What is a CFP®? (and Why It’s Important to Work with one)

What is a CFP® (and Why It’s Important to Work with one)

When searching for a financial advisor, you will likely see a lot of “alphabet soup” following prospective advisors’ names. While all these designations, licenses, and certifications have different education and experience requirements (and some may carry more weight than others), one certification rises above the rest as the standard for financial planning-focused advisors: the CFP®. In this blog, I will address the following questions: 1) What is the CFP® Certification? 2) Why is it important to work with a CFP® Professional?

What is the CFP® Certification?

The CERTIFIED FINANCIAL PLANNER™ (CFP®) certification is a financial services industry designation awarded to financial advisors that have successfully met the standard of excellence in financial planning set out by the Certified Financial Planner Board of Standards. To become a CFP® professional, an advisor must meet the “four E’s”:

1. Education: In addition to a four-year college degree, CFP® candidates are required to complete college/university-level coursework in the major financial planning areas of focus: General Principles and Professional Conduct, Education Planning, Risk Management and Insurance, Investment Planning, Tax Planning, Retirement Planning, Estate Planning, and Financial Plan Development.
2. Exam: After completing the education requirement, CFP® are eligible to sit for the CFP® exam. The exam is about 7 hours, and is a comprehensive test of a candidate’s knowledge in all the areas of focus studied in the education requirement.
3. Experience: Once a CFP® candidate has passed the certification exam, they are still not free to use the letters immediately. The candidate then must meet an experience requirement of 2 years (6,000 hours) of direct financial planning experience, to ensure that they are adequately prepared to offer financial planning services to individuals and families.
4. Ethics: Once a CFP® candidate has completed the education, exam, and experience requirements, the final step in the certification process is to submit to a comprehensive background check and commit to acting as a fiduciary to clients and maintaining the Certified Financial Planner Board of Standards’ ethical and conduct standards.

Once certified, a CFP® professional’s work is not done. To maintain the certification requirement, advisors must complete continuing education and other recertification requirements on a bi-annual basis. As you can see, becoming a CFP® professional is a rigorous process that requires true dedication to financial planning and to providing clients with the highest standard of advice.

Why is it important to work with a CFP® Professional?

While all the above is demonstrative of the amount of work and rigor that goes into becoming a CFP® professional, you may still be wondering, “why should I work with a CFP® professional?” There are several reasons that you should consider working with a CFP® professional, but I have outlined below three of the most important reasons to choose a CERTIFIED FINANCIAL PLANNER™ Professional over a non-credentialed financial advisor or financial coach:

1. The education requirements to obtain and maintain the CFP® certification mean that your advisor will be well-versed and up to date on the latest planning topics and trends. As an individual trying to navigate your own life changes and your journey to your financial goals, you likely do not have time to keep up with the many changes and strategies that come with real financial planning. A CFP® professional has not only demonstrated their commitment to learning the ins and outs of financial planning but is also required to stay on top of the changes and new information related to financial planning to maintain their certification. Working with a professional with a commitment to continuing education can be a major benefit to you as a consumer, as they can shoulder the burden of adjusting to the ever-changing financial planning landscape so you can focus on the things that are truly important to you.
2. CFP® professionals are required to act as fiduciaries, meaning your interests will always come first. While “fiduciary” has certainly become a buzzword in the financial advice industry, a surprisingly large portion of the financial advisor population is not held to a fiduciary standard for their clients. CFP® professionals, as part of earning and maintaining the certification, commit to always act as a fiduciary for clients, meaning that they have made a commitment (in writing and can be subject to sanctions should they not stay true to their commitment) to act solely in your best interest when providing advice. You can feel confident that the advice you receive from a CFP® professional is the best advice for your situation.
3. CFP® professionals are experienced. Whereas most financial advisors are not required to have any experience before working with clients, CFP® professionals are required to have at least two years of financial planning experience before they become certified. When you are looking for a financial advisor, you can feel confident that when you see the CFP® credentials next to an advisor’s name that they have multiple years of experience working with clients like you to build, implement, and maintain their financial plans.

As you can see, CFP® professionals have demonstrated a commitment to being the best financial planners that they can be for clients. Through rigorous coursework and testing requirements, as well as strong ethical commitments and continuing education, a CFP® professional brings deep financial planning skills and knowledge to every client relationship. As you are searching for your financial advisor, keep in mind the commitments that CFP® professionals make to the profession and to you as the client, and consider working with one for your financial planning needs.