What Is a Certified Financial Planner (and Why Do I Need One)?

Article summary

• What is a CFP? A Certified Financial Planner (CFP) is a highly trained financial advisor who must pass a rigorous exam, complete at least two years of hands-on experience and meet ongoing education requirements. Unlike general financial advisors, CFPs are bound by a fiduciary duty—meaning they are legally obligated to act in your best interests at all times.
• Who can benefit? Anyone looking to improve their financial situation can benefit from working with a CFP—whether you're a young professional building a foundation, a family planning for education costs or a retiree managing long-term assets. CFPs offer personalized guidance across key areas, including retirement planning, tax strategy, estate planning and investment management.
• How the process works: A CFP starts by reviewing your current financial situation, assessing risks and helping you set clear, achievable goals. From there, they create a customized financial roadmap tailored to your unique needs. To find the right fit, consider meeting with a few CFPs to compare their areas of expertise before committing to one.

As you navigate your life’s financial landscape, you may come to a point where you feel like you could use some expert assistance. You might have a complex tax situation or significant debt. Perhaps you’ve recently come into an inheritance. Or maybe you just want to be sure you’ll be in the best shape possible when it’s time to retire.

Each of these scenarios can be fully explored and addressed with the help of a Certified Financial Planner (CFP), a financial advisor who has undergone extensive training and certification.

CFPs are professionals who can focus their efforts on long-term strategic plans, and because they’re required to put your interests first whenever they provide financial advice and financial planning services, they’re uniquely qualified to serve you.

If you want to learn more about whether a CFP might be a good fit for your situation, read on to see what skills they bring to the table, the ways they can assist you and how to pick the right one.

Understanding CFPs

Although a CFP is a financial advisor, not all financial advisors are CFPs. According to the CFP Board of Standards, CFPs are distinguished by meeting specific standards in education, experience and ethics. To obtain certification, they must successfully complete a multi-year, multi-step process, including:

• Pass an exam that tests their ability to apply financial planning knowledge to real-life situations.
• Prior to certification, they’re required to have accrued at least 2 years of experience providing financial planning services.
• Once certified, they’re obligated to meet continuing education requirements.

A CFP professional takes a comprehensive approach to your financial situation and offers services tailored to your needs. Depending on your financial and personal circumstances, you may have one or more specific areas of financial planning that can be focal points.

• Retirement planning – A CFP can help you reach a comfortable retirement by assessing your current financial situation and estimating future expenses, identifying income sources and creating a plan for saving.
• Tax planning – A CFP can help you reduce the amount of taxes you’ll need to pay by maintaining your position in a certain tax bracket.
• Estate planning – A CFP can help preserve, manage and distribute assets to your beneficiaries and may also help manage financial obligations.
• Risk management – A CFP can help protect your capital and earnings by identifying, assessing and controlling financial, legal and strategic risks.
• Investment management – A CFP can manage your financial assets (a process also known as portfolio management or wealth management) to build a portfolio of stocks, bonds and other investments based on your goals. 

Who needs a CFP?

As measured by the TIAA Institute-Global Financial Literacy Excellence Center’s Personal Finance Index, financial literacy in the U.S. has dropped to 47%, the lowest point in the index’s 10-year history.

Although that overall lack of financial acumen can be cause for concern, anyone can address their own shortcomings by enlisting a CFP. And no matter your stage of life, it’s likely a CFP can provide valuable assistance with your finances.

• Young professionals can learn to lay the foundations for a secure future.
• Families with children can take steps to allow for higher education.
• Retirees can manage their finances so they don’t outlive their assets.

Although someone with complex finances stands to gain a significant advantage when working with a financial professional, anyone looking to optimize their situation and achieve specific goals can benefit from the training and experience of a CFP. 

Why is a CFP important?

Just as no two individuals have the same financial goals, the approach taken to address your specific objectives needs to be unique. That’s why the personalized approach of a CFP can’t be beat.

You’ll get a professional review of your circumstances, including such things as retirement and bank account statements, and your objectives, whether they’re plans for your retirement or for your children’s education.

The code of ethics and standards that a CFP commits to following gives them what’s called fiduciary duty. As a fiduciary, they are obligated to put the interests of their clients (known as their beneficiaries) above their own, and they can even be sanctioned or lose their certification if they don’t.

In broad terms, fiduciary duty requires a CFP to:

• Fulfill all their duties without violating the law
• Keep their clients’ information private
• Fully divulge any potential conflicts that arise
• Disclose all information that could impact the beneficiary

When you work with a fiduciary, you can rest assured that they are acting in your best interests.

The financial planning process with a CFP

Just as there are myriad financial situations that lead people to seek the services of a CFP, some CFPs are better suited to focus their efforts on one particular need rather than another. One CFP might be better at dealing with financial student debt, for example, while another may be more able to help someone looking to maximize their charitable giving.

To find the right CFP for you, consider connecting with a few different ones. Meet with them to review your needs and evaluate their areas of expertise. Then select the one that’s the best fit.

Once you’ve chosen a CFP to assist you with your financial planning, you can expect them to do some or all of the following:

• Review your current situation – An audit of your savings, investments and other assets is the first step in an assessment of your financial health.
• Assess potential risks – A review of your insurance coverage and outstanding debts broadens the picture of your current financial situation.
• Help you set goals – Forming a clear plan of action puts you in control of your money and ensures it’s being used to achieve your objectives.
• Work to create your personal budget – Think of this as your customized roadmap to meeting your long-term goals.
• Assist with other financial activities – There are many facets to your financial identity. A CFP is trained to know how to make the different parts work together to your advantage.

Setting yourself up for success

The more you consider your financial landscape, the better you’ll understand the value of having a trained professional in your corner. That’s why getting in touch with a CFP—someone who’s committed to always working towards your best interests—is a logical step in securing your financial future. Their expertise could be the key to helping you reach your personal financial goals.