certified financial planner™

How Can a Certified Financial Planner™ Help Me?

Quick Read:

  • A Certified Financial Planner™ has completed the rigorous process of the two part educational requirement, a thousand plus hours of work experience, and passing the CFP® exam.

  • Certified Financial Planners often follow the 8 principle knowledge topics to create financial plans

  • A Certified Financial Planner™ has a fiduciary duty to work in your best interest and follow strict ethical & code of standards.

  • There are approximately 96,000 Certified Financial Planner™ professionals in the U.S. (July 2023)

What is a Certified Financial Planner™?

Hiring a financial advisor can be life changing. Working with a Certified Financial Planner™ ensures your financial plan is designed with your best interest in mind. While some industries have rigorous requirements before allowing members to hold themselves out to the public as an expert, such as accountants (CPA) and physicians (MD), financial advisors have no such obligation.

To use the term financial advisor, no experience or educational requirement is needed. Any company can use the term to describe their employees and any industry can adopt the term to help promote their services.

The Certified Financial Planner™ designation helps potential clients understand which financial advisors have taken and passed the additional education, tenure, and ethics requirements. With a quick glance, it helps the general public understand the minimum qualifications a financial advisor possesses.

What Does it Take To Become A Certified Financial Planner™?

Pursuing the Certified Financial Planner™ designation requires a significant commitment broken down into an educational component followed by a comprehensive exam. The CFP® Board has a two part educational requirement which requires a Bachelor’s degree and completing a CFP® Board approved coursework program. The CFP® coursework program can be a standalone course or tied into a Masters or Ph.D. level program.

Coursework Program

There are eight principle knowledge topics set by the CFP® Board. These eight knowledge topics are broken down further into 70 subtopics. These areas comprise the majority of planning objectives encountered by individuals and families.

The coursework requirement is finished off with a capstone course where an actual financial plan is created and presented.

8 Principle Topics

  • Professional Conduct & Regulation
  • Principles of Financial Planning
  • Risk & Insurance Planning
  • Investment Planning
  • Tax Planning
  • Retirement and Income Planning
  • Estate Planning
  • Psychology of Financial Planning

8 Principle Knowledge Topics

The educational requirement is directly correlated to financial issues individuals and families encounter.

Once the coursework requirement is completed, a financial advisor can sit for the exam. The CFP® exam consists of 170 questions spread out over two 3-hour sessions, all completed in the same day. The style of questions is challenging with a mixture of multiple choice, short scenario, and case study questions. As of 2019, the average pass rate for first time test takers was around 67%.


Work Experience Requirement

Completing the two-part education requirement and passing the exam is a major achievement. However there is one more hurdle to clear, the work experience requirement.

The CFP® Board requires 6,000 hours of work experience dedicated to the development or delivery of financial plans. While personal finances are often associated with numbers and spreadsheets, practical experience working with individuals and families is required before officially holding yourself out to the public as a Certified Financial Planner™.

Ongoing Compliance and Regulation

Just as life brings changes, so do rules and regulations that impact the financial planning industry. The CFP® designation is not a lifetime appointment. On a bi-annual basis, Certified Financial Planner™ professionals need to complete continuing education requirements as well as attest to a background questionnaire.

Any industry-related issues such as client complaints or criminal activity must be disclosed along with personal issues that may affect the ability to provide financial advice, such as bankruptcy.

The depth the CFP® Board will go to protect the reputation and standard of the Certified Financial Planner™ designation is admirable yet required to let the public know who they are working with.

What can I expect working with a certified financial planner™?

With the comfort level of knowing a Certified Financial Planner™ has been thoroughly tested, the designation sets a standard of service potential clients can count on. A common glide path working with a Certified Financial Planner™ includes gathering your data, presenting your plan, and follow up meetings.


Data Gathering

First, a Certified Financial Planner™ will examine your entire financial picture before providing advice. To understand your situation, data gathering worksheets are often provided to submit paystubs, tax returns, investment statements, insurance policies, and any other relevant data.

A Certified Financial Planner™ will also discuss your personal goals and objectives. Questions such as what motivates you, your relationship with money, and your previous investment experience are all foundational questions.

While simple in nature, the concept of measuring twice and cut once is a defining feature of a Certified Financial Planner™. Time is taken to make sure the right advice is provided based on all information available, both financial and personal. Having a full understanding ensures your financial plan will be personal and relevant.


Financial Plan Delivery

The collected data is compiled into a comprehensive financial plan. The financial plan often mirrors the 8 principle knowledge topics. Detailed reports are generated with recommendations on how to move forward. These reports are geared towards understanding where you stand today and what it takes to get to where you want to go.

Ongoing Meetings

Once your financial plan is delivered, your relationship with a Certified Financial Planner™ transitions to a set review process. As your circumstances and financial data evolve, so does your plan. Often a Certified Financial Planner™ will set monthly, quarterly, or semi-annual review meetings to make sure your plan is up to date.

how is a certified financial planner™ different than other financial advisors?

A Certified Financial Planner™ has the obligation to follow a code of ethics and standard of conduct which outlines the level of care and competency they must abide by. While each financial advisor can differ in the services they offer, the Certified Financial Planner™ designation helps alleviate the concern your financial advisor is not working with your best interest in mind. The code of ethics contains six parts:

Code of Ethics

  • Act with honesty, integrity, competence 
and dilligence
  • Act in the clients best interest
  • Exercise due care
  • Avoid or disclose and manage conflicts of interest
  • Maintain the confidentially and protect 
the privacy of client information
  • Act in a manner that reflects positively 
on the financial planning profession 
and CFP® certification.

Code of Ethics

Protects the public and creates a standard in delivering financial advice to clients.

Fiduciary Oath

Alongside the code of ethics, the standard of conduct regulation is broken down into six parts. The first part, Duties Owed to Clients, contains the fiduciary duty which is a defining feature of financial advisors. The assumption that financial advisors will always provide advice in your best interest is unfortunately more wishful thinking than a rule.

The term “fiduciary” means a financial advisor will put a client’s best interest ahead of their own. In practice, the fiduciary standard may require a financial advisor to refer a client to another professional if there is a better fit. Interestingly, a fiduciary duty does not mean a Certified Financial Planner™ cannot sell products or work on commission. These transactions are allowed, however any product must be vetted to ensure it is the best option for a client.

At Derive Wealth, we take the fiduciary oath a step further with the decision to not sell any products. We believe selling products is a conflict of interest as commissions are involved. Instead, we partner with outside professionals to provide access to products when needed.

When Is A Certified Financial Planner™ Not A Good Fit?

A Certified Financial Planner™ is often not a good fit when the sole purpose is to purchase a product. For example, if the only need is life insurance or homeowners insurance, it may be cost-prohibitive to work with a Certified Financial Planner™. In these cases, going direct traditionally makes more sense.

Along those lines, a Certified Financial Planner™ traditionally works on an ongoing basis. If the need is simple in nature and does require additional monitoring, alternative options may make more sense.

The Best of Both Worlds: Certified Financial Planner™ and Flat Fee

At Derive Wealth, our singular goal is to design financial plans allowing clients to make smarter financial decisions. We remove conflicts of interests by not selling any products and engaging on a transparent, flat fee relationship. We feel our model has the best of both worlds: seasoned financial advice for one fixed fee.

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