What is a Certified Financial Planner (CFP)?
– A CFP is a financial professional who has earned a credential from the Certified Financial Planner Board of Standards (the CFP Board). The designation signals training and tested competence in personal financial planning areas such as investments, retirement, taxes, insurance, education funding, and estate planning.
Scope of a CFP’s work (what they do)
– Take a holistic view of a client’s finances: income, assets (investments, property), liabilities (mortgages, loans).
– Create customized plans tied to client goals (e.g., retirement income strategy, a college-savings plan).
– Advise on multiple personal-finance topics rather than just offering single products.
Key definition — Fiduciary duty
– Fiduciary duty means the advisor must put the client’s best interests ahead of their own when giving financial advice. For example, if a commission-generating product isn’t the best option for the client, a CFP must recommend the better match even if it yields a lower commission. The CFP Board requires certificants to act as fiduciaries when providing advice.
How to become a CFP — step-by-step
1. Education
– Hold a bachelor’s degree (or higher) from an accredited college or university.
– Complete CFP Board–approved coursework in financial planning topics. Some coursework may be waived for holders of certain credentials (for example, CFA or CPA) or advanced business degrees (MBA).
2. Exam
– Pass the CFP exam. The test is rigorous: 170 multiple-choice questions that cover roughly 100 topics across planning areas (regulation, planning process, risk management/insurance, investments, tax, retirement, estate, education planning, etc.).
– Passing is challenging: in November 2024, about 62% of eligible test-takers passed.
3. Experience
– Accumulate required professional experience: either 3 years (6,000 hours) of relevant full-time experience or 2 years (4,000 hours) in an approved apprenticeship pathway under supervision.
4. Ethics and background
– Meet the CFP Board’s ethical standards and disclosures; applicants must demonstrate commitment to acting in clients’ best interests. The Board reviews applications and has final discretion on awarding the designation.
5. Ongoing maintenance
– Complete continuing education: 30 hours every two years to retain the CFP marks and stay current.
CFP exam — what to expect
– Format: 170 multiple-choice questions.
– Content areas: a broad list that includes client relationship processes (gathering information, analysis, recommendation, implementation, monitoring) and technical subjects (taxes, investments, retirement, estate, insurance, education).
CFP vs. CFA (and MBA)
– CFP: Focuses on personal financial planning for individuals and families.
– CFA (Chartered Financial Analyst): Emphasizes investment analysis and portfolio management and is commonly used in institutional asset management.
– MBA: Is a graduate business degree; it is not equivalent to a CFP but may substitute for some coursework in the CFP education requirement (depending on the program and the Board’s rules).
When you might need a CFP — short checklist for clients
– You want a comprehensive, written financial plan covering multiple areas (investments, taxes, retirement, insurance, estate).
– You’re approaching retirement and need a sustainable withdrawal strategy.
– You want coordinated planning for children’s education, mortgage, debt, and long-term goals.
– You prefer an advisor who is required to act as a fiduciary.
– You or your family have complex financial or life-event planning needs (business sale, inheritance, blended family).
Checklist for someone pursuing the CFP credential
– Confirm bachelor’s degree (or plan to complete one).
– Enroll in CFP Board–registered coursework (verify program on CFP Board list).
– Plan study schedule for the exam (170 questions; broad syllabus).
– Map out work experience: full-time 6,000 hours or apprenticeship 4,000 hours.
– Prepare to meet CFP Board ethics and background requirements.
– Budget time for 30 hours of continuing education every two years after certification.
Small worked (hypothetical) example — fee illustration
– Suppose an advisor charges 1.0% of assets under management (AUM).
– Client has $500,000 invested under the advisor’s management.
– Annual advisory fee