CFA vs. CFP: What’s the Difference?

What Is a CFA?

Think of a CFA as an investment specialist. This type of financial advisor focuses on investment analysis and helps clients by managing and growing their portfolios. You can expect them to dig into the nitty-gritty details, including the more technical aspects of managing a large portfolio.

CFAs generally work for financial institutions like banks or serve at the helm of hedge funds. But individual investors can also work with a CFA, as many serve as private wealth managers for high-net-worth folks. Wealth managers can also provide tax guidance and estate planning services.

CFA Requirements

The CFA charter is issued by the CFA Institute. To receive this designation, a financial advisor must:

• Enroll in the CFA Program and pass three CFA exams.
• Complete at least 4,000 hours of qualified work experience over a 36-month period (or longer).
• Submit professional references and become a member of the CFA Institute.

What Is a CFP?

A CFP is a financial advisor who has earned a special designation from the CFP Board. They can provide individuals and small businesses with financial education and advice that's tailored to their unique needs. That may revolve around:

• Investing
• Budgeting and saving
• Debt repayment
• Retirement planning
• Estate planning
• Tax planning

CFP Requirements

To become a CFP, a financial advisor must:

• Complete financial planning coursework.
• Pass the CFP exam and earn a bachelor's degree within five years.
• Complete 6,000 hours of professional financial planning experience (or 4,000 hours of an apprenticeship).
• Promise to act in their clients' best interests.
• Adhere to the CFP Board's code of ethics and conduct.

CFA vs. CFP

CFAs and CFPs are both financial advisors, but their specialty areas are a little different. CFAs typically zero in on portfolio management and growth, which includes in-depth investment analysis. They tend to work for financial institutions and high-net-worth investors. CFPs offer a broader range of financial guidance that goes beyond just investing. They often serve individuals, families and small businesses.

Both CFPs and CFAs are held to high ethical standards and are expected to serve as fiduciaries. That means they're obligated to act in their clients' best interests. But pricing can vary depending on the financial professional, the level of guidance you need and the amount of assets you have under management.

CFAs and CFPs may charge a fee based on how much money they're managing in your portfolio. This usually ranges from 1% to 2%. If you're a high-net-worth individual, that could work out to a hefty fee—but it may be worth it if you ultimately earn higher returns. Other financial advisors charge an hourly fee, typically $200 to $400, or a flat retainer fee of several thousand dollars.

Should You Work With a CFA or a CFP?

The right option for you will depend on your unique financial needs. Consider the following if you're torn between a CFA vs. CFP.

When to Consider Working With a CFA

A CFA might be the best choice if:

• You have a large investment portfolio. If you're a high net worth individual, you may want professional portfolio management. The right CFA can analyze your holdings and may even suggest alternative investments like private equity, real estate or peer-to-peer lending.
• You want to maximize returns and manage risk strategically. You may not be keen on taking a do-it-yourself approach to investing—especially if you have a large portfolio. A CFA can evaluate your financial goals and risk tolerance, then suggest an asset allocation that's in line with that vision.

When to Consider Working With a CFP

You might feel more comfortable working alongside a CFP if:

• You want a complete financial roadmap. While CFAs can provide expert investing advice, their insights may stop there. A CFP can offer more comprehensive financial planning, which can help you reach your short- and long-term goals.
• You need help with retirement planning. Preparing for retirement is a long game that requires strategic investing and tax planning. The goal is to set an accurate savings target, then build your nest egg in the most tax-efficient way possible. A CFP can be a helpful resource here.

The Bottom Line

CFAs and CFPs are two different types of financial advisors. Either one can be helpful, though you can expect more thorough financial planning advice from a CFP. But if you're a high-net-worth investor with a complex portfolio, you might consider working with a CFA. Either way, you'll want to do your research to find a financial advisor who understands your goals and is compatible with your budget.