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Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
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But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
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Opinions expressed are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including any rates, terms and fees associated with financial products, presented in the review is accurate as of the date of publication. SHARE: Maskot/Getty Images August 29, 2022 This article was generated using automation technology and thoroughly edited and fact-checked by an editor on our editorial staff.
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Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management.
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While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo
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Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money. Investing disclosure: The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice.
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The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service.
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We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site.
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While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. A certified financial planner, or CFP, is a specialized type of financial planner who has met the certification requirements of the CFP Board. A CFP must keep up with continuing education, pass an exam and adhere to the CFP Board code of ethics.
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CFPs are bound by a , meaning they must meet the highest standard of care when . CFP candidates must have at least 4,000 to 6,000 hours of planning experience or equivalent, as well as completing coursework through a CFP Board program.
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A bachelor’s degree or its equivalent is also required as is an ethics commitment to work in your clients’ best interest. The CFP certification is one of the most highly sought-after designations for financial professionals and can add a lot of value to their career.
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Are CFPs better than fee-only planners
First off, it’s important to note that CFPs and fee-only planners might sometimes be one and the same. CFPs may call themselves fee-only as long as the planner and the planner’s firm receive no sales-related compensation and related parties receive no sales-related compensation from services performed by the CFP, according to the CFP Board’s standards of conduct.
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That can be an especially high standard for CFPs who work at some financial firms. CFPs are part of a larger, professional network, so they have a lot of resources at their disposal if clients have questions, a resource that independent fee-only planners might not have. One of the benefits of working with a CFP is that they must meet a fiduciary standard, which means they must put the needs of a client first.
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Fee-only planners, however, are not required to meet a fiduciary standard. And don’t confuse fee-only advisors with “fee-based” planners, the latter of whom may recommend products that pay them a commission.
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The value of a fee-only planner for clients is that it provides a better alignment of incentives for the advisor. That is, the fee-only planner is more likely to work on the client’s behalf if there’s no incentive (i.e., a sales commission) to push financial products and services to the client. While fee-only planners charge clients only for their time or other services, CFPs may also be compensated by the products they sell.
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In some cases, that compensation can be as much as 100 percent of the commission that the financial institution gets for selling the product. What does that mean for you?
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The more products a planner recommends, the more money the planner earns. A plan that includes a lot of high-commission products, then, is probably not in your best interest.
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While that arrangement may sound bad, it’s not necessarily the case that a CFP will only recommend products that pay the biggest commissions, experts say. So the fee-only compensation setup combined with the CFP designation can be a powerful combo that indicates a planner is skilled while being incentivized to act in your best interest. The CFP is a good designation to have, but it’s not the be-all and end-all.
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Just because a planner has a CFP certification does not mean that they are the best person to advise you. It’s important to get referrals and reviews for any financial planner you’re considering.
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Regardless of whether the advisor is fee-only or a CFP (or both), you need someone who understands your needs. (Here are some for you.)
How much does a CFP cost
You should expect to be charged a fee by a CFP for providing financial advice on your investments and perhaps for managing your investments for you as well.
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A CFP’s services don’t come cheaply. Most CFPs charge you an hourly rate for their services, and larger firms or those CFPs with more experience typically charge more.
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According to a recent survey by Bankrate, the typical CFP charges an average of $256 per hour, but you could easily find a CFP charging double that amount. While it might not seem like a big deal to pay someone $500 or $1,000 for a few hours of their time once a year, it can add up quickly when you’re paying for advice on a regular basis. As a result, it might make sense to go with a financial planner who charges you a flat monthly or annual rate, so you can budget for the advice you are getting.
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If you’re looking for a flat fee, that charges $30 a month and offers unlimited access to CFPs. Other CFPs will charge you a fee that’s based on how much money you have to invest. They can charge anywhere from 0.5 percent to 1 percent per year on the assets you manage.
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A planner who charges a percentage of assets under management is typically more expensive than a flat-fee-based planner, as the percentage fee is tied to the size of your portfolio. It’s worth noting that while these fees may come out of your pocket on the front end, that are aligned with your goals than if you go with the “free” advisors that many financial institutions offer you. They’re often really just salespeople in disguise.
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How to become a CFP
A financial planner needs a bachelor’s degree but no specific concentration or major to become certified, individuals must have at least 4,000 to 6,000 hours of financial planning experience, as well as successfully complete coursework in financial planning and pass a comprehensive exam. According to the CFP Board, the exam covers a range of topics, including insurance, annuities, securities and investment, taxes, retirement planning, estate planning, and financial planning practices. Then you must commit to ethical practices and to act as fiduciary on behalf of your clients.
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The CFP exam is administered by the Financial Planning Standards Board, an independent nonprofit organization advocating for consumer protection and financial planning standards. Those who pass the exam and meet the other criteria are awarded the CFP designation.
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To maintain the designation, professionals are expected to pay an annual renewal fee of $455, starting Oct. 1, 2022.
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Candidates must also obtain continuing education (CE) credits, and the CFP Board requires a minimum of 30 hours of CE over a two-year period. More and more financial planners are earning their CFP designation, which can be a boon for their careers.
Bottom line
A certified financial planner is a professional designation earned through a certification process.
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CFP professionals can be hired by a financial firm or act as independent planners. But there’s no guarantee that a CFP is the right fit for all of your financial needs. It’s vital to ask questions and understand the provider’s qualifications and expertise to be sure they meet your needs.
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SHARE: This article was generated using automation technology and thoroughly edited and fact-checked by an editor on our editorial staff. Bankrate senior reporter James F.
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Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more.
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