Discover the Prestige of Being a Certified Financial Planner™ (CFP®)
Certified Financial Planner™ (CFP®) is a prestigious designation recognized for excellence in the domains of financial planning, taxes, insurance, estate planning, and retirement savings.
Issued by the CFP Board of Standards, Inc., this certification is granted to individuals who successfully complete rigorous exams and continue with annual educational programs to maintain their expertise and credentials.
Key Highlights
- A Certified Financial Planner (CFP®) has earned formal recognition from the CFP Board of Standards, Inc.
- CFPs guide individuals in various aspects of financial management including retirement, investments, education, insurance, and taxes.
- Achieving CFP® status requires years of experience, passing demanding exams, proving ethical practices, and securing formal education.
- The defining trait of a CFP® is their fiduciary duty, ensuring they prioritize clients’ best interests at all times.
The Integral Role of Certified Financial Planners™ (CFP®)
CFPs assist individuals in effectively managing their financial footprint, encompassing investment strategy, retirement planning, insurance, and education funding. Importantly, CFPs are fiduciaries of your assets, guaranteeing decisions are made in your best interests.
Unlike typical investment advisors, CFPs take a holistic approach. They begin by assessing current finances, including cash, investments, and liabilities like mortgages and student loans, to form an accurate picture of your financial health.
Tailoring a Financial Plan Just for You
Once your financial standing is clear, a CFP® collaborates with you to design a bespoke financial plan. For instance, if you’re nearing retirement, they’ll craft a strategy to sustain you through those years. Or if a child’s college education is on the horizon, your CFP® will help manage those costs.
Upholding Fiduciary Duty
By standard, CFPs must always act in your best interest. For example, if there’s a financial product that benefits you more despite yielding less commission for the planner, that is the product they will recommend.
Embarking on the Journey to CFP® Certification
Achieving CFP® certification entails demonstrating competence in four key areas: formal education, passing the CFP® Exam, gaining relevant work experience, and adhering to professional ethics.
Requirements to Become a CFP®
- Education: Completing a bachelor’s degree and specific financial planning courses dictated by the CFP Board.
- Experience: Accumulating a minimum of three years (or 6,000 hours) of full-time professional experience, or two years (4,000 hours) in an apprentice role.
- Examination: Passing the CFP exam, a rigorous test of your financial planning knowledge and skills.
- Ethics: Aligning with the CFP Board’s code of conduct and regularly disclosing any potential conflicts or legal concerns.
A Glimpse into the CFP® Exam
The CFP® Exam, consisting of 170 multiple-choice questions on over 100 topics, evaluates a candidate’s grasp on financial principles. The exam includes two three-hour sessions with a 40-minute intermission, offered thrice a year. Costs vary based on application timing, with reattempts allowed up to four additional times.
What You Need to Know About CFP® Exam
- Timing: Two three-hour sessions in a single day.
- Cost: Standard fee of $925 in the U.S., with options for discounts or late fees.
- Scoring: Performance is measured against set criteria, not relative to other candidates.
- Retake Policy: Up to four additional attempts allowed.
Distinguishing CFP® from CFA
Though both CFP® and CFA are highly respected certifications, their roles differ significantly. CFPs primarily assist retail clients with financial goals such as investments and retirement. CFAs, on the other hand, engage with corporate clients on investment analysis, portfolio management, and financial reporting.
When Should You Consider a CFP®?
For those focused solely on investment in stocks and bonds, a CFP® may not be essential. However, for comprehensive financial management including estate, retirement, and tax planning, a CFP® is invaluable.
Cost of a CFP®’s Services
The cost of hiring a CFP® varies with your financial needs but generally ranges from $1,800 to $2,500 for full financial planning services, or about $250 per hour.
Is CFP® Comparable to CFA or MBA?
CFP® and CFA are distinct in their focus on personal versus corporate finance, respectively. Similarly, a CFP® is not equivalent to an MBA, as the latter deals with broader business operations compared to the specialized financial planning expertise of a CFP®.
Is The CFP® Exam Challenging?
The CFP® exam is known for its rigor and requires extensive preparation. Candidates are advised to maintain a structured study schedule to ensure success.
The Final Verdict
Obtaining CFP® certification demands substantial education, experience, and ethical commitment. Even after meeting all criteria, the awarding of the certification is at the discretion of the CFP Board, ensuring only those with a comprehensive understanding of financial planning achieve this esteemed designation.
Related Terms: fiduciary duty, chartered financial analyst, financial consultant, financial advisor.
References
- Certified Financial Planner Board of Standards. “The Standard of Excellence”.
- Certified Financial Planner Board of Standards. “Code of Ethics and Standards of Conduct”.
- Certified Financial Planner Board of Standards. “The Education Requirement”.
- Certified Financial Planner Board of Standards. “The Experience Requirement”.
- Certified Financial Planner Board of Standards. “The Ethics Requirement”.
- Certified Financial Planner Board of Standards. “Disciplinary Rules and Procedures”.
- Certified Financial Planner Board of Standards. “About the Exam”.
- Certified Financial Planner Board of Standards. “Exam Format”.
- Certified Financial Planner Board of Standards. “Upcoming Exam Dates & Registration Process”.
- Certified Financial Planner Board of Standards. “Rescheduling & Cancellation Policies”.
- Kitces. “Financial Advisor Fee Trends and the Fee Compression Mirage”.
