Certified Financial Planner (CFP)

What Is a Certified Financial Planner (CFP)?

A Certified Financial Planner (CFP) is a professional with an official designation issued by the Certified Financial Planner Board of Standards (CFP Board). It is often considered one of the most highly regarded certifications that financial professionals can attain. 

The qualifications to achieve this designation are stringent. Applicants must meet the minimum education requirements, possess the necessary experience, pass the required examination and undergo a background check. 

Once the certification has been issued, it has to be maintained through a series of continuing education sessions. Holders of this designation must also uphold ethical practices to remain in good standing with the CFPB.

CFPs often collaborate with clients to define their financial objectives and develop a strategy to achieve them. They may assist in making financial decisions and provide advice on investments, retirement accounts, and other financial matters.

An essential quality of a CFP is their fiduciary obligation, which morally requires them to provide advice that is always in their customers’ best interests.

Duties of a Certified Financial Planner

Certified Financial Planners assist clients in understanding their financial situations, defining their objectives, and developing realistic strategies to achieve them. 

This process requires CFPs to talk to customers about their situations, such as dealing with debt, saving money, and budgeting for themselves and their families.

CFPs may also examine investment options, advice on estate planning concerns and make suggestions regarding insurance and retirement savings plans. Some CFPs also offer tax planning strategies and information, but they typically do not handle tax return obligations.

On the other hand, Certified Financial Planners working with corporations may analyze and give advice on cash flow, predicted revenue, debt management, and employee benefits, among other matters.

Aside from the technical aspect of their work, acquiring new customers is also an important activity for CFPs. This frequently requires marketing their services and networking with other seasoned experts.

How Much Does a Certified Financial Planner Cost?

Below are some of the fee structures that CFPs usually implement:

Assets Under Management (AUM)

Some CFPs charge based on a percentage of the assets they are managing for their clients. Usually, this ranges from below 1% and can reach up to 2%.

To illustrate, if a CFP charges a 1% assets under management fee annually and a client has $1,000,000 worth of assets being managed for them, they will have to pay $10,000 a year.

Some CFPs have a tiered pay structure which means they will charge a lesser percentage for clients with higher asset values.

Fee-Only

Under a fee-only payment structure, some Certified Financial Planners may charge an hourly rate. This can be between $100 to $400 for casual consultations.

Other CFPs will charge a monthly or project-based fee. In these cases, clients may have to pay $1,000 to $3000 for projects, regardless of the duration.

Commissions

CFPs may also receive commissions from selling financial products like insurance or investments. These commissions might be incorporated into the product’s price.

Fee-Based

A fee-based structure allows CFPs to earn both commissions and fees. They may charge an hourly rate, a project fee, or an annual retainer fee and receive commissions from selling financial products.

How to Find a Certified Financial Planner

Before you search for a Certified Financial Planner, you must clearly understand the services you are looking for to select someone who specializes in the areas you need support with. 

Once you have clarified your needs, you can start searching internet databases to find a CFP. The Financial Planning Association (FPA) is one reliable database that you may use to locate a nearby financial planner that can assist you.

Another common way to discover a Certified Financial Planner is to ask friends, family, and coworkers for recommendations. This pre-filters your candidates since they have a proven track record with people you trust. 

Whether you found your prospects online or through personal recommendations, it is always good to verify if your potential CFP is still in good standing with the Certified Financial Planner Board of Standards by visiting their website.

When you are ready to make your selection, be sure to choose someone you feel comfortable discussing your finances with and whom you can trust to put your best interests first.

How to Become a Certified Financial Planner

If you are interested in becoming a Certified Financial Planner, there are several requirements you must meet.

Minimum Education

Two separate educational qualifications are required to become a Certified Financial Planner. The first is having a bachelor’s degree in any discipline from a recognized institution or university.

The second requirement is the completion of a financial planning curriculum offered by a CFP Board-registered program.

Accelerated Path

Some individuals may be able to bypass the financial planning curriculum requirement, accelerating their path to certification. Usually, these are professionals who already possess credentials in related disciplines. 

These professionals include Certified Public Accountants (CPAs), Chartered Financial Consultants (ChFCs), Chartered Life Underwriters (CLUs), and Chartered Financial Analysts (CFAs).

This option is also extended to individuals with doctoral degrees in business or economics or an attorney’s license.

Experience

Experience can be earned either before or after taking the CFP examination. To fulfill this requirement, a candidate must complete 6,000 hours of relevant professional experience or 4,000 hours of apprenticeship work.

Ethics

Certified Financial Planners must adhere to the highest ethical standards. Thus, candidates must disclose sensitive information about bankruptcies, criminal activity, or conflicts with past employers during the application process. 

Candidates declare the information on the ethics declaration form, which will be the basis for the background check conducted by the CFP Board. 

Exam

Candidates must pass the CFP exam, which measures their ability to use financial planning knowledge in real-world scenarios. This comprehensive examination guarantees that passers can create a complete financial strategy for their customers.

The exam is conducted over two 3-hour sessions over one day. It is composed of 170 multiple-choice questions covering eight principal financial knowledge topics.

Continuing Education

CFPs must complete 30 hours of continuing education (CE) every two years to maintain their certification. This requirement is composed of 2 hours on a CFP Board-approved Ethics discussion and 28 hours focused on a CFP Board principal topic.

The CE requirement takes effect immediately upon first certification or 12 months after passing the CFP test if the experience or degree criteria are not yet satisfied.

Certified_Financial_Planner_Requirements

CFP vs Chartered Financial Analyst (CFA)

Certified Financial Planners and Chartered Financial Analysts are some of the most well-known designations finance professionals can earn. Below are some of their fundamental differences. 

Professional Roles

A CFP helps individuals and families save for retirement, manage financial goals, and plan for significant life events. They provide guidance on various financial topics, including insurance and estate planning. 

In contrast, a CFA is a professional who works with institutions by conducting investment analysis and making recommendations to grow their portfolios. They also work with institutions during mergers and acquisitions.

Qualifications

Candidates for the CFA designation must have at least a bachelor’s degree, undergo four years of eligible work experience, and pass three exams covering four major topics. 

CFP candidates must also have at least a bachelor’s degree. However, they also need to complete an accredited financial planning program. Furthermore, they must pass the CFP certification exam covering eight principal financial knowledge topics. 

Finally, CFPs should achieve the required hours of qualified experience and adhere to the CFP code of ethics.

Salary and Fees

Financial professionals with the title of CFA earn an average annual salary of around $126,000 to $177,000. In terms of AUM fees, they can charge from below 1% to 2% annually. They may also charge about $100 to $400 in hourly fees or a fixed fee of around $1,000 to $3,000.

In contrast, the average annual salaries of CFPs can range from $43,000 to $120,000. As for AUM, hourly and fixed fees, CFPs often charge clients along the same range as CFAs.

Certified_Financial_Planner_vs._Chartered_Financial_Analyst

Final Thoughts

A Certified Financial Planner is a finance professional with an official designation issued by the Certified Financial Planner Board of Standards, Inc. 

They work with clients to set their financial objectives and develop a strategy to achieve them. They also help make financial decisions and provide advice on investments and other financial matters.

CFPs have a fiduciary obligation, which morally requires them to always act in their customers’ best interests. They also possess a very in-depth understanding of financial planning.

Educational qualifications, rigorous exams, thousands of hours of financial experience, and adherence to ethical standards must be satisfied before an individual can earn a CFP title. Additionally, they need to have continuing education to maintain their designation. 

If you are interested in hiring a Certified Financial Planner, you must begin by clearly understanding the services you are looking for. This will help you select someone who specializes in the areas you need support with.

Once you have clarified your needs, you can start searching internet databases to find a CFP or ask for recommendations from friends, family, or colleagues. 

Whether you found your prospect online or through personal recommendations, it is always good to verify if your potential CFP is in good standing with the CFP Board. You can also interview some of your candidates to ask for further details about their services and fees. 

When you are ready to make your selection, be sure to choose someone you feel comfortable discussing your finances with and whom you can trust to put your best interests first.

FAQs

A Certified Financial Planner is a professional with an official designation issued by the Certified Financial Planner Board of Standards, Inc. They work with clients to set their financial objectives and develop a strategy to achieve them.
Working with a Certified Financial Planner is a good idea before any significant life changes, like buying a house, as they can help you avoid potential pitfalls down the road. You can also consider hiring a CFP if you have significant assets that need to be managed.
Certified Financial Planners are financial advisors who have been granted the CFP designation by the CFP Board. Therefore, all Certified Financial Planners are also financial advisors. However, not all financial advisors possess the Certified Financial Planner designation.
Certified Financial Planners typically charge AUM-based fees at an average of below 1% up to 2% annually, fixed hourly fees of $100 to $400, or fixed project fees of $1,000 to $3,000. They also earn from commissions and fee-based structures.
Certified Financial Planners help individuals and families save for retirement, manage financial goals, and plan for significant life events. In contrast, Chartered Financial Analysts work with institutions on investment analysis and portfolio management.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.