What Exactly Is A Certified Financial Planner, And Why Should I Care?

Recently, I read Suze Orman’s The 9 Steps to Financial Freedom. At several points during the book, Suze refers to herself as a “Certified Financial Planner” several times, with the words in capitalized format. At the time, I somewhat brushed this off and kept plowing through her advice, but I kept wondering what exactly is a “Certified Financial Planner”?

So what is it? Basically, a “Certified Financial Planner” is an individual who has been certified by a group called the Certified Financial Planner Board of Standards Inc. The certification process involves going through an educational program (offered through various universities), pass an examination, work for a period of time in the financial planning process, and pay a certification fee. In other words, it’s a similar process to the certifications found in other industries.

Great, but what good is it? In general, a person that is a “Certified Financial Planner” has at least gone through some form of training and passed an exam that indicates at least some knowledge of basic personal finance issues. Obviously, a financial planner who has managed to get certified will want to use this credential as part of their advertising.

The real question is whether or not a financial advisor is more valuable if they are a “Certified Financial Advisor.” The simple answer is “to a degree.” If you’re looking for professional financial planning, a reputation as a “Certified Financial Planner” is certainly a positive, but as with any field, some lemons do make it through the certification process.

In short, a “Certified Financial Planner” is just a financial planner with a certification; the presence of this certification should be just one criteria in the process of choosing a financial planner. If you’re interested in hiring a financial planner, this certification is worth noting, but there are many other vital factors to look at including references, personal recommendations, and your feelings after asking some careful questions. If a “Certified Financial Planner” raises red flags for you but a non-certified planner does not, the certification isn’t worth the difference.

As for the ins and outs of whether to choose a financial planner at all, that’s an entirely different story. Financial planners are usually useful for individuals with a significant income who have difficulty organizing that income. Plus, you can usually rely on the advice of a financial planner, whereas reading sites like The Simple Dollar are more for entertainment purposes and jumping-off points rather than serious financial advice. They tend to be expensive, but they often can help you get your finances in order.

As for me, I’m not a financial planner, though the thought has crossed my mind recently.

Trent Hamm

Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.