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For money-conscious consumers who need advanced financial planning services, a Certified Financial Consultant (ChFC) could be a great place to start. While ChFC may be less well known than the Certified Financial Planner (CFP) designation, advisors who earn it actually have even more training designed to enhance their financial planning skills.
The ChFC designation was rolled out by the American College of Financial Services in 1982 as a competitor to the CFP title. It requires the same core curriculum as required for the CFP, plus additional courses that hone a candidate’s skills as a professional wealth manager.
To become a ChFC, a candidate must pass a total of eight courses covering all facets of financial planning. Additionally, they must have worked full-time for three of the past five years in a related field. An undergraduate or graduate degree from an accredited institution counts as one year of business experience.
“A ChFC works primarily in the financial services and insurance sectors, providing financial planning advice covering topics such as income tax, retirement, risk management, estate planning and investments” says Nicole E. Asher, a ChFC and Senior Wealth Advisor for Greenleaf Trust. in Kalamazoo, Mich.
ChFC vs CFP: what is the difference?
The services offered by licensed financial advisers and licensed financial planners are broadly comparable in practice. The difference between ChFC and CFP lies in the education required for each designation.
The CFP certification is administered and awarded by the Certified Financial Planner Board of Standards, Inc., also known as the CFP Board. The American College of Financial Services, an accredited private educational institution that offers undergraduate and graduate training programs, awards the ChFC. It also supports Chartered Life Underwriter (CLU) certification and prepares students to take the national CFP Board certification exam.
Individuals studying for a CFP or ChFC designation must successfully complete a core program of seven
Classes. (Some CFP programs may bundle it into six courses instead.) ChFC candidates must then complete an additional course in Contemporary Applications in Financial Planning that is not currently required of CFP candidates. The table below shows the courses required for each title:
There is no comprehensive exam required to obtain a ChFC, as is the case with the CFP, which cumulatively tests candidate retention of their financial planning courses. Instead, ChFC candidates take exams after the end of each course. Advisors with their CFP certification in good standing can earn their ChFC by taking the Contemporary Applications in Financial Planning course and passing the exam for that class.
CFP and ChFC charter holders are held to a fiduciary standard, meaning they are required by law to consider the best financial interests of their clients when making an investment decision. Both certifications require 30 hours of continuing education every two years, including an ethics course.
Fees charged by ChFCs
In terms of costs, working with a ChFC is quite similar to working with a Certified Financial Planner. There are several fee structures typically used by financial advisors, regardless of certification. Most ChFCs and CFPs will either be fee-based or fee-based.
The fees indicate that the adviser may receive commissions from investment and financial companies that sell products, in certain circumstances. Think of them as finder’s fees or rewards paid to the advisor to entice their clients to buy certain products. Paid advisors are those who do not accept these third-party commissions.
“The downside is that the advisor could sell the client unnecessary or inappropriate products and hide the commission charges, or spin the client’s account by buying and selling often to earn additional commissions,” says Steve Azoury, Chartered Financial Consultant (ChFC) and owner of Azoury Financial in Troy, Michigan. That said, both fee-based and fee-based ChFC advisors are held to a fiduciary standard, which means that regardless of how they make their money, they shouldn’t put you in products just for a bribe.
Here are the most common types of fees that can be charged by licensed financial advisers:
- Hourly rate: Some customers are charged a fixed hourly rate for services. You can expect to pay between $200 and $400 for a trusted ChFC. Azoury warns that you need to keep control of billed hours, especially if the advisor recommends active portfolio management, which requires more billable hours.
- Percentage of Assets: Some may charge an annual fee equal to the investment portfolio they manage, with costs ranging from 0.50% to 1.25% per year.
- Fees: With a commission model, a ChFC cannot charge you anything directly. They’ll make the process of buying the products they recommend easier for you, and you’ll pay for that and potentially the cost of the transaction. They will then receive a referral payment from the company you purchased the product from. Azoury recommends this treatment only to clients who know their finances and wish to participate in portfolio management so that you remain sufficiently informed to determine if a commission-based product is best for you.
- Annual installment: Some licensed financial advisors may charge an annual fee in addition to a percentage or hourly rate. Annual costs generally range from $2,000 to $7,500.
- A mixture of the above: Some ChFCs may use fee structures that borrow elements from each of the previous fee types. An advisor may charge an hourly fee and receive a certain commission, for example.
How to choose a ChFC
The American College of Financial Services offers a portal to find and evaluate licensed financial advisers. Once you have identified one or more prospects, go to the Securities and Exchange Commission (SEC) investment adviser’s public statement website to research your potential financial adviser and ensure that no formal complaints have been made against them. The SEC site also looks for FINRA’s BrokerCheck.
You can also ask friends and family for recommendations when looking for a ChFC, says Asher. However you find your advisor, be sure to find the time to sit down with them before hiring them. “Interview the advisor and see if you like his personality, demeanor and knowledge. Ask them how they are paid. Do they accept commissions or bribes to place investments in certain products? Asher said.
You’ll want to make sure you’re working with someone you trust, who is open and transparent about payment, has good references, listens and understands your needs, and is someone you can relate to. and speak openly, says Asher.
Should you hire a ChFC?
If it’s the knowledge and expertise you’re looking for from a financial adviser, a licensed financial adviser can be a smart move, provided you do your homework.
“If you’re going to work with an advisor, you should be working with an advisor who knows what they’re doing and is transparent about how they charge,” says Jeremy Keil, CFP at Keil Financial Partners in New Berlin, Wis.
Having a ChFC credential should give you at least some assurance that the advisor you are working with has in-depth knowledge of financial planning.