Updated on 04.11.07

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

Trent Hamm

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.

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  1. Jeremy says:

    Think of a CFP as the financial planning equivalent of a CPA when it comes to accounting. You don’t have to be a CPA to be an accountant or help someone with their taxes, just like you don’t have to be a CPA to be a financial planner or advisor.

    In either instance the tests required to obtain the certification are very difficult to complete so someone who has earned the designation more than likely has quite a bit of knowledge in the respective field.

    Advisors are a dime a dozen and nearly anyone can call themselves a financial advisor. Get yourself a few NASD licenses and work for nearly any financial firm and you could be an advisor. Even people who are nothing more than stock brokers can call themselves that.

    If you work with an advisor who is a CFP, you can be assured you are working with someone who at least knows something about all aspects of personal finance as opposed to someone at your bank or another firm who only sells mutual funds and calls themselves an advisor.

    I used to be an “advisor” and began studying for the CFP but ended up getting out of the advisory business and now have no reason to gain the certification.

  2. Bob says:

    I agree with the previous commenter.

    Too say that 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” is a little generic. If a person has taken the courses and passed the exam then they know more than “some knowledge”. I’ve completed the courses. However, I have not taken the exam yet. The exam is about 10 hours and has a 60% pass rate. And from what I’ve heard the board keeps trying to make the exam harder to decrease the current pass rate.

    Yes, some bad (unethical/immoral) Financial Advisors “slip” through or “green” to the industry Financial Advisors have passed the requirements. Overall, the CFP designation is a good thing to look for, but not the only thing. If you combine the CFP certification, with references and then agree with their form of compensation (there is a big wave of fee based or ala carte financial planners, compared to commission based advisors); that should be a good start.

    PS – You refer to the Certified Financial Planner as a Certified Financial Advisor in Paragraph 4. This is an incorrect reference.

  3. The great thing about a CFP is that they have a broad range of knowledge about personal finance issues, not just about investing. You can see what a person has to do to become a CFP at

    My take, if you’re hiring a financial planner, get a good reference and make sure they are a CFP, ours is.

  4. rodgerlvu says:

    thanks. you are the most intelligent person i ever met…

  5. deRuiter says:

    If I HAD to find a CFP, I’d interview him / her! Is your home paid for in full? May I see a copy of your portfolio? Do you have credit card debt? Let’s see your credit card statements. Why are you a CFP? Let’s face it, if the CFPO is all that brilliant, what does he need with YOU and your piddly little account? (Not YOU personally, anyone reading this, what does he need with any “little people”? Too often he / she is some schlub who’s in debt up to his ears. Step back folks, and think of what the CDFP wants. He wants your money in comissions! DEAL ONLY WITH A FEE BASED PLANNER IF YOU FEEL YOU ARE TOO CLUELESS TO MANAGE YOUR OWN MONEY. On the other hand, you can get most of the knowledge you need by reading Trent’s blog for free! 1. Spend less than you save 2. Invest. 3. Prepay on your home loan the first half of the mortgage, if you’re not planning to move in five year or less 4. Diversify your investments 5. never stop looking to make /save, a few more dollars, 6. Don’t buy what you don’t need. Most CFPs are no better off financially than the rest of the wold unless they’re smooth salesmen who have convinced a lot of people to let them churn their accounts. FOLKS, YOU CAN DO IT ON YOUR OWN BETTER, FOR FREE, FEEL MORE SECURE THAT NO ONE IS LYING TO YOU TO GET A COMMISSION, AND PAY BY FEE FOR ANY BITS OF ADVICE YOU NEED LIKE A COMPLICATED TRUST.

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