What Is a Certified Financial Planner (CFP)?

Written by Ryan Barnes, CFAUpdated: 19th Apr 2022
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Let’s look deeper into the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation for a financial professional. It’s one of the most rigorous and all-encompassing roles in the financial industry and an important acronym for all investors to know.

What Is a Certified Financial Planner?

A CFP® is a financial professional who meets rigid standards for ethics and professionalism, specializing in helping clients plan for all the financial goals they’ll have over their lifetime. Focus areas of expertise for CERTIFIED FINANCIAL PLANNERs™ are retirement planning, taxes, estate planning, and wealth management.

CFPs are front-facing financial services professionals who interact with clients and gather information and objectives about their ongoing financial goals.

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How Certified Financial Planners Work

Certified Financial Planners work with clients directly, gathering information about their long-term financial goals and current net worth. Then they work with the client to map out a plan to achieve the client’s long-term goals and follow up with them at periodic intervals to review progress and keep focused on the client’s stated goals.

Many CFPs work as sole proprietors, hanging up their own shingle in the community. But the majority of Certified Financial Planners will work as part of a larger financial services firm, whether it be a bank, credit union, asset manager, insurance company, or wealth management firm.

>> More: What Is a Financial Planner?

What Is a Fee-Only Certified Financial Planner?

There is an important distinction to make regarding how a CFP® – or any financial professional for that matter – is paid. A fee-only Certified Financial Planner means they are only paid directly by the client for their services and never through any investment products or companies. The latter represents a commission-based or fee + commission model of paying a CFP®, and financial planners who work this way aren’t bound by pure fiduciary duty.

Being a fiduciary means that a CFP® must always act in the client’s best financial interests. But being paid – even partly – via commissions on specific financial products implies that the financial planner or adviser only has to make recommendations suitable to the client’s needs.

Fee-Based CFPs

Being a fee-based CERTIFIED FINANCIAL PLANNER™ means that the client pays the CFP® directly for the advice and services they offer or the ongoing management of investment assets. Fees can be paid to a CFP® either by the hour, per visit/consultation, or as a fixed percentage of the assets being watched over by the CFP®.

How Do I Find a Certified Financial Planner?

There are several ways to find a CERTIFIED FINANCIAL PLANNER™ that fits your needs. You can find a local CFP by searching through local business directories or at aggregator sites like PlannerSearch.org or LetsMakeAPlan.org (affiliated with the CFP® Board itself).

You also may find it convenient to look up whether your local banking institution or credit union has CFPs on staff; many banks now offer these professionals to extend more services to their clients.

How to Choose a CFP®

First, you’ll want to decide how much time and effort you will spend on financial planning yourself. Maybe you want to go the Do-It-Yourself route but need some questions answered about specific accounts or investment options. Or maybe you really need a thorough, top-down review of your whole financial picture and some help mapping out your long-term goals.

Deciding first how much ongoing support you want out of a CFP® can lead you to the best professional for your needs. There are plenty of CFPs who can give you a one-time consultation for $150-$300. Or, if you’d rather work with a CFP® employed by a financial institution you own assets at already, you can go that route.

In these cases, you’ll likely see the CFP’s fees built into a fee-only model, along with your asset management fees. Most clients like this method as it aligns the interests of the CFP® with your own – they don’t make any more money off you unless your account size grows!

#1. Search and Review All Available Options

Before committing to a new CFP® relationship, it’s best to review all your options. Decide if you want to pay upfront for specific services like a financial plan, retirement plan, or estate planning meeting.

Or if you’d rather have an ongoing relationship with a CFP® as part of a holistic investment management program. These choices, along with whether you’d like to interact face-to-face or remotely with your financial planner, will lead you to the right CFP® for you!

#2. Ask Previous Customers How their Experience Was

Any top-tier CFP® would be happy to pass along the customer experience that other clients have had with them; you can often find this information available on a CFP’s (or their employer’s) individual website and social media presence.

You can also make sure there haven’t been any adverse legal actions against a particular financial planner by checking FINRA’s Broker Check Tool.

#3. Understand the Fee Structure

Always be sure you have a clear understanding of how any financial professional gets paid, including Certified Financial Planners. Whether their fees are built into an asset-based, fee-only model, or you are paying flat fees for advice as you go, it should be clear and in writing before starting any new relationship with a CFP®.

#4. Validate License

You can validate a CFP’s credentials right on the CFP Board’s website here or check other accreditations via the FINRA Broker Check tool and your state’s security regulator website via a Google search.

Who Should Use a CFP®?

Anyone interested in mapping out their long-term financial goals can be well served by working with a CFP®. They will take your whole financial picture into account, including everything that does into your net worth calculation, and they’ll take inventory of all your goals and income objectives.

Some people need assistance in sticking to long-term goals, whether that’s saving for retirement, planning for estate transfers, saving for a child’s college tuition, or any other of the myriad thing’s life throws our way. CFPs are experts at incorporating diverse lives into reachable goals.

What Does a Certified Financial Planner Do?

A CFP® will take stock of your total net worth and ask you questions about your future goals for family, retirement, and estate planning. They will then work with you on what kinds of investments can best position you for the life you want to lead while encouraging you to take the steps needed if you’re falling off course in some of your goals.

Are CFPs Safe to Use?

CFPs are highly regulated and held to the highest professional and ethical standards. They are bound to act as fiduciaries on your behalf, and they are safe to use and trust with your sensitive personal information.

CFP® vs. Financial Advisor: What’s the Difference?

While most Certified Financial Planners would call themselves a financial advisorin certain settings, they are a level above a financial advisor (or “adviser”; the spelling variation does not change the terminology in either case). A financial adviser by itself, with no accreditation following the professional’s name, likely means they are an employee of a financial services firm but have not completed CFP®, CFA®, or CPA coursework for official accreditation.

A CFP has all the expertise that anyone calling themselves a financial adviser will have – and more. CFPs are well-versed in financial planning, tax planning, retirement planning, estate planning, and investment management.

How Do I Become a CFP®?

To become a Certified Financial Planner, you’ll need to complete coursework at a CFP Board Registered Program, which is offered at many institutions across the country. Or, if your degree was in certain disciplines from certain universities, you may be able to bypass this coursework requirement.

Is It Worth Paying for the CFP® Exam?

The cost of obtaining a CFP designation is very mild compared to other high-profile designations such as the CFA (Chartered Financial Analyst) certification. The CFP exam is just one test taken over a single day. The cost of the exam is about $825, with slightly higher costs for later registration. The registration fee to the CFP Board is for ongoing certification, and continuing education is about $355 per year.

These fees are very reasonable considering that CFPs can charge at the upper end of industry norms for their services once they’ve become a Certified Financial Planner. Being a CFP allows your clients to know that you’ve been thoroughly vetted, just at the outset but on an ongoing basis, and are bound to always act in the client’s best interests.

How Much Does the CFP® Exam Cost?

A one-time certification fee of $355 is due when first applying to the CERTIFIED FINANCIAL PLANNER™ Board of Standards. The exam fee is a one-time payment of $825 and any extra fees you incur in purchasing test preparation materials, which can run from $500-$1200 for the CFP® coursework.

Ongoing Continuing Education (CE) credits must be completed to remain in official CFP® standing with the CFP® Board; CE credits can be earned online and are part of a $355 annual certification fee due to the CFP® Board. CFP® holders must complete 30 hours of CE credits every two years.

How Long Does It Take to Become a CFP®?

Because the CERTIFIED FINANCIAL PLANNER™ exam is just a one-time test, applicants don’t have to wait for years on end for another round of testing to become available. So, in theory, an applicant with the other requirements met could register for and take the test during one of the three times per year it is offered in the U.S.

Most test-takers who pass the first time say they spent between 200-250 hours studying and preparing for the CFP® exam – so expect the process to take some time, even if you already have started a career in financial planning or financial services. The knowledge base you’ll need to pass the CFP® exam is extensive, covering taxes, estate planning, ethics, investment products, and how to integrate diverse information into actionable results for clients.

What Degree Do You Need to be a Certified Financial Planner?

You can hold any degree and still later become a CERTIFIED FINANCIAL PLANNER™, so long as your degree was earned from an accredited college or university (the Department of Education must recognize this accreditation at the time the degree was given).

The degree must be held either at the time the CFP® exam is successfully passed or within five years after the CFP exam is taken.

Bottom Line: What is a CFP®?

A CERTIFIED FINANCIAL PLANNER™ is a financial professional highly trained in managing retirement, taxes, investments, estates, and every major financial touchpoint that life brings your way. They take a high-level view of your long-term goals and map out a path for you to achieve them.

Ryan Barnes
Ryan Barnes, CFA

Ryan is a certified Chartered Financial Analyst® (CFA®) with over 15 years of experience managing and steering hundreds of millions in client assets through complex and dynamic financial markets. Ryan’s work has appeared in the Wall Street Journal, Barron’s, Forbes, Nasdaq.com, Investopedia, and Bloomberg. Additionally, he has multiple citations in peer-reviewed papers for reporting done on the U.S. housing market preceding the Great Financial Crisis. Ryan’s areas of expertise are wealth management, financial markets, investing, and retirement planning.