certified financial planner™
How Can a Certified Financial Planner™ Help Me?
Quick Read:
A Certified Financial Planner™ has completed the rigorous process of the two part educational requirement, thousands of hours of work experience, and passed the grueling CFP® exam.
CFP® advisors have a fiduciary standard they are legally bound to. They must work in your best interest and follow strict ethical standards.
CFP® advisors have traditionally spent years preparing to passed an exhaustive one day, two part, 170 question exam
There are approximately 96,000 CFP® professionals in the U.S. (July 2023)
A Higher Standard for Financial Advisors
Hiring a financial advisor can be life changing. Working with a Certified Financial Planner™ ensures your financial plan is designed with your best interest in mind.
While some industries have rigorous requirements before allowing members to hold themselves out to the public as an expert, such as accountants (CPA) and physicians (MD), financial advisors have no such obligation.
To use the term financial advisor, no experience or educational requirement is needed. Any company can use the title to describe their employees and any industry can adopt the term to help promote their services.
The Certified Financial Planner™ designation changes that.
By requiring an education and experience requirement capped off with a grueling exam, the CFP® is designed to separate those who are serious about their craft from those who are simply passing through the industry.
So how can a Certified Financial Planner™ help you? Let’s find out.
Step #1: Two Part Educational Requirement
Obtaining the CFP® mark takes a serious commitment to deepen your understanding of personal finance.
Similar to any industry defining designation, there is a significant educational requirement before becoming eligible to sit for the exam. The CFP® Board has a two part educational requirement which requires a Bachelor’s degree and completing a CFP® Board approved coursework program.
The CFP® coursework program can be a standalone course or tied into a Masters's or Ph.D. level program.
8 Principle Knowledge Topics
The CFP educational requirement helps align a CFP’s knowledge base with real life personal finance topics.
Once a financial advisor completes the 8 principle knowledge topics, a capstone course is required to demonstrate how to consolidate each area into a comprehensive financial plan.
Why It Matters
The ability of your financial advisor to help you will be based on if they have the qualifications to help.
While completing the educational requirements alone does not indicate deep fluency in any particular area, it does indicate an above average level of expertise to help analyze your situation.
Further, a well-versed financial advisor knows their limits and has the educational background to hand off your situation to other industry experts if needed.
By working with a Certified Financial Planner™, you should feel comfortable they can either provide the help you are looking for or lead you to someone who can.
What You Can Expect
A CFP® will examine your entire financial picture before providing advice.
To understand your situation, data gathering worksheets are often provided to submit your paystubs, tax returns, investment statements, insurance policies, and any other relevant data.
A CFP® will discuss with you your personal goals and objectives. Questions such as what matters to you the most, your previous experiences with your finances, and how you look at investment risk are all common.
Having a full understanding of your financial data and personal goals ensures your financial plan will be relevant to your situation.
Step #2: Pass the Certified Financial Planner Exam
Once the educational requirements are completed, a financial advisor can sit for the exam.
The CFP® exam consists of 170 questions spread out over two 3-hour sessions. All completed in the same day. The style of questions is challenging with a mixture of multiple choice, short scenario, and case study questions.
Exam Requirements
The CFP® exam is a grueling one day test. 170 multiple choice, short scenario, and case study questions over two, three hour sessions.
So what’s your chance of passing?
As of 2019, the average pass rate for first time test takers was around 67%.
Why It Matters
The difference between a financial advisor and a CFP® professional can be stark.
A financial advisor without the CFP® designation may be product focused, putting the interest of the company they work for ahead of the interest of their clients.
Without being held to a fiduciary duty, a traditional financial advisor does not have to be comprehensive with their advice and does not have a legal obligation to recommend the right path for you.
A CFP® must act in your best interest. They must adhere to ethical standards and are legally bound to provide advice that is tailored to your personal situation.
What You Can Expect
To adhere to the ethical and fiduciary standards, a CFP® will put together a comprehensive financial plan mirroring the 8 principle knowledge topics.
Often detailed reports are generated with recommendations on how to move forward. These reports are geared towards understanding where you stand today and what it takes to get to where you want to go.
Additionally, your fee structure is often transparent and upfront. Transparency is key for CFP® professionals and often charged in a percentage or flat fee basis.
Step #3: Minimum Work Experience
Completing the two-part education requirement and passing the exam is a major achievement.
However you are not allowed to use the designation until one more hurdle is cleared. The work experience requirement.
The CFP® Board requires 6,000 hours of work experience that must be solely dedicated to the development or delivery of financial plans. Working in strictly an administrative role without any financial advisor experience does not count.
Why It Matters
You want to work with a financial advisor who is not only book smart but also real world tested. The minimum work experience provides that.
While personal finances are often associated with numbers and spreadsheets, practical experience working with individuals and families is required before officially holding yourself out to the public as a CFP®.
What You Can Expect
A CFP® will have the practical experience to provide advice relevant to your situation. They will have the preliminary training to translate your questions into a financial plan you can act on.
Further, the CFP® designation is not a lifetime appointment. On a bi-annual basis, CFP® professionals need to complete continuing education requirements as well as attest to a background questionnaire.
Any industry-related issues such as client complaints or criminal activity must be disclosed as well as any personal issues that may affect your ability to provide financial advice, such as bankruptcy.
The depth the CFP® Board will go to protect the reputation and standard of the Certified Financial Planner™ designation is admirable yet required to let the public know who they are working with.
Chat with a CFP® Today
Schedule Your Introduction Meeting
Now you know the benefits. Schedule your complimentary introduction meeting to share your personal situation with a Certified Financial Planner™