CFP study guide
CFP · Work through your exam, one topic at a time.
CFP® certification is the credential administered by CFP Board, a non-profit organization founded in 1985 that serves the public interest by promoting the value of professional, competent and ethical financial planning services. According to CFP Board, there are more than 100,000 CFP® professionals in 2024, representing about 1 in 3 financial advisors in the U.S. The CFP study guide has 8 sections and about 2,507 words.
01Professional Conduct and Regulation
CFP Board's Standards of Conduct combine a principles-based Code of Ethics - Integrity, Objectivity, Competence, Fairness, Confidentiality, Professionalism, Diligence - with rules-based Standards of Conduct. Fiduciary duty attaches when providing financial advice , not to every client interaction (a pure product sale may not trigger it).
326 words, about 2 min02General Principles of Financial Planning
Planning rests on financial statements - balance sheet (assets − liabilities = net worth) and cash flow statement (inflows − outflows) - and on time value of money : PV, FV, PMT, annuity due versus ordinary annuity, NPV, and IRR. Emergency fund: liquid assets ÷ monthly expenses (target 3–6 months) Current ratio: current assets ÷ current liabilities (target ≥ 1.0) Savings ratio: savings ÷ gross income (roughly 10–15%) Housing ratio 1: PITI ÷ gross monthly income (≤ 28%) Housing ratio 2: total debt ÷ gross monthly income (≤ 36%) Use the marginal rate for a projected change in income; use the average rate only to describe the overall burden.
316 words, about 2 min03Risk Management and Insurance Planning
Identify exposures → evaluate frequency and severity → select a technique (avoidance, reduction, retention, transfer, sharing) → implement → monitor. Retain high-frequency/low-severity losses; transfer low-frequency/high-severity losses.
305 words, about 2 min04Investment Planning
Expected return, standard deviation, and correlation drive construction. Diversification eliminates unsystematic risk; systematic (market) risk is measured by beta and cannot be diversified away.
298 words, about 1 min05Tax Planning
Start with gross income, subtract above-the-line adjustments (HSA, traditional IRA, student loan interest, self-employed health insurance), yielding AGI. Then subtract the greater of the standard deduction or itemized deductions (mortgage interest, state and local taxes capped at $10,000, charitable gifts, medical above 7.5% of AGI).
306 words, about 2 min06Retirement Savings and Income Planning
Defined benefit plans promise a benefit and place investment risk on the employer (PBGC-insured); defined contribution plans (401(k), 403(b), 457(b)) place risk on the employee. Know elective deferral limits with age-50 and 60–63 catch-ups, vesting schedules, ADP/ACP nondiscrimination testing, and top-heavy rules.
329 words, about 2 min07Estate Planning
Everything the decedent owns or controls: probate assets, jointly held property, life insurance where the decedent held incidents of ownership, retained interests, and powers of appointment. Beneficiary designations and jointly held property pass outside probate; a will controls only probate assets.
310 words, about 2 min08Psychology of Financial Planning
The psychology domain is about how clients actually behave and how the planner responds - not about diagnosing disorders. Know the difference between risk tolerance (attitude) and risk capacity (ability to absorb loss); the lower of the two governs the recommendation.
317 words, about 2 min