What is a Certified Financial Planner (CFP)?


A certified financial planner, or CFP, is a specialized type of financial planner who has met the certification requirements of the CFP Board. A CFP must complete continuing education, pass an exam, and adhere to the CFP Board’s Code of Ethics. CFPs are bound by a fiduciary duty, which means they must meet the highest standard of care when providing advice to clients.

CFP candidates must have at least 4,000 to 6,000 hours of planning experience or the equivalent, as well as taking courses through a CFP Board program. A bachelor’s degree or its equivalent is also required, along with an ethical commitment to working in the best interests of your clients.

The CFP certification is one of the most sought-after credentials for finance professionals and can add a lot of value to their careers.

Are CFPs better than paid planners?

First, it’s important to note that CFPs and paid planners can sometimes be one and the same thing. CFPs can qualify as fees only so long as the planner and the planner’s company do not receive any sales-related compensation and related parties do not receive any sales-related compensation for services performed by the CFP, in accordance with the standards of conduct of the CFP Board. This can be a particularly high standard for CFPs who work in some financial firms.

CFPs are part of a larger professional network, so they have plenty of resources at their disposal if clients have questions, a resource that paid freelance planners might not have.

One of the benefits of working with a CFP is that they must adhere to a fiduciary standard, which means they must put a client’s needs first. However, paid planners are not required to meet a fiduciary standard. And don’t confuse paid advisors with “paid” planners, as the latter can recommend products that pay them a commission.

The value of a fee-only planner to clients is that it provides better incentive alignment for the advisor. That is, the paid planner is more likely to work on behalf of the client if there is no incentive (i.e. sales commission) to push products and services financial to the customer.

While paid planners only charge clients for their time or other services, CFPs can also be paid by the products they sell. In some cases, this compensation can reach 100% of the commission that the financial institution receives for the sale of the product.

What does this mean to you? The more products a planner recommends, the more money they earn. A plan that includes many high-commission products is therefore probably not in your best interest. While this arrangement may sound bad, it’s not necessarily the case that a CFP will only recommend products that pay the highest commissions, experts say.

So the fee-only compensation setup combined with the CFP designation can be a powerful combo that signals a planner is competent while also being incentivized to act in your best interest.

The CFP is a good designation to have, but it’s not the be-all and end-all. Just because a planner has a CFP certification doesn’t mean they’re the best person to advise you. It is important to get references and reviews for any financial planner you are considering. Whether the advisor is fee-based or CFP (or both), you need someone who understands your needs.

(Here are some tips for finding the right financial advisor for you.)

How much does a PFC cost?

You should expect a CFP to charge you a fee to provide you with financial advice on your investments and perhaps also to manage your investments for you. The services of a CFP are not cheap. Most CFPs charge you an hourly rate for their services, and larger companies or CFPs with more experience usually charge more.

According to a recent survey by Bankrate, the typical CFP charges an average of $256 per hour, but you can easily find a CFP charging twice that amount. While it might not seem like a big deal to pay someone $500 or $1,000 for a few hours of their time once a year, it can add up quickly when you’re paying for advice regularly.

Therefore, it may be a good idea to hire a financial planner who charges you a fixed monthly or annual rate, so you can budget for the advice you get.

If you’re looking for flat fees, Charles Schwab offers a robo-advisor portfolio that charges $30 per month and offers unlimited access to CFPs.

Other CFPs will charge you fees based on the amount of money you need to invest. They can charge between 0.5% and 1% per year on the assets you manage. A planner that charges a percentage of assets under management is generally more expensive than a fixed-fee planner because the percentage fee is tied to the size of your portfolio.

It’s worth noting that while these fees may come out of your pocket initially, you can end up making much smarter decisions that align with your goals than if you opt for the “free” advisors that many financial institutions offer you. They are often just vendors in disguise.

How to become a CFP

A financial planner needs a bachelor’s degree, but no specific concentration or major to become certified, individuals must have at least 4,000-6,000 hours of financial planning experience, as well as successfully complete planning courses finance and pass a comprehensive exam. According to the CFP Board, the exam covers a range of topics, including insurance, annuities, securities and investments, taxes, retirement planning, estate planning and financial planning practices. Next, you must engage in ethical practices and act as a fiduciary on behalf of your clients.

The CFP exam is administered by the Financial Planning Standards Board, an independent, not-for-profit organization that advocates consumer protection and financial planning standards.

Those who pass the exam and meet the other criteria earn the CFP designation. To maintain the designation, professionals must pay an annual renewal fee of $455, beginning October 1, 2022. Candidates must also earn continuing education (CE) credits, and the CFP board requires a minimum of 30 hours of EC over two – one-year periods.

More and more financial planners are earning their CFP designation, which can be a boon to their careers.

At the end of the line

A Certified Financial Planner is a professional designation achieved through a certification process. CFP professionals can be hired by a financial company or act as independent planners. But there is no guarantee that a CFP will meet all your financial needs. It is essential to ask questions and understand the qualifications and expertise of the supplier to be sure that they meet your needs.


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