What Is a Certified Financial Planner (CFP) and Do You Need One?

If you’re looking for financial guidance, there’s no shortage of professionals out there who can advise you. However, credentials and expertise can vary, and it can be challenging to identify the right partner to help you with your money. One of the professionals you may find in your research is a certified financial planner (CFP). These individuals have completed rigorous coursework and gained years of experience, making them a good option if you’re looking for sound financial guidance.

Here’s what it means to be a CFP, how they help clients, whom they’re right for, and more.

Roles and responsibilities of a CFP

CFPs may provide several services, or they might specialize in one particular area. For example, some CFPs offer financial planning, investment guidance, estate planning, and other services, while others provide specialized guidance to those going through a divorce or planning a retirement. Potential roles and responsibilities often include:

• Financial planning.
• Insurance planning.
• Investment guidance.
• Estate planning.
• Debt payoff strategies.
• Asset transfer strategies.

Who should choose a CFP?

If it’s within your budget and you’re seeking comprehensive financial guidance, working with a CFP could be valuable. Those seeking specialized advice related to big life changes, such as buying a home or saving for retirement or college tuition, could also benefit from a CFP’s guidance.

How much does working with a CFP cost?

There’s no one set price tag for all CFPs. Instead, the cost of working with a CFP can vary depending on several factors, including whether they’re a new or established professional, the services you need, and their fee structure. Costs may range from a few hundred to a few thousand dollars, with more-experienced professionals commanding higher rates.

Some CFPs may charge an hourly rate, while others charge a flat fee. As you compare options, be sure to ask about their cost model and get estimates for the services you need.

CFP and fiduciary duty

Professionals who’ve earned the CFP credential have a fiduciary duty, meaning any recommendations they provide must be in their client’s best interests. This is true whether they operate on a fee-only cost structure, meaning their only means of compensation is client fees or a fee-based cost structure (they receive client fees and commissions for certain recommendations). If they receive commissions, it must be clearly disclosed to their clients.

Financial advisors and planners who aren’t CFPS may not be bound by the fiduciary standard. Instead, they may only need to recommend investments or products considered “suitable” for their clients as defined by the U.S. Securities and Exchange Commission (see page 24), rather than the best possible options for their needs.

How to become a CFP

Per the U.S. Financial Industry Regulatory Authority (FINRA), you’ll need to meet the following requirements to become a CFP:

• Have at least three years of professional financial planning experience (or part-time equivalent).
• Have a bachelor’s degree or higher from an accredited university or college.
• Successfully complete a board-certified CFP program or hold one of the following credentials:
• • Certified Public Accountant (CPA).
  • Chartered Financial Consultant (ChFC).
  • Chartered Life Underwriter (CLU).
  • Chartered Financial Analyst (CFA).
  • Ph.D. in financial planning, finance, business administration, or economics.
  • Doctor of Business Administration.
  • Attorney's license.
  • CFP certification from outside the U.S.
• Pass the CFP examination.

The CFP Exam

The CFP exam consists of 170 questions, including multiple-choice format and some scenario-based and case-study–focused writing questions. Candidates have three hours to complete the first 85 test questions and three hours to complete the last 85.

The exam is generally regarded as challenging, as it addresses many financial topics, including the following:

• Retirement savings and income planning.
• Investment planning.
• General principles of financial planning.
• Tax planning.
• Risk management and insurance planning.
• Estate planning.
• Psychology of financial planning.
• Professional conduct and regulation.

How do I find a CFP near me?

One way is to ask for a recommendation from a trusted friend or family member. Alternatively, the CFP Board of Standards, a nonprofit organization created to set and uphold financial standards, offers a search tool that lets you find CFPs in your area. Otherwise, you can benefit from services like WiserAdvisor who will pair you with the financial advisor to fit your needs.

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CFP alternatives

CFP vs. CFA

Both CFPs and chartered financial analysts (CFAs) have completed rigorous coursework to earn their certifications, but each has a different role. While CFPs primarily help individuals with overall financial planning and management, CFAs are focused on helping institutional investors make investment decisions.

CFP vs. financial advisor

Financial advisors often provide guidance on a client’s investments, though some of their services may also overlap with those provided by a CFP. Indeed, CFPs may also be financial advisors. Generally, though, financial advisors tend to focus on investment guidance and management, while CFPs offer financial-planning services related to many areas of money.

Time Stamp: CFPs are highly trained professionals offering many financial-planning services.

Whether you need help with saving for long-term goals or formulating a financial plan after a big life change, such as marriage or the birth of a baby, a CFP could provide the guidance you’re seeking. These professionals offer several types of planning services that align with many situations, but their services may come with a high price tag. Be sure to compare options before moving forward with one particular CFP.

Frequently asked questions (FAQs)

Is working with a CFP worth it?

It can be if you are struggling to get on track with your finances and can afford to pay for assistance. These professionals can help formulate a plan to pay off debt, save for retirement or other large expenses, and more.

What is the difference between an investment advisor and a certified financial planner?

An investment advisor focuses primarily on providing investment guidance to clients, while a CFP provides a much wider range of financial services.

How long does it take to become a CFP?

It usually takes 18 months to two years to earn your CFP credential, but the time frame can be shorter or longer. For example, it will likely take less time for a financial professional with years of experience to earn a CFP designation than it would for a current college student.