Certified financial planner: definition, what they do

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  • A Certified Financial Planner (CFP) is a trade-industry designation for advisers and other professionals in the financial field.
  • To obtain the CFP designation, advisors must have some experience, pass a rigorous exam and be committed to continuing financial education.
  • CFPs advise their clients on a wide variety of topics, including retirement and education planning, investment and tax planning, and risk management.
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Working with a Certified Financial Planner (CFP) can often be a good idea if you are looking for financial advice. A CFP is one of the most experienced and knowledgeable financial advisors you will find. They are bound by a strict code of ethics and professional standards that must be continually maintained. CFPs offer their clients a very specific level of expertise.

Here’s a more in-depth look at what CFPs do and what you need to know before working with one.

What is a Certified Financial Planner?

A CFP is a financial professional who has met all of the requirements for certification from the Certified Financial Planner Board of Standards, Inc. (CFP Board). This encompasses years of education in 72 financial specialties, thousands of hours of practical experience, and continued adherence to high ethical standards and certification requirements.

CFPs are trustees, which means they have an ethical obligation to always provide advice in the best interests of their clients. They also take a holistic approach to financial planning, looking at both long-term and short-term goals.

The cost of working with a CFP can vary widely depending on the services they offer, their experience, whether they work as a member of a firm or as an independent advisor, etc. Since CFPs have a fiduciary responsibility to their clients, they often use a compensation-only model. This means that they do not accept commission for the products they sell or recommend and charge the customer directly for their services. This could be done through a retainer, a percentage of the winnings, or some other arrangement agreed to by both parties.

What Does a Certified Financial Planner Do?

CFPs work with individual clients in a number of areas related to personal finance advice and planning. To obtain their certification, CFPs must:

  • Complete in-depth courses in financial planning specialties
  • Pass a six-hour exam that tests them on eight basic topics they’re likely to encounter in real-world planning situations
  • Complete at least three years of financial planning work with real clients
  • Comply with the code of ethics and standards of conduct of the CFP board of directors

CFPs can be independent practitioners who provide only financial planning services, wealth management advice, analysis or investment and portfolio management. Some are accredited professionals in a field related to financial planning who choose to obtain CFP certification to supplement their primary practice. You will often find CPAs, lawyers, insurance agents, and other legal, financial or business professionals with CFP certification.

A CFP may provide one or more services related to one of the specialty areas it has studied. Some of these include saving for retirement or college, setting up a trust or fund for charitable giving, helping to develop financial plans to achieve a short-lived goal. term, the orientation of your investment strategies, the assessment of the risks to your wealth and other specialties on which they choose to focus. .

Specifically, all CFPs have experience in each of the following areas:

  • Professional conduct and regulations: Consumer protection laws, fiduciary responsibilities, ethical obligations, functioning of financial institutions and the regulations that govern them
  • General principles of financial planning: The process of financial planning, managing cash flow, working with financial statements, debt management, financial advice, financing strategies, monetary concepts and calculations, financial values, attitudes, biases and behaviors
  • Educational planning: Analyze needs, savings options, how financial aid works, donation and income tax strategies, and education funding vehicles
  • Risk management and insurance planning: Principles, analysis and evaluation of risk and insurance; health, disability, long term, life, property and damage insurance; annuities; and business insurance needs
  • Investment planning: Risk assessment, investment concepts and measures of returns, asset allocation, portfolio development, diversification and analysis, tax issues related to investments, valuation of stocks and bonds and investment strategies (including alternative investments)
  • Tax planning: Fundamentals of tax law and calculations, how taxes apply to businesses, trusts, real estate transactions and estates, how to reduce and manage liabilities, and how to manage charitable donations
  • Retirement savings and income planning: Analyze retirement needs and advise the best plans for clients, the impact of benefit programs on retirement needs, regulatory and distribution considerations, select the right plan for a business and plan for the transfer of a business
  • Estate planning: Tax implications and property transfer strategies, estate liquidity and taxation, business transfers, application of laws and regulations to marriages and non-traditional relationships, and trusts

CFP vs CFA

In your search for a financial advisor or planner, you will certainly come across many CFPs. You can also find finance professionals who are Chartered Financial Analysts (CFAs). This is a certification similar to that earned by CFPs. However, the CFA program focuses only on investment analysis, where CFPs have much broader experience.

The financial report

If you’re looking for someone to help you with just about anything related to your financial health or your future, finding CFPs in your area might be a good place to start. These professionals are required to a very high level of education, ethics and experience which is ongoing to maintain certification. This can reassure you that your finances are in good hands.

This does not mean that financial planners who are not CFP are less qualified to meet your needs. It all depends on what you want to get out of your relationship with your financial guide and what kind of experience you think he should have. It is a very personal decision that only you can make. Remember that the CFP certification is only one tool to use when looking for finance professionals, not the only one.


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