Certified Financial Planner (CFP): What It Is, How To Become One

What Is a Certified Financial Planner (CFP)?

Certified Financial Planner (CFP) is a formal recognition of expertise in the areas of financial planning, taxes, insurance, estate planning, and retirement (such as with 401(k)s).

Owned and awarded by the Certified Financial Planner Board of Standards, Inc., the designation is awarded to individuals who successfully complete the CFP Board's initial exams, then continue ongoing annual education programs to sustain their skills and certification.

Key Takeaways

  • A certified financial planner (CFP) is an individual who has received a formal designation from the Certified Financial Planner Board of Standards, Inc.
  • CFPs help individuals in a variety of areas in managing their finances, such as retirement, investing, education, insurance, and taxes.
  • Becoming a CFP is one of the most difficult and stringent processes in terms of financial advisors. It requires years of experience, successful completion of standardized exams, a demonstration of ethics, and a formal education.
  • The most important aspect of a CFP is that they have a fiduciary duty, meaning they must make decisions with their client's best interests in mind.

Understanding a Certified Financial Planner (CFP)

CFPs are there to help individuals with managing their finances. This can include a variety of needs, such as investment planning, retirement planning, insurance, education, and so on. The most important aspect of a CFP is to be a fiduciary of your assets, meaning that they will make decisions with your best interests in mind.

CFPs are all-encompassing, particularly when compared to investment advisors. CFPs usually start the process by evaluating your current finances, including any cash, assets, investments, or properties, to come up with an idea of your net worth. They also take a look at your liabilities, such as mortgages or student debt.

From this point on they work with you and your needs to come up with a financial plan. For example, say you are nearing retirement, they will create a financial plan that can see you through your retirement years. Or perhaps you have a child that will be starting college; they can help create a financial plan to manage that cost.

A CFP is a type of financial advisor, but one that comes with a certified designation that demonstrates an in-depth knowledge of financial planning. You can think of a CFP as an elevated financial advisor. In fact, the requirements to become a CFP are some of the most difficult and stringent in the industry.

CFP and Fiduciary Duty

All CFPs are held to the standard of fiduciary duty, which means that they must always put your interests as a client ahead of their own. For example, if they made more money selling one product versus another, but the product that made them less money was better for you, that is the product they should recommend.

A CFP's fiduciary duty is clearly laid out by the CFP Board and states "At all times when providing financial advice to a client, a CFP professional must act as a fiduciary, and therefore, act in the best interest of the client." The Board goes on to state that three duties must be filled in relation to fiduciary duty. These are (1) duty of loyalty, (2) duty of care, and (3) duty to follow client instructions.

How to Become a Certified Financial Planner (CFP)

Earning the CFP designation involves meeting requirements in four areas: formal education, performance on the CFP exam, relevant work experience, and demonstrated professional ethics.

The education requirements comprise two major components. The candidate must verify that they hold a bachelor's or higher degree from an accredited university or college recognized by the U.S. Department of Education. Second, they must complete a list of specific courses in financial planning, as specified by the CFP Board.

Much of this second requirement is typically waived if the candidate holds certain accepted financial designations, such as a chartered financial analyst (CFA) or certified public accountant (CPA) designation, or has a higher degree in business, such as a master of business administration (MBA).

As for professional experience, candidates must prove they have at least three years (or 6,000 hours) of full-time professional experience in the industry, or two years (4,000 hours) in an apprenticeship role, which is then subject to further individualized requirements.

Lastly, candidates and CFP holders must adhere to the CFP Board's standards of professional conduct. They must also regularly disclose information about their involvement in a variety of areas, such as criminal activity, inquiries by government agencies, bankruptcies, customer complaints, or terminations by employers. The CFP Board also conducts an extensive background check on all candidates before granting the certification.

Even successful completion of the above steps doesn't guarantee receipt of the CFP designation. The CFP Board has final discretion on whether or not to award the designation to an individual.

The Certified Financial Planner (CFP) Exam

The CFP exam comprises 170 multiple-choice questions that encompass more than 100 topics related to financial planning. The scope includes professional conduct and regulations, financial planning principles, education planning, risk management, insurance, investments, tax planning, retirement planning, and estate planning.

The various topic areas are weighted, and the most recent weighting is available on the CFP Board website. Further questions test the candidate's expertise in establishing client-planner relationships and gathering relevant information, and their ability to analyze, develop, communicate, implement, and monitor the recommendations they make to their clients.

Here's some additional information on the administration, costs, and scoring of the CFP exam.

  • Timing: Candidates sit for two three-hour sessions on a single day; a 40-minute break period separates the sessions. Exams are typically offered in three different eight-day windows: March, July, and November.
  • Cost: $925 for an exam administered at a U.S. test site, with a discount for early applications and a surcharge for late ones.
  • Passing Score: This is criterion-referenced, which means performance is measured according to a set level of required competency, rather than against the scores of other individuals who have written the same exam. This prevents any advantages or disadvantages that can occur when past exams were of lower or higher difficulty.
  • Retaking the test: If you fail, you may retake the test up to four additional times over your lifetime.


Though a certified financial planner (CPA) and a chartered financial analyst (CFA) may sound similar, they are different certifications with different job functions and clients. A CFP works with individuals, often retail clients, helping them achieve their financial goals. This includes help in investing and retirement planning.

A CFA works with corporations performing investment analysis. CFAs focus on financial reporting, analysis, and portfolio management. They can trade financial products, such as derivatives, and help in mergers and acquisitions. CFA's usually work for investment banks and hedge funds.

When Do You Need a CFP?

A CFP is a financial advisor and when you might need one will depend on your financial goals as well as your familiarity with financial products and tax law. If you are simply looking to invest money in stocks and bonds, a CFP may not be needed. On the other hand, if you are looking to manage large-scale finances, investment choices, estate planning, and retirement planning, a CFP might be helpful in managing all of your needs. A CFP is a step above a non-designated financial advisor, which indicates their expertise in financial planning.

How Much Does a CFP Cost?

How much a CFP costs will depend on your specific needs. On average, a CFP charges between $1,800 and $2,500 for a full financial plan. They also charge $4,000 for a flat-fee retainer or $250 for hourly services.

Is CFP the Same as CFA?

No, CFP and CFA are not the same. A CFP is a certified financial planner that provides financial planning advice to individuals. This includes help with investing, retirement planning, estate planning, and tax law. A CFA is a chartered financial analyst who works for investment banks or hedge funds and performs financial analysis, modeling, trading, and portfolio management services.

Is CFP Equivalent to MBA?

No, a CFP is not equivalent to an MBA. A CFP focuses on financial planning for individuals. An MBA, on the other hand, is much larger in scope and focuses on the variety of ways in which businesses work. As such, the career paths for each designation differ. A CFP is a financial planner or advisor who works in financial consulting or wealth management. An MBA graduate has a variety of options, such as a business manager, portfolio manager, financial analyst, financial strategist, and even entrepreneur.

Is the CFP Exam Hard?

The CFP exam is not an easy exam. The exam requires a lot of preparation and covers a wide range of topics that the exam taker must be very familiar with. The best way to ensure you pass the CFP exam is by preparing for it well in advance and creating a study schedule.

The Bottom Line

Becoming a CFP takes a great deal of education and experience, as well as a strong grasp of financial ethics. The test to gain this distinction is comprised of 170 questions and is split into two three-hour sessions.

Even if candidates pass the test and meet all the requirements, the CFP Board still has the final say about whether or not to award this distinction. Due to these incredibly stringent requirements, CFPs have a very in-depth understanding of financial planning.

Article Sources
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  1. Certified Financial Planner Board of Standards. "The Standard of Excellence."

  2. Certified Financial Planner Board of Standards. "Code of Ethics and Standards of Conduct."

  3. Certified Financial Planner Board of Standards. "The Education Requirement."

  4. Certified Financial Planner Board of Standards. "The Experience Requirement."

  5. Certified Financial Planner Board of Standards. "The Ethics Requirement."

  6. Certified Financial Planner Board of Standards. "Disciplinary Rules and Procedures."

  7. Certified Financial Planner Board of Standards. "About the Exam."

  8. Certified Financial Planner Board of Standards. "Exam Format."

  9. Certified Financial Planner Board of Standards. "Upcoming Exam Dates & Registration Process."

  10. Certified Financial Planner Board of Standards. "Rescheduling & Cancellation Policies."

  11. Kitces. "Financial Advisor Fee Trends and the Fee Compression Mirage."

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