In a Nutshell
Certified financial planners are financial advisers who have met certain requirements set by the Certified Financial Planner Board of Standards. This nonprofit organization emphasizes that CFPs must put their clients’ best interests above their own when giving financial advice.If you struggle to manage your finances, partnering with a financial adviser can be a great help. From robo-advisers to human advisers on anything from simple budgeting to investments, it can be tough figuring out who — or what — is best for your needs.
There are countless financial professionals who may try to offer you financial guidance. So, when considering financial advisers, you’ll want to compare cost, expertise, experience, training and credentials.
Some financial professionals have a CFP credential. Here’s what that means.
What is a CFP?
A certified financial planner is a financial adviser who has earned a CFP certification. CFPs must complete certain education, training and exams and have thousands of hours of practical experience. The CFP Board administers and manages all initial and ongoing certification requirements.
The board is a nonprofit organization that sets and enforces CFP certification criteria. The board’s goal is to ensure that all CFPs have both a solid understanding of the ever-changing financial industry and an ethical commitment to advise in their clients’ best interest.
How to become a CFP
The CFP board administers the CFP certification process. In order to complete the certification, all candidates must meet requirements known as the “four E’s.” They include:
Education
The CFP Board requires all candidates to complete CFP Board-approved coursework. CFPs also must have a bachelor’s degree or higher from an accredited college or university.
Exam
All candidates must pass the CFP exam once they complete their coursework. With this exam, the board evaluates the candidate’s ability to apply their financial knowledge to a wide range of situations.
Experience
The board also requires either 6,000 hours of qualifying experience in the field or 4,000 hours of experience as an apprentice. The aim is to make sure that applicants have put their knowledge to plenty of practice in everyday situations.
Ethics
CFP professionals must agree to uphold high standards for ethics and professional conduct as defined by the board. The standards emphasize integrity, fairness, professionalism and diligence when working with clients. All CFPs agree to fiduciary standards to act in their clients’ best interests.
CFPs must renew their certification by completing 30 hours of continuing education each reporting period.
Why consider working with a CFP?
Managing your finances often means a lot more than investing and budgeting. It can involve figuring out how all of the pieces of your finances must work together — for the short term and over the long haul — to help you achieve your financial goals.
Navigating all that can be challenging, so it’s obvious that some sort of adviser might help. But why look for an adviser with a CFP credential?
It’s a practical starting point
Narrowing down your choices for a financial adviser can be overwhelming, but you’ve got to start somewhere. By limiting your search to CFPs, you’ll at least know all your candidates have a bachelor’s degree and enough understanding of finances — and of their ethical obligations as an adviser — to pass the CFP Certification Examination.
CFPs are trained in dozens of financial areas
You’ll face many financial decisions throughout your life. Whether you’re just starting out or starting to think further into the future, CFP certification is designed to ensure its professionals can help you with anything from developing a budget and tackling debt to maintaining good credit, figuring out tax and insurance strategies, or preparing to buy a home or retire.
You can check CFPs for red flags
The CFP Board has a web page where you can look up CFPs to verify their certification status. And if a CFP has been publicly disciplined by the CFP Board or had a bankruptcy within the past 10 years, that info will appear in the search results, too.
Bottom line
Your financial future is important. You want to put it in the hands of someone you trust. Partnering with a CFP can give you peace of mind knowing that they’ve met certain requirements for education and competency — and that they’ve committed as part of their certification to act in your best interest. In addition, the CFP Board provides an easy way to check any CFP’s background for certification status and certain red flags.
Of course, with so many financial professionals available, you’ll want to be sure to fully vet all of your options before making a final decision.