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ChFC vs. CFP: What's the Difference?

If you’re ready to create a financial plan but can’t quite do it on your own, you might need the help of a financial advisor. But finding the right financial advisor can be a whole process on its own. When looking at different advisors, you’ll notice that some have different certifications, most noticeably ChFC and CFP designations. What exactly do these letters mean, and how are they different? Is one better equipped to help with financial planning? Let’s break it down.

What’s the Difference Between a CFP and a ChFC?

In practice, certified financial planners (CFPs) and chartered financial consultants (ChFCs) aren’t all that different. The differences lie more in what’s required to earn each certification. The ChFC designation requires more coursework, but both CFPs and ChFCs study similar topics. A CFP is required to take seven courses, while a ChFC must take nine courses, two of which are application-based courses. While a CFP must take a comprehensive board exam after completing all coursework, a ChFC takes a test at the end of each course. However, both must have certain levels of professional experience and uphold the high ethical standards required by each issuing organization.

Financial advisors who work in financial planning typically have either a CFP designation or a ChFC designation. Financial advisors are experts in the field of financial planning. They give clients advice on how to set and achieve financial goals, and carry an understanding of how to create a comprehensive financial plan. That way they can provide different strategies and suggestions to help you manage your finances.

What Is a CFP?

ChFC vs. CFP: What's the Difference?

The CFP designation remains the most known certification for financial planning. It is awarded by the Certified Financial Planner Board of Standards. There are four requirements to receive the designation: education, a comprehensive exam, work experience and ethics.

CFPs receive a rigorous education in financial planning. You must hold at least a bachelor’s degree from an accredited college or university to begin the initial coursework in a CFP Board-approved program. Then you must complete approved courses that cover topics ranging from retirement to estate planning to insurance. The education doesn’t stop once you’re certified. To maintain the certification, you must complete continuing education (CE) programs every two years.

After the education portion, you must take a CFP exam. This exam stretches over a few days and covers financial planning, professional conduct and ethics. Passing this exam shows that you’re qualified to develop financial plans, provide useful recommendations and handle client-advisor relationships.

You must also have three years of experience in the finance industry to be eligible to earn this certification. This level of experience shows that you know the ins and outs of the industry, rather than just the general idea.

Lastly, the ethics requirement consists of a background check and a standards code. Before granting you the certification, the board reviews any potential violations, like previous misconduct. This is to ensure that you adhere to the standards of the CFP Board. Being able to follow the rules of conduct and exhibit professionalism are keys to being a successful financial advisor.

Once you meet all “four e’s” (education, examination, experience and ethics) you may receive your CFP certification. Holding a CFP certification proves to clients that you are knowledgeable in financial planning and have achieved the high standards enforced by the CFP Board.

What Is a ChFC?

In 1982, the ChFC designation was introduced as an alternative to the CFP designation. It’s awarded by the American College of Financial Services in Bryn Mawr, Pennsylvania. The ChFC is lesser known than the CFP, but still stands as a distinguished certification in financial planning. An advisor with either designation can certainly give thorough advice. The biggest difference between the two is the process of becoming certified.

The education portion for a ChFC is lengthier, comprising of nine college-level courses. But at the core, it is a similar education to the CFP education. Courses focus on financial planning, covering topics like investing, insurance planning and retirement planning. There are also courses that focus on planning with different types clients, such as divorcees or special needs families.

These courses are self-paced and can be done online. Contrary to the CFP, there is no comprehensive exam at the end. Instead, you take a final exam at the end of each course.

To enroll in the program, you must have at least three years of experience in the finance industry. Having a degree in finance or business will help you in the courses and can count as one of your years of experience. Again, you must subscribe to a professional pledge and a code of ethics.

Like the CFP, you must continue to earn CE credits to maintain your designation. This involves taking courses and participating in programs to keep you current on financial planning practices.

Meeting all of these requirements leads to a ChFC designation. These high standards ensure that you are prepared to become a financial advisor and give knowledgeable and helpful advice that suits your clients’ needs. In turn, clients will also be assured that an advisor with this designation can be trusted.

ChFC vs. CFP: Which One Is Better for Financial Planning?

ChFC vs. CFP: What's the Difference?

Naturally, you might wonder which type of certification makes an advisor more qualified in financial planning. From a client standpoint, there is not much of a difference between  advisors with these two different certifications. Some financial advisors even have both designations. Both issuing organizations maintain high standards and the CE requirement shows that both advisors adapt with the times. Because the CFP is more common, you are more likely to find someone with a CFP designation than a ChFC designation.

When looking for a financial advisor, the most important thing to do is to check that they are legitimately qualified. Advisors with either distinction can give a comprehensive overview of financial planning. Some will also likely specialize in a particular area like insurance, retirement planning or investing. This is not specific to the designation and just depends on the individual who holds it.

To figure out if an advisor is right for you, be sure to do your research and meet with multiple advisors before making your decision. If one doesn’t work for you, don’t be afraid to look for another.

The Bottom Line

From a client standpoint, the differences between a ChFC and CFP are minor. Even with the educational differences, they are fairly similar in practice as financial advisors. Both still require extensive education and experience that prepares advisors to give the best financial advice. So, when it comes to choosing an advisor, it is better to judge an advisor on an individual basis, rather than based on which one these two designations the advisor holds.

Tips for Finding a Financial Advisor

  • Figure out what you’re looking for in a a financial advisor. CFP and ChFC aren’t the only certifications out there. Some advisors specialize in retirement planning or helping people navigate the financial challenges of divorce. It’s also important to know how much you’re able to invest, as many advisors require you to have a minimum level of investable assets before they’ll agree to work with you.
  • Ask for recommendations. Talk to friends and family members in similar financial and life situations about who they turn to for financial advice. SmartAsset also offers a financial advisor matching tool, which pairs you with nearby financial advisors based on your needs and preferences. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three fiduciaries who suit 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.
  • Do your homework. Be sure to look over a firm’s Form ADV, and also ask an advisor questions about their fees and investing style. Advisors bound by fiduciary duty must put their clients’ best interests before their own. Fee-only financial advisors only earn money from the fees their clients pay them, not from selling financial products.

Photo credit: ©iStock.com/ljubaphoto, ©iStock.com/kickimages, ©iStock.com/michaeljung

Emily Zhu Emily Zhu writes on a variety of personal finance topics for SmartAsset. Her expertise includes retirement, credit cards, taxes and banking. She grew up in Brooklyn, but now splits her time between Brooklyn and Rochester. Emily is currently studying at the University of Rochester.
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