Content of the material
- Not All Financial Planners Are CFP Professionals
- Is Financial Planning the Right Career for You?
- Quiz: Is Financial Planning Right For You?
- Maintaining the CFP Designation
- How to Prepare for the CFP® Exam
- CFP® Professional Requirements
- Questions About How to Become a Financial Advisor
- 4. Experience
- What work experience does a CFP need?
- Should I Get an MBA?
- Required Experience for a Financial Planner
- What Should I Major in to Become a Financial Advisor?
- How Much You Need To Study To Become A CFP
- Work Experience Necessary To Become A Certified Financial Planner
- What are some tips for becoming a CFP?
Not All Financial Planners Are CFP Professionals
Financial planners are advisors who help people visualize the comprehensive nature of their economic reality. They quantify their client’s current assets, liabilities, income and expenses. They then use this information and other variables to create models that predict the future value of that client’s financial resources.
Financial planners take into consideration expected financial contributions and withdrawals and factor in the real-life events their client expects to happen over time. They include desired consumption goals and possible contingencies. They prepare what-if scenarios to show that client whether or not they can afford all the things they want to own and still retire comfortably.
Retirement is just one of the many financial life events CFP professionals take into account. A good financial planner seeks to optimize the entirety of his or her clients’ financial resources, while understanding the behavioral nuances associated with money. Still, not all financial planners are CFP certificants. But does that even matter?
Think about that in these hypothetical terms. Let’s say you just bought an expensive new car. You will eventually have some scheduled maintenance performed on it. Would you be okay entrusting that maintenance to a local service station? Or would you be more comfortable taking the car to the factory-certified mechanic at the dealership where you bought it?
Now consider this in the context of the entirety of your financial resources. Who would you feel more comfortable entrusting that to: Someone who might be able to do the job or a professional certified by an established standard-setting organization?
Is Financial Planning the Right Career for You?
Take this quiz to help you find out:
Quiz: Is Financial Planning Right For You?
1. How comfortable are you with making sales?A. I could sell my grandmother a ticket to a SuperNova concert with no guarantee that she'll enjoy the performance.B. I could sell my grandmother that SuperNova ticket, but I would feel guilty if she didn't like the show.C. Only a bad person would sell their grandmother a SuperNova ticket.
2. At what stage of life are you?A. I just graduated from college.B. I've been out of school for a few years.C. I've been in my line of work for several years, but I'm ready for a change.
3. How much of an extrovert are you?A. I have been the president of nearly every club I have ever joined.B. I have enough friends to make me happy.C. A good book, a room to myself, and no interruptions is my idea of heaven.
4. You could be described as:A. Both analytical and a good communicator.B. Analytical but not a good communicator, or a good communicator but not analytical.C. Neither analytical nor a good communicator.
5. At work, I prefer to do my job:A. Completely independentlyB. Somewhat independently.C. As part of a team.
6. What appeals most to me about becoming a planner is:A. The challenge of building a client base.B. The creation of my own business.C. The analysis of investments.
7. According to the Bureau of Labor Statistics, the median annual income for financial advisors was $89,330 in 2020. How do you feel about that?A. I've never been average and I'll earn more than the median.B. That would work for me.C. Working for commissions only makes me nervous.
Maintaining the CFP Designation
After you have gone through all of the steps to obtain your CFP designation, remember that you have to hold onto it. There is an annual certification fee of $355 that allows you to keep using the CFP mark.
There is also an ongoing continuing education requirement to help you stay informed on industry and professional practice matters. CFP certificants are required to spend 30 hours every two years on professional continuing education.
How to Prepare for the CFP® Exam
The exam is given in a computer-based format and consists of 170 multiple-choice questions that test your financial planning knowledge in client situations. You are given the exam in two 3-hour sessions with a 40-minute scheduled break between the two sessions. Each session includes two subsections and you may take an optional, unscheduled break between the exam subsections. Preparing for the CFP® exam requires a significant time commitment. CFP Board recommends you spend at least 250 hours studying for the exam. While that sounds overwhelming, the time goes pretty quickly between pre-study, the Candidate Handbook, required education courses, question bank time, a review class, practice exams, and your own review preparations.A great way to approach preparing for the CFP® exam is to think of it like training for a marathon. It’s not a situation where you can sprint (or cram). There’s just too much to learn, and you’ll need to be able to apply it to case studies. So, you make sure you have the space in your life to dedicate the necessary hours to study. Then, create a strategic study plan. A great way to structure your plan is to mirror the exam weighting, which the CFP Board updates based on regular job task analysis. At the same time, you shouldn’t start off by studying the most heavily weighted topics in depth. Instead, learn the basics of each category first. Then, work deeper into the categories based on weight and your familiarity with them, so you can absorb more detail.
CFP® Professional Requirements
To becoming a CFP® professional, you must:
- Complete a CFP Board-registered education program. You can choose from several options for your education. CFP Board must be notified when you’ve completed it. Many of the coursework providers can do that for you.
- Sit for the CFP® exam. You can do this once CFP Board has been notified of your education completion. The CFP® exam is offered three times a year in March, July, and November. You must take the exam within the 8-day window at one of the approved locations provided by CFP Board. You are permitted to register for the exam before you complete your program, but CFP Board must receive verification of your education completion by the education verification deadline, or you’ll be charged a $100 withdrawal fee.
- Hold or earn a bachelor’s degree from an accredited university or college within five years of passing the CFP® exam. You can sit for the exam beforehand, but you need to make sure you complete your degree in that 5-year window.
- Demonstrate financial planning experience. This can be professional experience (6,000 hours) in relevant personal financial planning activities, or apprenticeship experience (4,000 hours) that meets additional requirements.
- Pass CFP Board’s Candidate Fitness Standards. To do this, you must agree to adhere to their ethical standards. You also must disclose any criminal or employment termination history and pass a background check. For more information about the ethics requirement, you can visit CFP Board website here.
Candidates are most concerned about the CFP® exam. Here’s what you need to know.With financial advising projected to be one of the top 10 fastest growing occupations, getting your CFP® mark can help set you apart in the financial advising industry.
Questions About How to Become a Financial Advisor
Experience in the field is required to attain the certification. According to the CFP Board’s experience requirement, you must achieve 6,000 hours of professional experience related to the financial planning process or 4,000 hours of apprenticeship.
The CFP Board notes that “qualifying experience includes activities involving the delivery of financial planning services to individual clients,” including direct interaction with clients or a supervisory role.
Teaching financial planning-related courses, internships or the Financial Planning Association’s Residency Program are also suggested as ways to gain the necessary experience requirements.
What work experience does a CFP need?
Along with the education requirements, a CFP needs 6,000 hours of relevant experience in the financial planning field or 4,000 hours of apprenticeship experience under the supervision of a licensed CFP professional. The CFP Board requires you to have experience that shows you can provide financial planning independently, and you can get this experience in a variety of ways. For example, you could get an internship, participate in the Financial Planning Association Residency Program, support or supervise the financial planning process, teach classes related to financial planning or work with clients directly.
The CFP Board may want to know that you can successfully:
Build a professional relationship with the client
Collect information about the client and their financial goals
Evaluate the client's financial status
Make recommendations for financial planning
Enforce the recommendations
Monitor the recommendations
Should I Get an MBA?
While an MBA requires you to invest additional time and money into your education, it can pay off for you personally, professionally and financially. It’s important to have a clear reason for pursuing one to get the most out of your experience.
Required Experience for a Financial Planner
The financial planning field does not generally require a specific amount of experience for entry-level positions. However, recent graduates with related work experience can stand out from their competition in the job market. Some bachelor’s programs feature internships and practicums for students to develop experience before graduation.
Entry-level personal financial advisor jobs typically include on-the-job training under the supervision of more experienced advisors. Qualifying for certifications in financial planning typically requires professional experience. Becoming a CFP requires 6,000 hours of relevant professional experience or 4,000 hours of apprenticeship experience.
What Should I Major in to Become a Financial Advisor?
Anyone can become a financial advisor regardless of their major; however, there are certain majors that help in becoming a financial advisor. These include economics, business management, finance, accounting, statistics, and other majors that are similar.
How Much You Need To Study To Become A CFP
You’ll want to get good review materials and study, study, study! I spent about 1-2 hours every weekday for about four months before I took the exam (and I passed the first time). I used Kaplan’s Certified Financial Planner review materials without the live review class. Basically, I went the self-study route because I’m good at studying on my own and sticking to a disciplined schedule.
The CFP® exam costs $595 to take (that’s just the exam fee – and it’s higher for international locations). Review materials and/or classes will run you anywhere from $400 to $1,400+ depending on what you choose. Yes, that’s nearly $1,000 just to take one of the most stressful exams of your life. Fun!
You don’t find out what your score was – just whether you passed or not. If you fail, you’ll get a list of general areas (not specific questions) you need to improve on for the next exam.
Work Experience Necessary To Become A Certified Financial Planner
Your work experience must involve at least one of the six elements of the financial planning process:
- Establishing and Defining the Relationship with the Client
- Gathering Client Data Including Goals
- Analyzing and Evaluating the Client’s Financial Status
- Developing and Presenting Financial Planning Recommendations and/or Alternatives
- Implementing the Financial Planning Recommendations
- Monitoring the Financial Planning Recommendations
There’s more information available on each of these steps on the CFP® Board’s website.
My advice for completing the experience requirement? I do not recommend working on your own or working for a brokerage type company (you know the kinds I’m talking about, right?). You’ll have to focus most of your time on sales and not comprehensive advice.
Instead, I’d recommend finding a fee-only financial planning firm you can work with. Also, be sure you agree with their investment philosophy and compensation methods. It’s just not pretty when there’s not a good fit.
Find the best financial planner you can and try to work as a paraplanner (assistant) to them. This will help solidify your studies and the exam materials while also preparing you to deal with your own clients once you’ve finished all the CFP® requirements. Having a good mentor will help so much more than classes and exams ever will.
Yes, you can work with clients before you finish the CFP® certification (assuming you have your state licenses), but you’re more likely to make mistakes and miss opportunities for your clients. There’s a reason they’ve included this experience requirement!
What are some tips for becoming a CFP?
Consider following these tips to pursue a career in financial planning:
Connect with other aspiring financial planners. By building a network of professionals, you can share tips for pursuing the CFP certification and learn about employment opportunities in the field. Consider joining the Financial Planning Association (FPA) or the National Association of Personal Financial Advisors (NAPFA).
Find a mentor. A mentor who has undergone the CFP certification process can offer guidance on studying for the CFP exam and completing the board-registered program. You can also learn how to search for a CFP position after you become certified.
Attend conferences. Attending a national or regional conference can help you expand your network and build your financial planning skills.