What Is a Certified Financial Planner (CFP)? - MagnifyMoney

What Is a Certified Financial Planner (CFP)?

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A certified financial planner (CFP) can help clients to navigate nearly every aspect of financial planning, including estate planning, dealing with tax issues and planning for retirement. Earning a CFP designation requires meeting rigorous requirements, from reaching a certain number of years of experience to passing an exam.

We cover what they do, as well as who might benefit from working with a CFP and how to find one.

What is a CFP?

A financial professional who has earned the CFP designation often specializes in helping clients to develop comprehensive financial plans to meet short- and long-term goals.

The CFP is offered and overseen by the Certified Financial Planner Board of Standards Inc. In addition, CFPs have accreditation through the National Commission for Certifying Agencies (NCCA), which is used in a wide range of industries and imposes standards designed to ensure the health, welfare and safety of the public.

To earn the CFP designation, you must meet a number of requirements in terms of experience, coursework and ongoing education. CFPs also are held to an ethical code and are required to act as fiduciaries, which means that, among other things, they must put their client’s best interests ahead of their own.

Financial planners commonly earn the CFP designation, but other professionals who also might hold it include wealth advisors, estate-planning specialists, trading and research associates and branch managers at financial firms.

What does a CFP do?

CFPs help clients to achieve financial goals by developing personalized and holistic strategies and plans that are unique to the client’s financial situation. Typically, when you meet with a CFP, you can expect to dive deep into the current state of your finances and the financial goals you hope to achieve.

Specific steps that your CFP will take to develop your plan will depend on your goals, but in general, CFPs might analyze your assets, liabilities, cash flow, insurance, investments and tax strategies. CFPs provide a wide range of services, including:

  • Balancing your budget
  • Managing student debt
  • Merging finances
  • Selecting healthcare coverage
  • Purchasing a home or car
  • Establishing and maintaining healthy credit
  • Planning for educational expenses
  • Saving money
  • Planning for retirement
  • Selecting life insurance
  • Determining tax strategies
  • Estate planning
  • Managing retirement income
  • Planning for long-term care

Although CFPs also can provide basic investment planning services, such as building a portfolio, they typically focus more on holistic financial planning.

What are the requirements to become a CFP?

CFPs are sought-after financial advisors because of the rigorous requirements associated with their certification. A CFP must meet several educational and professional requirements, outlined below.

Requirements to Earn CFP Certification
  • A bachelor’s degree or higher from an accredited university or college
  • 3 years full-time personal financial-planning experience or equivalent part-time experience
EducationComplete a CFP-board registered program, or hold one of the following credentials:
  • CPA
  • ChFC
  • CLU
  • CFA
  • Ph.D. in business or economics
  • Doctor of Business Administration
  • Attorney’s license

Exam type170 multiple-choice questions during two, 3-hour sessions in a single day
Continuing-education requirements30 hours every two years

What is the difference between a CFP and a CFA?

Both CFP and certified financial analyst (CFA) are prestigious designations that can signal a financial professional’s expertise, but they’re different in terms of what type of financial professional typically acquires them and how they do so.

In a nutshell, CFAs place more emphasis on investment management than holistic financial planning. There also is a difference in whom each advisor serves and how, as CFPs generally work with individual clients to develop personalized, comprehensive strategies to reach their financial goals, while CFAs are more often focus on investment analysis for individuals and institutions.

The table below further hashes out the core differences between a CFP and a CFA. Note that it is possible to hold both designations.

  • Bachelor’s degree
  • Complete CFP-board registered program
  • Pass CFP exam
  • 3 years of full-time personal finance planning experience, or equivalent part-time experience
  • Bachelor’s degree (or equivalent work experience)
  • Pass Level I, II and III CFA exams
  • 2 years of full-time experience in a role that involves investment decision making
  • Member of CFA Institute ($275/year)
Exam topics
  • Professional conduct and regulation
  • General financial planning principles
  • Education planning
  • Risk management and insurance planning
  • Investment planning
  • Tax planning
  • Retirement savings and income planning
  • Estate planning
  • Ethical and professional standards
  • Quantitative methods
  • Economics
  • Financial reporting and analysis
  • Corporate finance
  • Equity investments
  • Fixed income
  • Derivatives
  • Alternative investments
  • Portfolio management
ClienteleIndividuals and families Individual and institutional investors

Who should consider working with a CFP?

Anyone who would like a comprehensive plan and strategy toward either maintaining and managing a healthy financial life or meeting short- or long-term financial goals could benefit from working with a CFP.

However, you should consider working with a CFP only if you believe that the benefits will outweigh the costs. The price of hiring a CFP differs widely based on factors such as level of expertise and experience and the scope of your financial needs. The fee structure of CFPs can vary, too, and clients might pay a flat fee, an hourly fee or a percentage of the assets that the CFP manages.

For example, a 2017 report published in the Chicago Tribune pegged the typical hourly rates of CFPs as $200-$400 per hour, while CFPs that charge a fixed annual fee tended to charge $3,500-$7,500 per year. Meanwhile, CFPs that charge a percentage of assets under management typically have rates around 1%.

How to find a CFP

The easiest way to find a CFP is to use the CFB Board’s search tool on its website. Simply enter your zip code, and the website will pull up a list of CFPs near you who are accepting new clients.

The CFP Board’s search tool will give you important information on the CFP, including their address, minimum asset requirements, any CFP Board disciplinary history, any bankruptcy disclosures from the past 10 years and focus areas. You also should use the Securities and Exchange Commission’s Investment Adviser Public Disclosure directory to perform additional background research on any CFP you consider.

Beyond credentials, other factors to take into consideration when determining whether you want to hire a particular CFP — and which CFP might be the best fit for you — should include:

  • Fees: Are the rates they charge in line with the industry standard? Are you comfortable with the fee structure?
  • Investing philosophy: Is their approach to investing something you agree with? For example, do they prefer an active or passive investing approach? What are their thoughts on value investing or stock picking?
  • Client history: Why did their last client leave them? What’s their disciplinary track record?
  • Work style: How do they prefer to communicate — in-person, over the phone or by email? Is their work style compatible with yours?

The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.