What is a certified financial planner (CFP)?

If you have planned to receive financial advice, you have probably met the acronym CFP. But what does that mean? A certified financial planner (CFP) acts as a personal financial coach, and they have serious references to support their expertise.

To become CFP, a person must complete a study program, then take a rigorous examination in two parts which covers heritage management, tax planning, insurance, retirement planning, inheritance planning and other crucial personal financing subjects. Hanging by the Certified Financial Planner Board of Standards, the designation of the CFP also means that holders must do a large quantity of continuing education each year to maintain their skills – or they may lose certification.

Below, we will unpack what is necessary to obtain the CFP designation, exploring education, experience and the required ethical obligations.

The extent of the expertise of a CFP

A CFP professional is a financial advisor who has obtained certification to provide financial planning services to individuals. This may include the creation of personalized plans for investments, retirement, insurance, financing of education, tax strategies and inheritance planning. One of the most important aspects of the role of a CFP is their commitment to act as a fiduciaryAlways prioritize the best interest of their client.

CFPs are supposed to adopt a holistic approach to financial planning. They start by completely assessing a client's financial situation. This includes income assessment, assets (such as investments and goods) and liabilities (such as mortgages or student loans). Based on this detailed assessment and specific objectives of the customer, they develop a tailor -made financial plan.

For example, they could help customers close to retirement to formulate a strategy to generate sustainable income. Or they could help a young family create a savings plan to finance future college studies of their children.

Understand the Fiduciary obligation of the CFP

The cornerstone of the CFP designation is committed to a fiduciary obligation towards its customers. This means that all CFPs are legally obliged to place their customers' interests above their their own when providing financial advice. For example, if a CFP would receive a higher commission by recommending an investment product on another, but the low -order product is better suited to the customer's needs, it is ethically and legally required to recommend the better suitable product with the lower commission.

Although many are surprised to learn this, it is not always – and it is often not – the case with other finance professionals such as brokers.

Here is how the CFP board of directors defines this obligation: “At any time, by providing financial advice to a customer, a CFP professional must act as a trustee and therefore act in the best interest of the customer.” This includes three main responsibilities:

1. The duty of loyalty (place the interests of the client first)
2. The duty of diligence (act with competence and diligence)
3. The duty to follow the customer's instructions (comply with all requests from reasonable and legitimate customers)

How to become a CFP

Winning the CFP designation is a difficult but rewarding process which means a high level of competence in financial planning. Becoming CFP implies meeting strict requirements in four key areas: education, examination, experience and ethics.

Education

The first step towards becoming CFP is to respect the education guidelines. Applicants must have a baccalaureate or more of a college or an accredited university. This diploma can be in any field, but candidates must also take specific courses in financial planning, as indicated by the Board of Directors of the CFP. This course generally covers a full range of subjects:

The CFP board of directors maintains a list of qualified educational programs. It is essential to ensure that your course meets its requirements to avoid delays in your certification course.

Experience and real knowledge

In addition to formal education, budding CFPs must acquire substantial experience in the real world in financial planning. Applicants must have at least three years or 6,000 hours of full -time professional experience in industry, or two years (4,000 hours) in a learning role.

This experience can be acquired through various roles, such as work in a financial planning company, a bank, a brokerage or an insurance company. The key is that experience must involve providing financial planning services directly to customers or supporting the financial planning process significantly. The learning path requires meeting more structured experience requirements, as being under the direct supervision of a CFP.

Ethics

Applicants must prove their commitment to act in the best interests of customers by doing the following:

• Adherive to the professional driving standards of the CFP board of directors: This code of ethics describes the principles that guide CFP professionals in their interactions with customers and the public.
• Disclose any relevant basic information: Candidates must disclose any involvement in criminal activity, civil disputes, regulatory surveys, bankruptcycustomer complaints or job layoffs.
• Pass a complete check of the history: The CFP board of directors performs an in -depth verification of the history of each candidate to verify their ethical position before granting certification. The CFP board of directors has the right to deny certification to anyone who does not meet its standards.

Certified financial planner exam (CFP)

THE CFP examination Includes 170 multiple choice questions covering 100 subjects related to financial planning such as regulations, financial planning principles, education planning, risk management, insurance, investments, tax planning, retirement planning and inheritance planning.

The subjects are weighted and available on the CFP board of directors website. Other questions test the expertise of the candidate in establishing relations with customer plans, collecting relevant information and analysis, development, implementation and monitoring of the recommendations they make to their customers.

• Timing:: The candidates sit at two three -hour sessions in a single day. The exams are generally offered in three eight -day windows in March, July and November.
• Cost: $ 925 for an examination administered on an American test site, with a discount for the first applications and a supplement for the late.
• Passage:: The performance is measured according to a fixed level of competence required, rather than in relation to the scores of other people.
• Take the test:: Those who fail can resume the test up to twice within 24 months.

Continuing education

After becoming CFP, homework and studies are not completed. CFPs must finish 30 hours of continuing education every two years. It is a question of ensuring that they remain up to date on the last rules and strategies of financial planning.

CFP VS CFA

Although the CFPS and approved financial analysts (CFA) have designations that are only a letter made, these are Different certifications With different functions and customers.

CFPS generally works with individual customers. Meanwhile, CFAs are often used by investment management companies such as common funds, hedge funds and investment capital companies. The work of a CFA is to analyze the growth and profitability of companies as well as their solvency and the amount of the debt they carry.

In addition, CFAs are qualified to carry out personal financial planning and wealth management. As such, like CFPs, they often advise customers on investment given their specific objectives, their finances and their specific finances and finances risk tolerance.

The bottom line

A CFP is a professional invested massively to become an expert in whom you can trust. Behind these three letters are years of education, rigorous tests, real world experience and a commitment to put the interests of customers first.

Whether it's planning retirement, saving for the college of your children or simply trying to make Savier money movements, a CFP provides expertise and ethical commitment to guide you to guide your financial journey.