What Is a Certified Financial Planner?

A man wearing a black button-up shirt is showing his female client a tablet at his office.

A certified financial planner (CFP) is a financial professional who has met the CFP board's requirements for certification and passed the CFP exam. Keeping the certification also requires completing continuing education requirements and abiding by the organization's code of ethics and standards.

Here's what to know about certified financial planners and whether hiring one may be a good move for you.

What Is a CFP?

Financial planner and financial advisor are general terms for someone who offers financial advice. However, anyone can give themselves a fancy-sounding finance title.

Many financial planners and advisors earn and maintain certifications to help stay up to date with best practices, and to show clients that they truly have expertise in financial planning. The certified financial planner certification is one well-known and trusted option.

To become and remain a certified financial planner, a person must:

  • Meet the education requirements. Certified financial planners must have a bachelor's degree or higher, or be on the path to receive the degree within five years of passing the CFP exam. They must also complete financial planning coursework or have a relevant advanced degree or other professional certifications.
  • Pass the CFP exam. A person can sit for the CFP exam after completing the educational requirements. The exam covers different aspects of financial planning, such as professional conduct, risk management, investment planning, and retirement savings and income planning.
  • Have relevant experience. Advisors also must have at least 6,000 hours of experience related to financial planning to receive the CFP certification, or 4,000 hours of experience if they're working as an apprentice and meet certain qualifications.
  • Abide by the code of ethics. All CFP professionals must abide by the CFP's code of ethics and standards of conduct and agree to a background check to receive and maintain their credentials. For example, CFP professionals have a fiduciary duty to act in their client's best interests.
  • Continue their education. To maintain a CFP credential, certified financial planners must complete 30 hours of CFP board-approved continuing education every two years.

Financial planners may earn additional or alternative credentials as well, such as chartered financial analyst, chartered financial consultant, chartered life underwriter and retirement income certified professional. These can also help you understand the person's expertise.

The Financial Industry Regulatory Authority has a database of finance-related professional designations you can review, along with overviews of the requirements and whether you can verify a person's credential online.

When You May Want to Hire a CFP

You might want to work with a financial planner for various reasons, and financial planners may specialize in a specific type of client or area of financial planning.

For example, you might want to meet with a financial planner to review your finances and create an investment plan. This could be a one-time project or an ongoing arrangement where the planner manages your investments on your behalf. Or, you might turn to a professional to assist with estate planning, managing an inheritance or preparing for a major life event such as marriage, divorce or starting a family.

All financial planners aren't a good fit for every situation, however. After all, you wouldn't necessarily want to hire someone who primarily helps young tech employees understand their stock options if you're near the end of your career and have questions about managing your retirement income. When researching and interviewing financial planners, look for someone who has experience in the areas relevant to your financial needs.

How Much Does a CFP Cost?

CFP professionals' fees may vary depending on their specialty, experience and the type of work. Fees may also be charged in different ways depending on the CFP.

The 2020 Kitces Research Financial Planning Process Study found the median cost for different commonly used fee arrangements based on responses from 800 financial advisors, including CFP and non-CFP advisors.

  • Based on assets under management: 1% to 1.25%. Financial planners may charge a fee based on how much money they're managing for a client. The assets under management (AUM) fee is often a percentage of the managed amount, charged annually.
  • Flat-fee retainer: $4,000. Rather than using an AUM model, you may be able to pay a flat monthly, quarterly or annual fee to work with a financial planner. The median annual retainer fee was $4,000.
  • Hourly rate: $250. Working with a CFP who charges hourly may be a good option if you have one-off questions or a small project.
  • Financial plan project fee: $1,800 or $2,500. Financial planners may offer comprehensive financial plans as a one-time project. Some charge an hourly rate (the $1,800 median cost), while others have a flat fee (the $2,500 median cost).

In general, CFPs may charge more for their services than non-CFP advisors.

Additionally, you may want to consider how the planner makes money. Fee-only financial planners make money from charging clients fees, while commission-based planners make money when their clients sign up for or invest in particular products or assets. Planners may also have a hybrid model and make money from fees and commissions.

Some people prefer to work with fee-only planners to avoid the potential conflict of interest that can arise when planners get paid for their recommendations. Others may prefer commission-based planners who don't charge as much.

In either case, you can ask the planner if they have a fiduciary duty or responsibility. As a fiduciary, the planner has an obligation to put their clients' best interest first, even if that means turning down a commission.

The CFP standard of conduct requires all CFP professionals to act as fiduciaries. However, CFPs don't need to be fee-only planners.

You Can Also Look for Free and Low-Cost Financial Advice

If hiring a CFP isn't in your budget, you can look for other ways to get free or low-cost financial advice. For example, some nonprofits partner with CFPs to offer free financial planning to underserved clients. Or, if you're focused on paying off debt or managing your budget, you may be able to get free or low-cost support from a certified credit counselor.

Additionally, there are many free educational resources that you can use to learn about different aspects of financial planning, and tools that can help you review and track your finances. Credit is also an important part of personal finance: You can sign up for a free Experian credit report and credit score to see where your credit stands.

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