When choosing a doctor for life-saving medical treatment, you’d never settle for somebody without the correct certifications. There’s too much on the line to ignore whether they have the correct letters behind their name—MD, DO, PhD, and so on.
Your financial future should be no different. When you’ve decided that it’s time to hire a professional—for help with financial planning, retirement planning, estate planning, or investment management—you have likely reached a level of wealth and complexity that requires a seasoned and certified advocate who will keep your financial interests as their north star.
Here’s the catch: finding that advocate goes beyond just hiring a certified financial planner (CFP) and calling it good. It is critical that you verify a firm’s fiduciary standard in addition to the individual advisor’s credentials. The financial advice you receive and the investment strategies you pursue depend on it.
Fiduciary vs. Brokers: Standard of Care Differences
When you start the process of finding the right firm or advisor to work with, you’ll hear every firm, be it a broker-dealer or a registered investment advisor (RIA), say they’ll act as a fiduciary and do what’s best for your financial situation.
Unfortunately, thanks to dual registration, not all fiduciaries are created equal. If the firm is dually registered as both a fiduciary and a broker, you may not be getting fiduciary support in the way you expect 100% of the time.
Dual-registered firms typically act in the best interest of their clients when it comes to financial planning and advising, but in the implementation of the plan, they may recommend certain financial products for which they can earn kickbacks and commissions. How is that possible? Through nuances of the suitability standard and whether a specific recommendation meets your basic needs or is truly optimal.
Verifying Fiduciary Standards
So everyone is using the word fiduciary. How can you be sure you’re hiring a true fiduciary advisory firm to support your financial goals? That’s where certifications come in.
The CEFEX certification is the gold standard for fiduciary investment firms. Here at Plancorp, we’ve proudly carried the CEFEX certification for more than 15 years and counting.
What is the CEFEX Certification?
CEFEX, short for the Centre for Fiduciary Excellence, is an organization that certifies firms adhering to fiduciary standards through rigorous auditing.
These standards represent the best practices in the financial industry, ensuring that certified firms prioritize their clients' best interests and can back those claims up with consistent processes across every client.
Being a fiduciary financial advisor means all recommended strategies, including investment advice, put the financial goals of the client above all else. It’s how you know the advice is free from conflicts of interest and something you can build trust in.
The fiduciary standard typically applies to a firm’s fee structure as well. You’ll often see CEFEX-certified firms adhering to a fee-only structure, meaning their clients pay a flat fee, often a percentage of their managed assets, for services.
This structure supports their fiduciary duty as they’re not subjected to potential conflicts of interest.
Why CEFEX Certification Matters
When partnering with a wealth management firm, potential clients are looking for proof of integrity, which the CEFEX certification provides.
Beyond trusting the firm to operate under a fiduciary duty of care, a client of a CEFEX-certified firm may also realize investment objectives sooner and achieve a better alignment of investment services to expenses.
This is due to the firm choosing low-cost investments, adhering to very specific asset allocations, and regularly conducting tax-advantaged strategies like tax loss harvesting in their clients’ investment portfolios.
How a Firm Gets CEFEX-Certified
The CEFEX certification process is voluntary, and involves meticulous annual assessments based on specific criteria set by the Securities and Exchange Commission (SEC) and developed in consultation with leading firms.
The assessment, conducted annually, includes document review, client file sampling, on-site visits, and interviews with senior representatives at the firm to verify they are upholding the fiduciary standard in all areas of the business.
(You can find a firm’s certifications in their Form ADV Part 2A. Here is a link to ours.)
How to Find a CEFEX-Certified Financial Advisor
CEFEX maintains a published list of certified firms on their website.
In 2007, Plancorp proudly became the first firm in Missouri to obtain CEFEX certification. We were also one of the first firms to obtain it globally.
If you’re ready to partner with a financial professional who promises to operate under a fiduciary standard of care in all aspects of your financial life, we’d love to talk with you.
Our financial analysis is the perfect place to start. We’ve distilled the key indicators of wealth alignment into a simple, 2-minute analysis that will evaluate how you’re doing and where you could improve in all areas of your financial life. It’s the first step toward your customized financial strategy with Plancorp.
