The Certified Financial Planner (CFP) designation is granted by the Certified Financial Planner Board of Standards, Inc. (CFP Board). It indicates proficiency in education, examination, experience and ethical standards. CFP® professionals work in a number of capacities, from financial planners guiding individuals through key life milestones to wealth managers offering specialized services to high-net-worth clients. The CFP designation not only demonstrates a comprehensive understanding of finance, but also a commitment to ethical principles, making CFP® professionals invaluable partners for clients pursuing financial success.
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What Is a CFP Designation?
The CFP designation stands for Certified Financial Planner. It is a professional certification granted by the Certified Financial Planner Board of Standards, Inc. (CFP Board) in the United States. The CFP designation is recognized internationally and signifies that a professional has met the “4 E’s” essential to the certification: Education, examination, experience and ethical requirements established by the CFP Board.
To earn the CFP designation, a candidate typically needs to complete a series of educational courses in financial planning, pass a comprehensive CFP exam, acquire relevant work experience in the financial planning field and adhere to a code of ethics and professional responsibility. The certification prepares advisors to work in various aspects of financial planning, including investment, retirement, estate and tax planning.
Financial professionals with the CFP designation are often sought after by individuals seeking comprehensive and well-rounded financial advice because the certification indicates top-notch expertise and dedication to ethical standards in the financial planning industry.
How to Earn Your CFP
Earning your CFP means fulfilling the certification requirements for the “4 E’s” listed above. Education means earning a bachelor’s degree from an accredited institution. This degree doesn’t have to be finance-focused. Aspiring CFPs must also enroll in a bachelors-level courses on personal financial planning and a CFP Board-registered capstone class.
Next, you’ll need sufficient experience in the field. Specifically, 6,000 hours of professional financial advising experience is necessary. In some cases, 4,000 hours as an apprentice will fulfill the requirement.
Third is the examination. The test is completed in two parts, but both occur on the same day, and it has 170 multiple-choice questions. The current pass rate is about 67%, indicating that preparation and study are essential to completing this step.
Last but not least, CFPs must adhere to the CFP Board’s code of ethics. The code emphasizes integrity, fairness, competence, confidentiality, and objectivity. In other words, CFPs work in their client’s best interests, maintain client privacy, and give advice to help the client maximize their financial potential (as opposed to maximizing their own profits).
What Jobs Can You Get After Earning a CFP?
The CFP certification opens up many opportunities in the financial management field. While specific titles can vary by company and region, here are the roles that lend themselves most to CFPs:
Financial Planner
Financial planners help individuals and families achieve their financial goals. For example, a financial planner could help clients create a retirement plan based on their income, retirement account contributions, life expectancy and retirement age.
In other words, financial planners crunch the numbers for ordinary working people to accomplish the financial milestones of life, such as buying a house, sending children to college and planning their estate. In addition, you’ll draw up monthly budgets for households and help clients optimize their tax situations.
Financial Advisors
The generalists in the field, financial advisors can work in various industries, from life insurance and banking to investing and estate planning.
The common thread in all these areas advisors work is financial management. This means helping clients with whatever financial needs they have, such as optimizing a stock portfolio or creating a living trust.
Financial advisors can find positions at a broad range of companies and institutions or work as independent agents.
Financial Consultant
A financial consultant usually works with corporate clients who need help running their financial systems. Professionals in this section of the industry create financial plans and implement strategies to help businesses run efficiently.
This line of work means rubbing shoulders with attorneys, investment specialists and accountants to get the job done. Additionally, CFPs in this field will need to stay abreast of broad economic trends, including market patterns and legislative changes.
Investment Advisor
Investment advisors are responsible for responsible for managing investment portfolios on behalf of clients. This involves selecting appropriate investment strategies based on client financial goals, risk tolerance and market conditions.
As an investment advisor, you must register with your state. The CFP alone will not allow you to work in that capacity. However, some statesprovide an exception to testing requirements, such as the Series 65, Series 66 and Series 7, if you complete the CFP.
Financial Analyst
Financial analysts fill data-driven roles, meaning they review financial information in various industries. For example, you might analyze a company’s financial statements and accounts to determine areas of overspending or ways to generate higher profits. On the other hand, you might break down complex investment reports to help individual and corporate clients see how to optimize their portfolios.
Wealth Manager
A Wealth Manager specializes in providing financial advice and management services to high-net-worth and ultra-high-net-worth individuals. These clients typically have complex financial situations and require tailored strategies for investment, estate planning, tax management and legal assistance. The goal is wealth preservation and growth.
Wealth Managers may work for private banks, wealth management firms, or financial advisory teams within larger institutions. Their role involves understanding the specific needs and goals of high-net-worth clients, developing customized wealth management plans and coordinating with other professionals such as tax advisors and attorneys.
Bottom Line
Earning the certified financial planner (CFP) designation is a rigorous process that involves meeting the education, examination, experience and ethical requirements for certification. This certification equips professionals with the knowledge and skills needed to excel in various aspects of financial planning, making them highly sought after by clients seeking comprehensive, objective financial advice.
Tips for Choosing a Job After Earning a CFP
Once you’re ready to begin serving clients, you’ll need a plan for attracting them. Building a professional website and developing a social media following are good places to start. But if you’d like to fast-track your growth strategy, you might consider using an online lead generation tool to help with prospecting. SmartAdvisor, for instance, helps you connect with leads so that you have more time to spend serving your existing clients and scaling your business.
The CFP is one of many certifications to pursue – and some professionals hold multiple credentials. If you’re still deciding which path to take, here’s a comparison of what CFAs and CFPs do for work.
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