What Does It Take To Become A Certified Financial Planner?
28 Jun 2019
In order for you to become a Certified Financial Planner (abbreviated as CFP), you need the proper education, work experience, and finally, you have to pass a certification exam. It is only then that you can legally be able to provide your clients with financial advice. You will help them come up with extensive plans so that they can be able to reach essential financial goals, like retirement, starting up a business, college tuition, securing a home, and the like. This includes upholding the CFP Board’s code of ethics.
As a Certified Financial Planner, you will have the ability to decide whether you want to work for a big insurance firm or start a business of your own. However, before we’ve gone too far ahead, in this article, we are going to go through the requirements for becoming a CFP to begin with.
What kind of education do you need?
The first essential step in terms of the necessary education is taking up a program registered by the CFP Board. These programs are extensive and cover the basics of a variety of topics, including insurance planning, personal finance, investment planning, tax planning, retirement planning, and so on. If you don’t have any previous experience that could exempt you from some of the courses, you should head directly to the CFO Board’s site where you can find the list of programs. Here you can choose which of them suit you the best. Once you are done with a program, you will get the necessary certificate.
The other part related to education that is very important is less related to financial planning. Basically, before you are able to become a CFP, you need to have at least a bachelor’s degree. However, the field that you have graduated in does not matter. All in all, you can even take the exam in the meantime, but you will not have the approval to call yourself a Certified Financial Planner until you have a bachelor’s degree as well. If you decide to take the exam first, you have five years to graduate in order to be approved.
What kind of experience do you need?
Next to filling out the necessary education requirement, you also must have at least three years of work experience. While it isn’t necessary for it to be full-time, it does have to amount to 6,000 hours. And, of course, it is crucial that the work experience is relevant. What this means is that it has to be gained through particular activities outlined by the CFP Board, such as supervision, personal delivery, direct support, teaching, and indirect support.
You should know that both paid and unpaid work are taken into consideration. However, it goes without saying that you need to work with a real client, and provide them with all-encompassing and objective advice as a financial planning professional. Also, your work experience needs to include at least one of these segments of the financial planning process:
• Establishment and definition of the relationship with the client
• Collection of all the necessary data about the client, including their financial goals
• Analysis and evaluation of their financial status
• Establishment and presentation of financial planning proposals and possible alternatives, if necessary
• Implementation of the aforementioned financial planning proposals
• A review of the client’s situation in relation to these proposals
What is the certification exam like?
First, you need to register for the CFP exam, which you can do at the standard rate of $695. However, there is also a rate for those who apply early which is $595 (it is available until six weeks before the deadline), as well as a rate for those who apply late (two weeks before the deadline) which is $795.
In order for you to prepare for the exam, experts such as MAUS Business Systems suggest that it would be wise to take up a course that covers all the necessary information. If not, you should at least get your hands on a proper study package.
The exam itself is made out of 170 multiple-choice questions. They all revolve around particular client situations where you need to show your financial planning knowledge. It lasts for two 3-hour sessions, with a 40-minute break in between. So, we can definitely ascertain that it is not an easy task. It requires a lot of time to prepare, but it also depends on your dedication. According to the CFP Board, you should spend at least 250 hours preparing for it.
Every year the exam is different, but the general pass rate goes from 42 to 66 percent. In case you fail, it takes about 4 months before you are able to take it again. This is because you can do it in March, July, and November. Furthermore, you are never told how much you scored, no matter whether you have passed or not. Again, if you do not pass the test, you will only be given a list of general topics that you need to work on, instead of the exact questions that you have answered wrong.
When you finally get your CFP certificate, you need to finish three renewal requirements in every two years. For starters, there is a $100 fee for a background check that you need to pass. Then, there is a $325 certification fee. Both of these are non-refundable. Finally, you need to extend your education process for at least 30 more hours.