William Bevins CFP® and fiduciary advisor Franklin TN. William offers fee-only financial planning and wealth management help to individuals and small businesses. William only accepts compensation from his clients, providing them with unbiased financial recommendations in the areas of financial planning, retirement planning, and wealth management.

Understanding the Certified Financial Planner (CFP®) Designation: A Comprehensive Guide

When it comes to planning your financial future, finding the right professional to guide you can be an overwhelming process. Among the many acronyms you'll come across in this field, CFP®, or Certified Financial Planner, is a standout and offers the assurance of a high standard of expertise and ethics. This article aims to explain what the CFP® designation entails, the process to achieve it, and its unique advantages.

The CFP® Designation

The Certified Financial Planner (CFP®) designation is a professional certification mark for financial planners, conferred by the Certified Financial Planner Board of Standards (CFP Board) in the United States. A CFP® professional possesses expertise in all areas of financial planning, including retirement planning, taxes, insurance, estate planning, and investment management. This designation stands out as a symbol of professionalism and credibility within the financial planning industry.

Obtaining the CFP® Designation

Obtaining the CFP® certification is not an easy task—it requires substantial education, work experience, and commitment. Firstly, candidates must hold a bachelor's degree from an accredited college or university.

Secondly, they must complete a CFP Board-approved financial planning coursework program. This coursework covers a broad spectrum of financial planning topics, including insurance, investment planning, estate and retirement planning, professional conduct, and fiduciary responsibility.

On the work experience front, candidates must have at least three years (or 6,000 hours) of full-time practical experience related to financial planning, or two years (4,000 hours) of apprenticeship experience that meets additional requirements.

Once the education and experience criteria are met, candidates must pass the CFP® Certification Examination, a comprehensive and challenging test that assesses their ability to apply financial planning knowledge in an integrated format.

Lastly, candidates must agree to adhere to the CFP Board’s Code of Ethics and Standards of Conduct, which emphasize obligations to work in the client’s best interest. They must also disclose any investigations or legal proceedings related to their professional or personal conduct.

Passing The CFP® Exam

The Certified Financial Planner (CFP®) examination is known for being a highly challenging test. The comprehensive nature of the exam, along with the depth and breadth of knowledge it covers, make it a hurdle even for those with substantial experience and education in financial planning. It's an exam that tests not only your knowledge of financial planning concepts but also your ability to apply and integrate this knowledge to provide holistic financial planning solutions.

As per the CFP Board, the pass rate for the exam has hovered around 60-65% in recent years. This means that around one-third to two-fifths of individuals who sit for the exam do not pass on their first attempt. This rate underlines the rigor of the exam and the level of preparation required to pass it successfully.

The number of hours candidates need to dedicate to studying for the CFP® exam varies based on their background, study habits, and familiarity with the material. However, a common recommendation is to devote 200-300 hours of study time spread over a three to four-month period leading up to the exam. This might sound like a lot, but remember that the CFP® exam covers a wide range of topics, from insurance and retirement planning to tax management and estate planning.

Preparing for the exam isn't just about reading and memorizing information. It's about understanding and internalizing complex financial concepts, and being able to apply them to different situations. To do well, candidates need to work through practice questions, take mock exams, and constantly review areas where they find they're weak.

Given the low pass rate and the significant study time required, it's clear that earning the CFP® certification is no small feat. It takes hard work, persistence, and a dedication to understanding the complexities of financial planning. But for those who pass, the rewards—a respected credential and the knowledge to truly help clients plan for their financial future—are well worth the effort.

CFP® Professionals in the US

As of 2023, the number of CFP® professionals in the US has grown steadily. However, they represent only about 20% of the country's financial advisors, a percentage that underscores the rigor of the CFP® certification process. This implies that while the CFP® designation is not rare, it's not a common credential either, reinforcing the stature and the exclusivity that this certification carries within the financial planning industry.

The Fiduciary Role of CFP® Professionals

One of the most significant aspects of the CFP® designation is the fiduciary responsibility that these professionals carry. The term fiduciary means that CFP® professionals are obligated to act in their client's best interest, a duty that is at the core of their professional conduct.

This fiduciary advisor responsibility is a critical aspect of the relationship between a client and a CFP® professional, creating trust and offering assurance that the professional's advice will prioritize the client's interests above their own. For example, they must provide complete transparency about their compensation and must carefully manage any potential conflicts of interest.

Fee-only Advisors

Typically, CFP® professionals operate as fee-only advisors. This means they receive their income solely from their clients, not from commissions based on product sales or investments. By doing so, they minimize conflicts of interest and align their success directly with their clients' success. This practice further assures clients that the advice they receive is based solely on what's best for their financial health, not the advisor's commission.

The CFP Oath

The CFP® oath is a commitment made by every CFP® professional to uphold the highest ethical and professional standards, as defined by the CFP Board's Code of Ethics and Standards of Conduct. This commitment emphasizes honesty, integrity, competence, and the duty to put the client's interests first.

The Oath serves as a cornerstone of the client-CFP® professional relationship, assuring clients of the professional's dedication to serving their best interests, and giving them confidence that their financial future is in safe, responsible hands.

The CFP® Planning Process

The financial planning process followed by a CFP® professional is a holistic, step-by-step approach that takes into consideration every aspect of a client's financial life. This process includes:

  • Understanding the client's personal and financial circumstances.
  • Identifying and selecting goals.
  • Analyzing the client's current course of action and potential alternatives.
  • Developing the financial planning recommendations.
  • Presenting the financial planning recommendations.
  • Implementing the financial planning recommendations.
  • Monitoring progress and updating the plan as needed.

This comprehensive process ensures that every financial decision is based on a clear understanding of the client's goals, circumstances, and risk tolerance.

Advantages of Working with a CFP®

One of the key advantages of working with a CFP® professional is the peace of mind that comes with knowing your financial future is being planned by a highly qualified professional. Their rigorous training and comprehensive approach to financial planning mean they can help you navigate complex financial decisions and provide strategies that cater to your unique financial goals and circumstances.

The fiduciary standard they uphold ensures they are obligated to act in your best interests, and their fee-only compensation model can reduce conflicts of interest. Moreover, the CFP Board's strict ethical standards provide a level of protection to consumers and ensure a high level of professional conduct.

Importance of a Financial Plan Written by a CFP®

A financial plan written by a CFP® professional is like a road map for your financial journey—it outlines where you're starting, where you want to go, and the best routes to get there. This plan is not a one-size-fits-all document, but a tailored strategy that takes into account your unique circumstances, goals, and risk tolerance.

A CFP® professional doesn’t just consider one aspect of your finances—they look at your entire financial picture. By doing so, they can create a comprehensive plan that fits your needs and can adapt to changes in your life or financial situation.

In conclusion, the Certified Financial Planner designation is a mark of professionalism, rigor, and commitment to the client's best interest. While obtaining this credential requires substantial effort, it's a testament to the advisor's expertise and dedication to ethical practice. The CFP® professional's holistic approach, fiduciary duty, and tailored strategies provide clear advantages to clients and make a significant difference in their financial journey.

About William Bevins CFP® CTFA

William Bevins is a CERTIFIED FINANCIAL PLANNER™ and wealth advisor serving Middle Tennessee. His practice focuses on writing financial plans, wealth management, offering advice, and building suitable investment portfolios for individuals, small to medium-sized businesses, and family offices. He may be contacted by email at [email protected].