Certified Financial Planner (CFP): Meaning, Certification Requirements
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A certified financial planner (CFP) is a financial advisor who holds one of the most rigorous certifications for financial planning knowledge. They must pass the CFP exam, have several years of experience related to financial planning and follow strict ethical standards set by the CFP Board of Standards.
One of those standards is among the most important if you're in the market for a financial advisor: the fiduciary standard. The CFP Board requires that advisors with the CFP designation are fiduciaries, which means they must act in their client's best interest and minimize or disclose conflicts of interest.
Not everyone needs help with their finances, but for those who do, having a CFP in your corner can be invaluable. If you aren't sure how to organize your finances, navigate investing or balance your financial priorities, a CFP can help.
What does a certified financial planner do?
CFPs can provide services across a broad range of financial planning concerns. They are required to demonstrate in-depth knowledge of risk management, investment, tax, retirement savings and income, and estate planning in order to obtain the CFP certification.
More specifically, CFPs who provide holistic planning can create and maintain a financial plan. Typically, that's based on your financial goals, current situation and appetite for risk. CFPs can also help with:
Planning for retirement.
Saving for short- and long-term goals.
Choosing investments.
Tackling debt.
Some CFPs specialize in certain areas, such as divorce, retirement planning or small-business ownership. Because of this, it’s helpful to have an idea of the services you need before you choose a CFP.
» Learn more: How to choose a financial advisor
How much does working with a CFP cost?
Financial advisors use various fee models. CFPs are typically fee-only advisors, which means they earn money directly from clients and not through commissions paid by investments or other products they recommend. Still, their fees and how those fees are charged may vary widely depending on the service they provide, your geographic area and other factors. An overview of typical CFP fees is below.
Fee type | Commonly associated with | Typical cost |
|---|---|---|
Assets under management (AUM) | Managing your portfolio of stocks, bonds and other investments. | 0.25% to 0.50% annually for a robo-advisor; about 1% for a financial advisor. |
Flat annual fee (retainer) | Special projects, such as analyzing whether to buy or sell your business. May also provide more access to the advisor. In some cases, advisors may substitute flat fees for AUM fees. | Typically $2,500 to $9,200. |
Hourly fee | Special projects, such as helping create a financial plan for a specific situation, such as a divorce. | $200 to $400. |
Per-plan fee | Creating a detailed, written comprehensive financial plan for a client. | Typically $3,000, but varies by service. |
To compile this information, we reviewed industry studies on average rates among financial advisors. Those studies included:
We also reviewed fees charged by providers reviewed by the NerdWallet investing team. | ||
If you're looking for a CFP, the CFP Board has a directory, which makes it easy to find an advisor in your area, check a CFP’s certification status and check for disciplinary actions.
» Check out more ways to search for a financial advisor locally
What's the difference between a CFP and other advisors?
The various designations financial advisors hold can cause some confusion. Some advisors even have multiple designations. Here are a few common designations financial advisors may have:
Chartered financial analyst: CFAs specialize in investment analysis and portfolio management. They often serve as financial advisors for corporations.
Certified public accountant: The CPA certification is common among tax preparers and accountants. If your financial advisor has a CPA, they may be able to help you optimize your tax situation.
Chartered financial consultant: ChFCs complete similar coursework to CFPs. ChFCs may have more training in modern financial planning topics, including behavioral finance, planning for same-sex couples and planning after a divorce. But CFPs have more stringent academic and examination requirements.
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