Chartered financial analyst, or CFA, and certified financial planner, or CFP, are common certifications for individuals working in finance. These certifications are designed to tell a client (and employer) that the holder knows what they’re doing and is qualified to do certain types of work. The certification processes require applicants to have different amounts of experience and education. There is overlap in the occupations you can have, but holders tend to go down different career paths.
Let’s look at what separates these two certifications so that you can choose the right one for you – whether you’re looking to get certified or you’re trying to find a financial advisor.
What Is a Financial Advisor?
A financial advisor is an expert in financial planning. They help clients, which can be individuals, groups or firms, set and achieve financial goals. Some financial advisors will advise clients on a broad range of topics. Others will focus specifically on one financial topic or situation. For example, a financial advisor who is a CPA (certified public accountant) is a financial advisor focusing on taxes. Some advisors may also work with specific clients like professional athletes or people creating estate plans.
In order to showcase their expertise, advisors may put in the work to receive advanced certification. Two common programs are the CFA and CFP certifications.
CFA vs. CFP: What People Do With the Certifications
CFA stands for chartered financial analyst. That name gives a clue to the kind of work that CFAs typically pursue: financial analytics. The two most common occupations for a CFA are portfolio manager and research analyst, according to the CFA Institute. (The CFA Institute is the association that administers the CFA program and certification.) Working with a CFA is common for people who want help with investing and asset allocation.
A CFP is a certified financial planner. Again, the name provides a clue to the work that CFPs usually do: financial planning. Common occupations for CFPs include financial planner, wealth manager and financial advisor. A CFP often works with individual clients.
While both of these certifications are common, CFP is the more common certification for a financial advisor because it is more tailored to financial planning with individuals.
If you want to bolster your resume with one of these certifications, the one you choose will depend on the kind of work that you want to do. You can learn more about the specific certification programs in the next few sections.
If you are looking for a financial advisor, you can be confident that someone with either of these certifications has gone through the work of understanding how to manage your finances.
General Requirements for Becoming a CFA
The CFA Institute administers the CFA certification process. In order to receive certification, you must become a member of the CFA Society and pay the annual membership dues.
Completing the CFA program requires that you have a bachelor’s degree (or the equivalent) and four years of professional work experience in the investment decision-making process. There are also three levels of exams that applicants must pass. Each level has a different focus and consists of multiple parts.
The first exam level tests basic knowledge and focuses on investment tools. The second level of exams focuses on asset valuation and emphasizes more complex analysis. The third set of exams focuses on portfolio management.
In general, CFA holders primarily work in occupations that center on investing. The certification is advantageous in occupations that relate to investing and portfolio analysis.
General Requirements for Becoming a CFP
The Certified Financial Planner Board of Standards oversees the CFP certification. Like the CFA program, applicants need to meet certain education and experience requirements. In order to earn the CFP, you need a bachelor’s degree and some college-level study in financial planning. Applicants must have 6,000 hours of experience with financial planning (or 4,000 hours through an apprenticeship program).
Then there is an exam which takes place during two three-hour sessions on a single day. The exam (which is multiple choice) uses real-life situations to assess an applicant’s ability to use broad financial planning knowledge.
Overall, the CFP program is shorter and less-rigorous than the CFA program. If you think this could be the program for you, you can learn more about CFP certification requirements here.
The CFA and CFP certifications are both common for financial advisors. For clients, working with an advisor who has one or the other may not make a huge difference. Both certification programs teach applicants how to handle someone’s financial future. If you are considering a career in finance and want the added certification, then it’s worth considering what exactly you want to do. CFAs typically work more in the field of financial analytics and investing while CFPs usually focus on financial planning with individual clients. Keep in mind that getting a CFA is also a longer process with more exams.
Things to Consider for Finding a Financial Advisor
- We covered two common certifications in this article but there are a number of others. For example, a CPA may be more helpful for tax planning and a CLU is probably your best choice for life insurance help. As you look around, make sure to check out this list of the top financial certifications.
- Before working with a financial advisor, it’s a good idea to consider your goals and where you generally stand toward meeting those goals. Are you saving for retirement? How close are you to reaching your retirement savings goals? Knowing what you already have can make it easier for an advisor to help you. A matching tool like SmartAsset’s SmartAdvisor can help you find a person to work with to meet your needs. After you answer a series of questions about your situation and goals the program will narrow your options down to three fiduciaries who meet your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.
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