What is a CFP® and What Do They Do?

Considering a career in finance?

If so, you might be weighing dozens of different 3-letter acronym certifications that could set you apart in an increasingly competitive job market—and, more importantly, help you find a career you truly love.

One lucrative and rewarding option is that of the Certified Financial Planner™ (CFP®). If providing financial advice to help people achieve their goals sounds good to you, you’re in the right place!

I’ll explore what a CFP® is, what they actually do, and how the CFP® certification compares to other finance credentials like the Certified Public Accountant (CPA) or Chartered Financial Analyst™ (CFA®).

Let’s dig in.

Key Takeaways

• CFP® Certification Expands Finance Career Opportunities: The CFP® designation equips you to provide in-depth financial planning services, adding value to many careers in finance.
• Holistic Financial Planning: A CFP® covers a wide range of financial topics, from investments to estate and tax planning, giving you a broader role in your clients’ financial lives.
• Fiduciary Duty Ensures Trust: CFPs® are held to a fiduciary standard, meaning they must act in the client’s best interest when providing financial advice.
• Growing Demand for CFPs®: As more individuals seek personalized financial advice, the demand for CFPs® is increasing, creating more career opportunities.
• CFP® and CFA® Serve Different Finance Roles: While a CFP® focuses on comprehensive financial planning for individuals, a CFA® specializes in investment analysis and portfolio management.

What Is a CFP®?

A Certified Financial Planner™ is a financial professional who helps clients with comprehensive financial planning, covering areas such as retirement planning, tax strategies, investment advice, and estate planning. What sets CFPs® apart from other financial advisors is that they’ve completed a rigorous certification process governed by the CFP Board. This includes completing specific education requirements, passing a challenging exam, gaining relevant experience, and adhering to strict ethical standards.

Why CFP® Certification Matters

Not all financial advisors offer advice on just one aspect of your financial life. In particular, CFPs® are known for their comprehensive financial planning approach. Their advice is grounded in a fiduciary duty, meaning they must act in the best interest of their clients. If you’re considering a career in finance, the CFP® designation not only gives you credibility but also ensures you’re trained to offer well-rounded advice, which could translate to a wider number of careers than some other certifications.

Here’s a quick rundown of what you need to become a CFP®:

1. A bachelor’s degree or higher from an accredited college or university.
2. Completion of CFP®-specific coursework requirements.
3. Passing the CFP® exam, which includes two three-hour sessions in a single day.
4. Meeting a professional experience requirement in financial planning.
5. An ethics declaration ensures you provide ethical financial planning advice.

If you’re interested in a role that lets you work closely with clients and provide personalized advice on a broad range of financial issues, the CFP® certification can help you build credibility and expertise.

What Does a Certified Financial Planner™ Do?

The role of a CFP® goes far beyond crunching numbers or handling taxes. If you’re considering adding this designation to your resume, you’ll be working directly with clients to create tailored financial plans that address every aspect of their entire financial life. This could include investment planning, preparing for retirement, managing taxes, and even risk management.

Financial Planning

At the core of what a CFP® does is financial planning. CFPs® work with clients to assess their finances, identify opportunities for improvement, and create personalized strategies for saving more money, investing, and reducing debt. This role requires compassion, thoughtfulness, strong relationship-building (and maintaining!) skills, the ability to analyze and problem-solve, and naturally, a strong understanding of personal finance.

You’ll be helping clients with:

• Retirement planning: How much they’ll need to retire and what investment strategies they should follow.
• Tax planning: Finding legal ways to reduce their tax liability, something your CPA training can help you master.
• Estate planning: Ensuring their assets are distributed according to their wishes in the most tax-efficient way possible.

Investment Advice and Portfolio Management

CFPs® provide advice on investment planning, guiding clients through creating diversified portfolios that align with their risk tolerance and financial goals. While financial analysts and portfolio managers often focus on managing large funds or institutional clients, CFPs® work more closely with individuals to develop personalized investment analysis.

If you enjoy the idea of combining your accounting knowledge with investment strategies, this part of the job will give you the opportunity to put that into practice. You’ll be responsible for portfolio management, ensuring that clients’ assets are working for them over the long term.

Comprehensive Financial Plans

Where other certifications, like the CPA (Certified Public Accountant), focus primarily on tax or compliance issues, CFPs® build a full financial picture that includes all areas of financial planning.

As a CFP®, you’ll develop financial plans that cover:

• Retirement planning
• Risk management and insurance
• Investment analysis and strategy
• Tax strategies

This holistic approach allows CFPs® to provide well-rounded advice that takes into account all aspects of a client’s financial life. If you’ve ever been interested in looking beyond just the numbers on a tax return and getting involved in long-term financial planning, this could be a great fit.

Fiduciary Duty

Unlike some other financial advisors, CFPs® are bound by a fiduciary duty. This means they must act in the best interests of their clients, putting the client’s needs ahead of their own when giving financial advice. Many financial professionals are not held to this standard, which gives the CFP® designation additional credibility.

For example, some financial planners may sell products on commission, creating potential conflicts of interest. However, as a CFP®, you are required to recommend strategies that benefit the client first and foremost. This aligns closely with the ethical standards you’re already familiar with in accounting.

How CFPs® and CPAs Work Together

If you’re already considering the CPA track, you might wonder how the CPA and CFP® certifications could complement each other. Where CPAs focus on tax compliance and accounting, CFPs® offer broader financial planning. Together, these certifications cover a client’s needs, from tax preparation to investment management and long-term financial planning.

For example, if you work with a client who needs retirement planning, your CPA skills could help them manage taxes efficiently. As a CFP®, you could also provide a holistic retirement strategy, including investment growth and estate planning.

Why Consider CFP® Certification?

Adding the CFP® designation to your credentials can open doors to a fulfilling and well-paid career. Here’s why CFP® certification might be a great fit:

• High Pay Potential: CFPs® often earn competitive salaries, with opportunities for high earnings as they gain experience and build client bases.
• High Job Satisfaction: Helping clients reach their financial goals brings a sense of fulfillment, with many CFPs® enjoying the variety and impact of their work.
• Ideal for Extroverts: Building long-term relationships with clients is a key part of the role, making it a great fit for those who enjoy connecting with people.
• Flexible Career Paths: CFPs® can work in diverse settings, including financial planning firms, wealth management, or as independent advisors.
• Growing Demand for Certified Financial Planners™: With increasing interest in personalized financial advice, the demand for CFPs® is on the rise.

Choosing the Right Certifications

Torn between a CFP® and other certifications? Here’s how they compare:

• CFP® (Certified Financial Planner™): Focuses on personal financial planning, investments, retirement, and tax strategies for individuals. Works closely with clients on comprehensive financial goals.
• CPA (Certified Public Accountant): Specializes in accounting, tax preparation, auditing, and financial reporting for individuals and businesses. Typically focused on compliance and tax-related tasks.
• CMA (Certified Management Accountant): Focuses on management accounting, financial analysis, and strategic decision-making within businesses. Primarily works in corporate finance roles.
• FRM (Financial Risk Manager): Specializes in risk management, particularly identifying and managing financial risks within organizations. Commonly found in banks, insurance companies, and investment firms.
• CFA® (Chartered Financial Analyst™): Specializes in investment analysis, portfolio management, and securities research. A CFA® typically works with institutional clients, asset management firms, or investment banking.
• ChFC (Chartered Financial Consultant): Similar to a CFP®, it includes a broader range of financial planning topics with a focus on advanced insurance and estate planning.

How to Become a CFP®

If you’re serious about becoming a CFP®, here’s what you’ll need to do:

1. Education: You’ll need a bachelor’s degree from an accredited university.
2. CFP® Coursework: Complete the necessary coursework requirements in financial planning topics.
3. Pass the CFP® Exam: The CFP® exam is a comprehensive test that covers everything from investment planning to tax planning. It consists of two three-hour sessions on various financial topics.
4. Professional Experience: You’ll need 6,000 hours of professional experience or 4,000 hours of a rigorous apprenticeship working in finance or related fields, such as accounting or tax planning.
5. Ethics Requirement: You’ll also need to sign an ethics declaration and pass a background check to meet the CFP Board’s ethical standards.

Conclusion

A CFP® designation provides the opportunity to broaden your finance career by working directly with clients on all aspects of their financial lives.

With the growing demand for personal financial planners, a CFP® certification can open doors to work in areas like retirement planning, tax strategies, investment advice, and more. By becoming a CFP®, you not only gain valuable knowledge and skills but also build credibility as a trusted advisor.

If you’re personable, trustworthy, intellectual, strategic, and thoughtful, becoming a CFP® could be the perfect career for you.

For those considering certification, numerous CFP® exam prep courses are available to help you successfully pass the exam. Don’t let its low pass rate intimidate you–with the right preparation, there’s no doubt in my mind that you can do this! Good luck!

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