Why Should Your Financial Advisor Be a CFP?

If you're looking for a financial advisor, you might come across someone with the initials CFP next to their name. CFP stands for certified financial planner and denotes that someone has passed the CFP exam and so met the CFP board's requirements.

The CFP designation stands out among the more than 100 qualifications accessible to financial professionals. The fiduciary—or trustworthiness—aspect is one of the CFP's most important requirements. This requires every CFP to prioritize their clients' demands before their own.

Most financial professionals are not required to do so, making the CFP and its board of directors a significant and unique body in protecting consumer interests.

What is the CFP Board?

The CFP board is in charge of distinguishing who can be certified to be a financial planner. Its board of directors has the right to remove the CFP designation from anyone who has attained it.

“Once you have passed the CFP exam, the CFP board continues to monitor advisors,” said Melissa Sotudeh, CFP and the director of advisory services at Halpern Financial. “Although it is not a regulatory body and cannot impose fines or legal penalties, advisors who violate the CFP Board code of ethics will have their CFP designation removed and be kicked out of the organization.” When you have a profession that’s responsible for managing millions of dollars worth of investments, you need to have a responsible authority making sure people don’t abuse their power.

Important: The CFP designation protects the consumer from predatory financial advisors looking to make a quick buck.

History of the CFP Board

The CFP board currently has 17 members, financial professionals from across the country. The CFP is a relatively new profession; the board first created the idea of the CFP in the 1970s although financial planning had been around since the end of World War II. The CFP board was first started in 1985 to certify new planners and ensure there would be a fair, separate organization overseeing the profession.

The Importance of the CFP Designation

Unlike some certificates that are worth little more than the paper they’re printed on, the CFP designation is one of the most prestigious financial certificates around.

“The CFP designation offered by the CFP board is one that is actually significant because it requires so much preliminary work," said Sotudeh. "It usually takes from nine months to two years of study.”  

Some requirements of the CFP include having a bachelor’s degree and taking courses about the roughly 75 various topics that the CFP exam covers. The exam takes six hours to complete and has 170 questions.  

The exam is only offered three times a year, and it’s important for first-timers to get it right—statistically, the pass rate continues to go down for repeat takers. You’re also required to have worked in the financial industry before you’re eligible to receive the CFP license. There are other ethical requirements you must uphold and those who already hold the certificate must go through continual education requirements.

The Bottom Line

Whether you’re looking to get your CFP license or are just in the market for a financial planner, don’t skimp on the CFP designation. Those three letters show that someone is qualified in financial and investment planning, and that they provide an honest fiduciary benefit to their clients. Not everyone who calls themselves a financial advisor can say that. You can also make sure to hire a fee-only CFP who won't be paid based on how many transactions you do.

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