CFP®: What it means – Why it’s important

School of Financial Wellness

what is so special about a certified financial planner?

Join us for our next Meld University webinar, Defense Wins Retirement: Shifting Your Strategy from Growth to Income on August 25th from 3:00 – 4:30 PM CDT with speaker Kyle Whittington, CFP®.

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You’ve likely heard the phrase CERTIFIED FINANCIAL PLANNER™ as you’ve gotten serious about your financial planning. You may have also seen the CFP® acronym next to the names of the financial professionals you’ve encountered.

It sounds important — official, almost — but in the world of financial advice, what does it actually mean to be a Certified Financial Planner™? And why does it matter?

Let’s start with the basics.

What is a CFP®?

CERTIFIED FINANCIAL PLANNER (or CFP®, for short) is a designation awarded by the Certified Financial Planner Board of Standards that indicates an advisor has proficiency in the knowledge required to be a financial planner. To receive it is no easy feat. You need real-world work experience. You have to satisfy specific educational requirements, and you’ve got to pass a three-day test.

From a client perspective, the CFP® is an attractive designation because Certified Financial Planners are required to follow the fiduciary standard – which means they must act in the best interests of their clients — always.

What’s the history of the CFP® designation?

Financial regulators have always been concerned with the prospect of people abusing their profession. But in the days before the CFP® designation, the standards were a lot lower. Financial advisors were held to a so-called “suitability standard,” which basically meant they had to act in a way that was suitable for their customers.

That standard left much to be desired. So, in the early 1970s, a group of financial professionals started putting together what would eventually become the Certified Financial Planner Board of Standards, which was officially established in 1985.

The main focus of this new class of financial professional was around education and ethics. The new structure was based on the idea that a more educated advisor, bound to act in the best interests of his or her clients, would be a better advisor for their clients.

What does it take to become a CFP®?

As we mentioned, the process is rigorous. First, there are certain education requirements these professionals must meet to be eligible for CFP® status. You need a bachelor’s degree or higher from an accredited college or university. And, you need to have completed certain coursework in financial planning or hold some other financial designation, like a CFA or a CPA. That’s your foundation.

Then you need actual “in-the-field” experience — three years, to be exact, or two years of apprenticeship.

Finally, there’s the written test, comprised of 6 hours of testing, all in a single day. It covers everything from establishing client-planner relationships to analysis, communication, and developing and monitoring recommendations.

The sum of these requirements is the bare minimum just to attain the CFP® designation. Going forward, CERTIFIED FINANCIAL PLANNERS are required to complete continuing education programs every year to maintain their status.

What about the ethical requirements for CERTIFIED FINANCIAL PLANNERS?

CFP® applicants must submit to background checks and are required to disclose information related to any criminal activity or conflicts of interest. The CFP Board also sets standards of professional conduct that CERTIFIED FINANCIAL PLANNERS must adhere to if they want to maintain their designation. They include a focus on integrity, objective advice, competence, fair treatment, privacy, professionalism and diligence.

Those standards got a substantial upgrade in 2018 that includes the expansion of the fiduciary standard all CFPs® are held to because, as the CFP Board puts it on their website: “Knowing what to expect from a financial planning relationship puts you in the driver’s seat — which is exactly where you belong.”

Are all financial advisors CFPs®?

In a word, no.That means not all financial advisors are held to the same standards. And consider this: According to a survey conducted by the CFP Board, 87 percent of clients who hire Certified Financial Planners™ report being very satisfied, compared to only 72 percent of those who hire financial advisors who are not CFP®-certified. At Meld Financial, we utilize a team of CFPs to meet your needs. We also provide our School of Financial Wellness as a part of Meld University, which is our commitment to educating the public on financial issues, free of charge.

In the complex world of financial planning and wealth management, the first step is understanding your options when it comes to a financial advisor. Then you can make the best possible decision for you and your financial needs.

Contact us to schedule an appointment and learn more about how a CFP® can help you reach your financial goals.

Why Meld Financial?

Meld Financial, Inc. is an independent wealth management firm located in Birmingham, AL.

We specialize in financial planning, investment management, employee benefits and executive benefits for individuals, families, trusts, foundations and institutions.

We provide independent and objective services melded with customer-driven financial goals.

Mark McGarvey - President - Meld Financial

“We will always recommend the same course of action we would choose for ourselves, given the same circumstances.”

-Mark McGarvey, President