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ChFC vs. CFP: What's the Difference?

Technically, you don’t actually need any training or certifications to call yourself a financial advisor. So the fact that someone has undertaken the coursework, exams and expense that the certified financial planner (CFP) designation requires says something positive about the advisor. Same goes for chartered financial consultants (ChFCs). Of course, to the issuing organizations, the differences between the two designations are huge. To clients, though, the differences may not seem so significant when considering financial advisors. Still, to inform your decision, we break down the differences below.

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 the same basic 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 may be either CFPs or ChFCs. Some may even be both – the coursework overlaps so much that you can take ChFC courses to prepare for the CFP exam. All can advise clients on how to achieve their financial goals and manage their 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 including retirement, estate planning and 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 less 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. There is no final, comprehensive exam, as there is for the CFP designation. 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 a ChFC is prepared as a financial advisor to give knowledgeable and helpful advice that suits clients’ needs. In turn, clients will be assured that an advisor with this designation knows what they’re talking about.

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.

That said, the CFP Board and the American College feel that the differences between their designations are enormous. For example, the CFP Board stresses that their designees are held to a fiduciary standard, while ChFCs are not. It also argues that its comprehensive exam requires CFPs to have a deeper and better command of the subject matter. On the other hand, the American College points out that its coursework is more up-to-date and that it requires two electives that have modern-day applications.

As noted earlier, either designation is a positive sign about the advisor. If you’re trying to choose between a CFP or ChFC and all other factors are equal, you may want to base your decision on personality. Who do you feel most comfortable talking to? Who do you think listens – and hears you – best?

 

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

  • Talk to at least three advisors before choosing one. That way, you’ll have enough context about fees and strategies to make an informed decision.
  • Ask if they are bound by a fiduciary duty to put their clients’ interests before their own. This is always the case for CFPs, who are also fee-only financial advisors. Advisors who are also brokers or insurance agents tend, instead, to be required only to recommend what’s suitable.
  • Use SmartAsset’s financial advisor matching tool, which links you with nearby financial advisors based on your needs and preferences. It’s free and takes five minutes.

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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