CFP® vs CFA

Financial markets can be capricious creatures and many investors seek to outsource their decision-making when their accounts reach a certain threshold. After all, avoiding big mistakes is the key to maintaining wealth. That’s where a financial advisor comes in. A qualified professional advisor can help guide your money into the proper vehicles and enhance your ability to sleep soundly at night. 

But finding the right financial advisor can be tricky. The financial advice industry is teeming with different acronyms and not everyone has your best interests at heart. You’ll need to figure out what YOU need from an advisor before making any calls. Certified financial planners (CFP^®s) and chartered financial analysts (CFAs) are 2 of the designations financial advisors have attached to their names, each signaling a different area of expertise. Knowing what separates a CFP^® and a CFA is critical when searching for the right advisor.

Certified financial planners^® are highly educated and experienced professionals specializing in a slew of money management areas. CFPs work mostly with individual clients and small businesses providing advice on topics like taxes, investment, retirement and estate planning.

Getting a CFP^® license requires a college degree, work experience at a reputable firm and the knowledge needed to pass a strenuous exam. Here’s a breakdown of what’s needed to become a Certified Financial Planner:

• Education: CFP^®s need a 4-year degree from an accredited university in a major like finance or accounting and an additional CFP Board-certified, college-level financial planning course that includes 7 areas of financial planning. The CFP Board course also requires a capstone course involving the development of a financial plan.

• Experience: CFP^®s need 6,000 hours of professional experience or 4,000 hours of apprenticeship experience (the difference is explained here). Candidates must log their hours with the CFP Board for verification. Experience only counts if it’s attained 10 years prior to or 5 years after taking the CFP^® exam.

• Exam: The CFP^® exam takes 7 hours to complete and testing is only done 3 times per year. The exam consists of 170 multiple choice questions; candidates take the test in a couple of 3-hour sessions separated by a 40-minute break.

CFP^®s must also submit to a code of ethics devised by the CFP Board. Any criminal activity or suspension of the license must be disclosed to the Board before the CFP^® license will be granted or renewed. 

What is a CFA?

Chartered financial analysts perform some of the same duties as certified financial planners, but CFAs go through more rigorous, specialized testing. CFAs are analysts and they often reach high positions in large corporations. CFAs specialize in building portfolios and investment banks often hire them to pick the proper asset allocation for their funds.

The CFA designation is one of the most respected in the field due to the arduous work needed to acquire it. Here are the required steps according to the CFA Institute:

• Education: CFA candidates must hold a bachelor’s degree from an accredited university or be in the final year of an approved program. If you haven’t completed the degree program, only the Level I exam will be available.

• Experience: It is expected to have 4 years of experience working full-time in the investing field, including 2 years of direct involvement in investment decisions. Part-time work experience is not accepted, nor is work completed while still enrolled in school.

• Exam: Candidates must take 3 levels of exams, which must be passed in succession. The CFA Institute estimates 300 cumulative hours of study are needed to pass the exams. Exams are offered once per year in June (Level I may also be taken in December).
• Level I exam: 240 multiple-choice questions, split into two 3-hour sessions
• Level II exam: Up to 30 vignettes with 120 supporting questions, split into two 3-hour sessions
• Level III exam: Up to 30 vignettes combined with open-answer and multiple-choice questions; first 3-hour sessions are open-answer and second session is multiple-choice

After passing exams, candidates must apply for charter membership at the CFA Institute to be granted their license. Membership requires submitting 1 ethics statement, having an international travel passport and providing 3 professional references.

CFP^®s generally develop financial plans for individuals and their families. Retirement planning, tax preparation and estate planning are covered heavily during the CFP^® coursework and examinations. One of the key CFP^® vs. CFA differences is the time spent on relationship building. CFP^®s need to develop a rapport with their clients and understand their individual goals. If you need to buy a house or open a 529 Plan for an offspring’s college, a CFP^® should be the professional you seek out.

Who Should Use a CFA?

CFAs focus more on the day-to-day investing and analysis aspect of the financial industry. Math and quantitative analysis are the focal points of the CFA program. CFA charterholders often work for large corporations managing portfolios, analyzing risk or developing financial reports. CFAs command high salaries and often can be found high on the corporate ladder. Large business owners and managers of complex investment portfolios will appreciate the services of CFAs, but individuals looking for tax help or 401(k) rebalancing should consider a CFP.

Finding a qualified CFP^® is easy. The easiest way is to use this free tool by SmartAsset. After a short quiz you will be paired with the 3 fiduciary financial advisors (which are CFP^®s) in your area.

Another way to find a CFP is through the CFP Board. All you’ll need is an ID number to verify any claims. CFPs are fiduciaries and hold themselves to a high standard of ethics, but fee-only advisors tend to be the most cost-effective for clients. Take a look at the financial advisors we recommend below.

How to Find a CFA

Chartered financial analysts aren’t as plentiful as their counterparts, but the CFA Institute can verify any claims. They also have a member directory where prospective clients can search for qualified CFAs in their area. Searching the CFA Institute Member Directory can be done by area or by name. Simply type in your ZIP code to locate charter holders nearby or search for a specific analyst by entering a name, address or employer.

Get the Right Financial Advisor

Knowing the difference between a CFA and a CFP^® and hiring the best type of advisor ultimately streamlines your financial goals, saving you time and money. Since each has a different area of expertise, the best advisor for your goals will give you an advantage in growing your portfolio.  

Frequently Asked Questions