education while also saving for retirement” vs. “a college savings plan.” Then, put those questions into a web search, reading more than a few of the answers, and don’t rely only on AI-generated ones. Try to filter out any questionable sites—the more correct answer will be reflected across multiple sites. You’ll get a sense of the options and different considerations, and whether you understand the tradeoffs presented. Are you starting to feel confident that you can make your own decisions and implement a plan yourself? If not, why? Is it some deep complexity in the tax code, or is it that you don’t have experience making a yearly budget? Yes, hiring someone with an understanding of the tax code might be needed, but becoming good at making and keeping a budget is something you need to learn to do yourself.

Going through this list of what you think a CFP can do for you will reveal whether you really need to hire an expert or could do this work yourself with time to research and crunch the numbers. And make sure you understand the advisor’s cost, whether in fees, commissions, or higher fund expenses, to evaluate whether it is worth it. If you do go the CFP or financial advisor route, use it as an opportunity to learn rather than just deferring to the expert. You may find that for many money questions, they don’t provide sufficient value for the fees charged. Yet others will be comforted by a second set of eyes and regular personal attention that they feel they need. Neither approach is better; it is strictly a matter of personal circumstances and preference. The most important thing is not to make an expensive mistake, either through a lack of understanding or by ignoring the work needed to understand the financial trade-offs and make the necessary decisions.

* Saving $10 a month, or $120 per year, over 40 years will grow to $25,516 at a 7% return or $38,252 at an 8.5% return. With that amount, a simple single-premium immediate annuity today will pay about 6.8% annually at age 70, or between $1,735 and $2,600 per year. A good income portfolio at 5.5% would produce $1,400 to $2,100 per year in interest and dividends. Now, imagine what saving only $100 a month over 40 years could provide.