Plain-English definitions of the terms for CFP exam study. Simplified for learning; CFP Board’s materials are authoritative. This is educational only and not personal financial advice.
| Term | Definition |
|---|---|
| CFP | Certified Financial Planner, a personal financial planning certification administered by CFP Board. |
| CFP Board | The US body that sets the education, exam, experience and ethics standards for the CFP certification. |
| Financial planning | Helping a person organise their finances to meet life goals across saving, protecting and investing. |
| The 4 E’s | Education, Examination, Experience and Ethics - CFP Board’s four certification components. |
| Financial planning process | CFP Board’s step-by-step approach to advising a client, from understanding their situation to monitoring the plan. |
| Fiduciary duty | The obligation to act in a client’s best interest when providing financial planning. |
| Code and Standards | CFP Board’s Code of Ethics and Standards of Conduct for CFP professionals. |
| Risk management | Identifying and reducing financial risks, often through insurance. |
| Insurance planning | Choosing coverage for life, health, disability, property and liability risks. |
| Investment planning | Building an approach to risk, return and asset selection suited to a client’s goals. |
| Tax planning | Arranging finances to be tax-aware across planning decisions. |
| Retirement planning | Accumulating savings and turning them into sustainable retirement income. |
| Estate planning | Arranging the transfer of a person’s wealth and affairs. |
| Psychology of financial planning | The study of client behaviour, communication and counselling in planning. |
| Cash flow | The money coming in and going out over a period. |
| Net worth | Total assets minus total liabilities. |
| Time value of money | Money today is worth more than the same amount later because it can earn a return. |
| Capstone course | The financial plan development course required within the registered education program. |
| Experience requirement | 6,000 hours (Standard) or 4,000 hours (Apprenticeship) of qualifying work. |
| CPE | Continuing Professional Education - 30 hours every 2 years (including 2 hours of Ethics) to maintain the CFP. |