What is a Certified Financial Planner and what do they do?

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  • A Certified Financial Planner (CFP) is a professional designation for advisors and other financial professionals.
  • To earn the CFP designation, advisors must have some experience, pass a rigorous exam, and engage in ongoing financial education.
  • CFPs advise clients on a wide variety of topics, including retirement and education planning, investment and tax planning, and risk management.

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 can find. They are held to a strict code of ethics and professional standards which must be continuously maintained. CFPs offer their clients a very specific level of expertise.

Here’s a more detailed look at what CFPs do and what you need to know before working with them.

What is a Certified Financial Planner?

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

CFPs are fiduciaries, which means they are ethically bound to always provide advice that is 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 greatly depending on the services they offer, their experience, whether they work within a company or as an independent consultant, etc. Because CFPs have a fiduciary responsibility to their clients, they often use a fee-only compensation model. This means that they do not accept commission for the products they sell or recommend and directly bill the customer for their services. This could be through a deposit, a percentage of 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:

  • Take in-depth courses in financial planning specialties
  • Pass a six-hour exam that tests them on eight core topics they are likely to encounter in real-world scheduling situations
  • Complete at least three years of financial planning work with actual clients
  • Comply with the CFP Board’s Code of Ethics and Standards of Conduct

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

A CFP can provide one or more services related to one of the specialty areas he 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-term goal. term, the orientation of your investment strategies, the assessment of risks to your wealth and other specialties on which they choose to focus. .

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

  • Ethics and professional regulations: Consumer protection laws, fiduciary responsibilities, ethical obligations, the operation of financial institutions and the regulations governing them
  • General principles of financial planning: The financial planning process, cash flow management, use of 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, strategies around donations and income tax, and education funding vehicles
  • Risk management and insurance planning: Principles, analysis and evaluation of risks and insurance; health, disability, long-term, life, property and accident insurance; annuities; and business insurance needs
  • Investment planning: Risk assessment, investment concepts and return measurements, 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: Basic principles 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 on the best plans for clients, how benefit programs affect 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 Cash and Taxation, Business Transfers, How Laws and Regulations Apply to Marriages and Non-Traditional Relationships, and Trusts

CFP versus 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 (CFA). This is a similar certification to what CFPs earn. However, the CFA program focuses only on investment analysis, where CFPs have much broader experience.

How to find a CFP

One of the easiest ways to find a CFP in your area is to search LetsMakeAPlan.org, which is the Certified Financial Planner Board of Standards’ consumer site. There you can enter your location, the radius you want to search, and the planning services you are looking for. If you already know a CFP’s name and want more information about them, you can also search for their last name.

The search results will display an address, map, year of certification and their current certificate (if applicable), planning services offered, languages ​​spoken, and any disclosures, disciplinary actions or bankruptcy involving an individual CFP. If you want to verify the credentials of someone claiming to be CFP, you can do so at CFP.net.

Once you find a CFP you might want to work with, plan to interview them to see if they are a good fit for your needs. Consider asking questions about:

  • Education and degrees
  • Specific services offered and their experience in these areas
  • Their approach/philosophy to financial planning
  • What types of clients do they usually work with
  • Fee Structure and Fiduciary Responsibilities; Does the commission play a role in their business?
  • Who will work on your account and personally with you
  • Any disciplinary or legal action associated with the CFP or its firm

Remember that a CFP works for you and you should feel comfortable with them. Don’t feel pressured to hire one person over another. Go with the person who has the best qualifications to help you achieve your goals and the right chemistry to build a long-term professional relationship with.

The bottom line

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 held to a very high standard of education, ethics and experience which is ongoing to maintain certification. This can reassure you that your finances are in good hands.

That’s not to say that non-CFP financial planners 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. This is a very personal decision that only you can make. Remember that the CFP certification is only one tool to use in finding finance professionals – not the only one.

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