CFA vs. CFP: An Overview
The differences between a chartered financial analyst (CFA) and a certified financial planner (CFP®) are many.
But the main distinction often comes down to the fact that a CFP® works with individual clients to achieve their personal financial goals, while a CFA focuses on investing in large-scale corporate situations.
- CFA and CFP® are two widely recognized and respected financial credentials earned by professionals.
- The CFA program is very broad and might be more aptly described as the equivalent of a master's degree in finance with accompanying minors in accounting, economics, statistical analysis, and portfolio management.
- The focus of the CFP® is to train financial advisors to create and implement financial plans for investors.
Certified Financial Planner (CFP®)
A certified financial planner (CFP®) helps individuals plan their financial futures. CFPs are not focused only on investments; they help their clients achieve specific long-term financial goals, such as saving for retirement, buying a house, or starting a college fund for their children.
To become a CFP®, a person must complete a course of study and then pass a two-part examination. The exam covers wealth management, tax planning, insurance, retirement planning, estate planning, and other basic personal finance topics. These topics are all important for someone seeking to help clients achieve financial goals.
Chartered Financial Analyst (CFA)
A CFA, on the other hand, conducts investing in larger settings, normally for large investment firms on both the buy side and the sell side, mutual funds or hedge funds. CFAs can also provide internal financial analysis for corporations that are not in the investment industry. While a CFP® focuses on wealth management and planning for individual clients, a CFA focuses on wealth management for a corporation.
To become a CFA, a person must complete a rigorous course of study and pass three examinations over the course of two or more years. In addition, the candidate must adhere to a strict code of ethics and have four years of work experience in an investment decision-making setting.
The primary difference between the two designations has to do with the role or job that the individual is primarily concerned with. Providing financial advice and planning to individuals and families is most likely to be covered by the training and curriculum offered by certified financial planners and the services they provide. These include recommending investment portfolios, insurance products, and tax guidance.
CFA charterholders, on the other hand, are most likely to work for a financial institution such as a bank, hedge fund, pension, or mutual fund company. These professionals actively manage portfolios, engage in equity research or financial analysis, and trade assets like derivatives, commodities, or currencies.
Still, some CFA charterholders may engage in financial advising or run an advisory practice. Likewise, CFP® credentialed individuals may work for a bank or trading firm. In some cases, holding both designations is desirable to achieve a complete set of skills and knowledge for the job you do.
In choosing a designation to pursue, ask yourself what kind of work you want to do, where you want to work, and if you want to work as an employee with a guaranteed salary or an entrepreneur where the sky (and the basement) is the limit. No matter which you choose, each of these financial designations will provide ample professional opportunities for those who spend the time and energy to earn them.
Scott Bishop, CPA, PFS, CFP®
Avidian Wealth Solutions, Houston, TX
With all the designations and acronyms in the financial services industry, it’s not surprising that you can be confused by these similar-sounding terms.
Becoming a CFP or CFA is difficult. Each has rigorous exams that need to be passed. Both also require continuing education to keep the designation.
CFPs mainly give advice to individuals, but some advise small business owners as well. CFPs also help with retirement planning, investing, and other financial planning.
On the other hand, CFAs give advice to various institutions, such as banks, mutual funds, pension funds, insurance companies, and securities firms. They focus on stocks and market analysis, helping companies and institutions make good investment decisions. CFAs also put together portfolio allocations for individuals.