A certified financial planner (CFP) is a specialist who excels in simplifying financial planning for families, individuals, and businesses or organizations. The CFP designation is an official form of recognition for financial planners who have received certification. In addition to general financial planning, a CFP might specialize in retirement planning, estate planning, taxes, or insurance.
The Significance of Certification for a Financial Planner
The CFP designation is issued by the Certified Financial Planner Board of Standards, Inc. (the CFP Board).
Certification isn’t required by law, but certification means a financial planner has completed the CFP Board’s exam. Certification also indicates that the financial planner participates in educational programs to maintain their certification and skills.
A financial planner with certification is often considered more professional and trustworthy than one without certification. Although this assumption isn’t necessarily the truth, certification does affect how a financial planner is perceived. This is primarily because earning a CFP certification isn’t easy.
The CFP Exam
The CFP exam consists of 170 multiple-choice questions specifically concerning financial planning. Topics include tax planning, estate planning, retirement planning, professional regulations and conduct, risk management, investments, insurance, and financial planning principles.
The CFP exam is weighted. That means certain areas of the test have more importance than others. As of this writing, the exam is weighted as follows:
- Retirement savings and income planning – 17% of the exam.
- General financial planning principles – 17% of the exam.
- Investment planning – 17% of the exam.
- Risk management and insurance planning – 12% of the exam.
- Estate planning – 12% of the exam.
- Tax planning – 12% of the exam.
- Professional conduct and regulation – 7% of the exam.
- Education planning – 6% of the exam.
In addition to testing knowledge of financial planning, the exam also tests other important areas. CFP candidates must demonstrate the ability to gather information, analyze the information, communicate with clients, implement a plan, and monitor the outcome.
The CFP exam takes a total of 6 hours to complete. The first testing session is 3 hours. CFP candidates are then given a 40-minute break. After the break, the final 3-hour session begins. And the exam is offered during March, July, and November.
The CFP Board doesn’t indicate what’s considered a passing score for the CFP exam. However, the Board does state that to pass the exam, a CFP candidate’s score must meet the minimum competency level. The minimal competency level isn’t publicly shared, but the CFP Board determines it.
Retaking the test is allowed in the event of a failing score. However, it’s only possible to retake the test four additional times. If the CFP candidate fails after the fourth attempt, they cannot retake the test.
The CFP exam currently has an overall 60 percent pass rate. And among first-time test-takers, the pass rate is 64 percent. CFP prep courses can help candidates perform better on the exam.
CFP Prep Courses
The CFP Board recommends taking a CFP prep course to prepare for the exam. The Board also recommends asking the following questions before enrolling in any prep course.
- What is the educational level of the course? Is the material the level of a bachelor’s, master’s, or doctorate?
- How long does it take to complete the course?
- Does the total cost of the course includes books, tests, and additional fees?
- What’s the course schedule?
- Is the course offered online, in-person, or both?
- What are the course provider’s credentials?
- Does the course help students find internships or jobs after passing the exam?
- Does the course provider offer additional help in preparing to become a financial planner?
The specific questions and topics on the CFP exam constantly change. And no one outside of the CFP Board has prior knowledge of exactly what will appear on the exam.
CFP candidates are advised to study set, case-style, and discrete practice questions dealing with financial planning. Studying these types of practice questions familiarizes candidates with the style of the exam.
The CFP Board maintains a list of registered CFP prep course programs. However, the CFP Board does not endorse or recommend any specific program. Also, just because a program isn’t listed on the CFP Board website doesn’t mean the program isn’t reputable.
Types of CFP Prep Courses
There are generally three types of course formats.
- Self-paced courses are usually the most inexpensive. Once students enroll in a self-paced course, they gain access to lessons that they can take at their own pace.
Self-paced courses are good for students who need to study on their own time. Perhaps work, and family responsibilities make it impossible to attend class at a specific time. However, self-paced courses require a lot of self-motivation. And there’s not an instructor if the student needs help.
- Live online courses are taught online in real-time. Classes take place online at a designated time. There is also a remote instructor. Because of the Covid-19 pandemic, this option has become more popular among CFP candidates.
- In-person classes take place in a traditional classroom. Some students perform better in a live classroom with an instructor. However, because of the Covid-19 pandemic, some in-person courses are either temporarily paused or offered via Zoom until further notice.
Popular CFP Prep Courses
The following courses are popular CFP prep courses. The information is presented for information purposes only.
- Kaplan – Kaplan offers two CFP exam prep review courses.
The Premium Review package is available live online or on-demand for later viewing. The package includes a review class, an activity feed that guides students through the content, and several study tools. The study tools include exam strategy videos, a QBank containing practice questions, and a pre-study assessment.
The Essential Review package is a self-study course. The course materials allow students to review at their own pace.
- Boston University – Boston University offers an online program. The full program consists of seven courses, but individual courses are available as well.
The full program includes seven courses. Recorded webinars are available on-demand, and students also have access to faculty for tutoring or questions via email. Content is available 24-hours a day, seven days a week.
Students enrolled in the full program are given 21-month access to each course. Students taking individual courses have 3-month access to each course.
- Zahn Associates – Zahn Associates offers the Live Review Program. The program is an in-person program that takes place at various locations. However, due to Covid-19 restrictions, some classes are now only offered online.
CFP professionals teach the Live Review Program courses. And the courses focus on case evaluations, application, and analysis. Class materials are regularly updated, and students have access to 1,800 test questions via an online portal.
Additional CFP Requirements
Becoming a CFP requires more than a passing score on the CFP exam. To earn the designation, a candidate must also meet formal education requirements, have relevant work experience, and have a good reputation as an ethical professional.
Before a candidate can take the exam, they must have a bachelor’s degree or higher from an accredited college or university. In most cases, the candidate must also take financial planning courses required by the CFP Board.
However, the course requirements are usually waived if the candidate is a chartered financial analyst (CFA), a certified public accountant (CPA), or has a master of business administration (MBA).
It’s also necessary to have at least three years of experience in the financial planning industry. An alternative is to have two years of experience as an apprentice in the industry.
Professional conduct is considered as well. The CFP Board sets standards of professional conduct for all CFPs. The CFP Board also does a background check before granting any candidate the CFP designation.
Ethics are important because CFPs are entrusted with sensitive financial information. CFPs know their client’s personal assets. They know how much money a client has, their assets, investments, properties, and more. CFPs are also expected to provide helpful and ethical financial guidance and plans for their clients.
CFPs are expected to report any incidents of:
- Criminal activity
- Customer complaints
- Government investigations
The CFP Board has the right to grant or deny the CFP designation. A candidate can meet all of the requirements, but the CFP designation still isn’t guaranteed.
The demand for CFPs is growing. It’s estimated that in 2019, the US had more than 85,000 CFPs. And the US Labor Department estimates that jobs in financial planning are expected to grow at a rate of 4 percent from 2019-2029.
A CFP might choose to work independently and have their own roster of clients. However, a CFP can choose to seek formal employment.
There are several roles in financial services that might suit a CFP. For example, an associate advisor works with a team of additional advisors to prepare clients’ financial plans. The advisor also prepares presentations and additional materials for meetings with clients.
A wealth management advisor deals with wealthy clients of a certain net-worth. A CFP in this role helps clients build investment portfolios.
There’s also the position of a financial analyst. A financial analyst researches and analyzes investment opportunities and then makes recommendations to advisors. Then there’s an investment manager who chooses investments on behalf of a firm for its clients.
The main responsibility of a CFP is to help someone reach a financial goal. Whether it’s a client that needs help planning for retirement or a firm that needs help choosing the best investments, a CFP can help with those goals.
The Importance of a CFP Certification
According to the CFP Board, 86 percent of consumers would rather work with a financial planner who has passed the CFP exam. And 90 percent of consumers believe that a financial planner with certification is more trustworthy, knowledgeable, and professional than a financial planner with no designation.
Clients who work with financial planners feel that the CFP designation means the financial planner has extensive training, experience and will meet the ethical standards set by the CFP Board. And a planner with the CFP designation is more likely to attract clients or qualify for employment.
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