NAPFA, the National Association of Personal Financial Advisors, is an organization through which fee-only financial planners can further enhance their professional skills, market their services, and become part of a collective, influential voice on matters that affect them and their clients. Founded in 1983, NAPFA currently has more than 2,400 members nationwide, all of whom are fiduciary advisors.
A NAPFA-registered financial advisor is a fee-only financial planner that adheres to the industry’s most demanding practice requirements, including fee-only compensation and a commitment to a comprehensive, holistic approach to financial planning. NAPFA advisors must prove competence in financial planning matters and provide a high level of care and responsibility to each client.
A fee-only financial planner is compensated solely by the client and receives no compensation that is contingent on the purchase or sale of a financial product. A NAPFA advisor or affiliate may not receive commissions, rebates, finder’s fees, bonuses, or any form of compensation from others as a result of a client’s implementation of the individual’s planning recommendations. Fee-only financial advice is important because a financial planner who has a financial stake in the course of action that he/she recommends to a client faces an inherent conflict of interest and cannot be considered objective and unbiased.
NAPFA-registered personal financial advisors must not only provide fee-only financial planning advice, but also holistic financial planning services to those they serve. This means that rather than focusing on investments in general and stocks in particular — a trend encouraged and reinforced by the fact that most providers of financial advice benefit from the sale of financial products — NAPFA advisors must focus on all factors that comprise the investor’s unique financial situation.
If a financial planner doesn’t understand the client’s full picture, the quality of advice in any one area, including investment advice, can suffer significantly. Competent and informed investment decisions must take into account all the other factors that comprise an investor’s financial profile, including tax, estate planning, insurance, risk tolerance, specific family circumstances, and ultimate financial goals. A financial plan built holistically includes much more than investment advice. It is an all-purpose tool that enables the financial planner and client, working together, to make better financial decisions because each individual decision is made within the context of the full picture.
NAPFA-registered personal financial advisors practice truly holistic financial planning to ensure their clients’ entire financial picture is taken into account.
Here is a document from NAPFA to help explain the importance of holistic financial planning.