How To Become A Certified Financial Planner

Fulfill three requirements to become a CFP®:

  1. Education
  2. Exam
  3. Experience

That’s the order that the CFP® Board lists, and I’d say it’s probably the best order to follow. You can fulfill the experience requirements before you take care of the education or exam requirements. But I think you’ll have an easier time with all three if you focus on the education part first and then complete the exam while you are working in a financial planning firm. (It also makes it easier to get hired!)

The Education Requirement to Becoming A CFP

There are actually two parts to the education requirement. Before you can take the CERTIFIED FINANCIAL PLANNERTM exam, you must complete a CFP® Board registered program first. This amounts to at least 15 credit hours of material.

You’ll cover topics like the basics of personal finance, insurance planning, employee benefits, investment planning, retirement planning, tax planning, and estate planning. I fulfilled this requirement by getting a bachelor’s degree in financial planning, but a simple certificate will suffice for this part of the requirement.

You can get around all or part of this requirement if you hold certain certifications or degrees. Here’s a short list of ways you can automatically qualify to take the CFP® exam:

  • Certified Public Accountant (CPA) License
  • Licensed Attorney
  • Chartered Financial Analyst (CFA®)
  • Chartered Financial Consultant (ChFC)
  • Chartered Life Underwriter (CLU)
  • Ph.D. in business or economics
  • Doctor of Business Administration

Also, you can request a transcript review to exempt you from some of the required courses if you’ve taken classes that cover the required topics. You’ll have to review the topic list I linked to earlier to see if they’ll qualify. 

Then you must send in an application along with a $100 fee, your transcript, and course descriptions from the course catalog or the course syllabus if the title doesn’t clearly convey the content you covered.  You’ll need to take additional courses to fill out any of the topics you haven’t covered.

If none of the exceptions applies to you, you’re just going to have to plan on taking the courses from scratch. The easiest way to do this is through a CFP® Board registered program since their curriculum has already been approved.

5 Milestones to Becoming a Certified Financial Planner

There are five important milestones that candidates for the CFP designation must reach.

1. Candidates Must Have a College Degree

This is a pretty straightforward requirement. You cannot be eligible to earn the CFP designation without an undergraduate college degree from an accredited institution.

The good news is that your degree can be in any subject. The better news is that you can still start the certification process even if you haven’t yet graduated. Candidates looking to get certified have up to five years after passing the CFP exam to earn their college degree.

2. Specific Certification Coursework Is Required

In order to be eligible to sit for the CFP exam, candidates are required to complete the CFP Board’s certification coursework. There are about 150 or so Registered Programs around the country that offer classroom and/or online instruction.

It’s important to note that people interested in the CFP designation must study under a provider preapproved by the CFB Board. This coursework can take from 12 to 18 months to finish.

There is also an Accelerated Path for candidates with certain qualifying credentials. Those include:

Certified Public Accountants (CPAs) Lawyers Chartered Financial Analysts (CFAs) Chartered Financial Consultants (CHFCs) PhDs in Financial Planning, Finance, Business Administration, or Economics Those that have a Doctor of Business Administration degree CFP certificate holders from outside the USA

Abbreviated coursework is required for candidates that can verify one of these credentials. Called the Capstone Course, it is a 45-hour financial plan development curriculum intended to enhance the financial planning skills of professionals providing another form of planning service, such as investment, tax or estate.

Candidates must receive Capstone Course instruction from an approved Registered Program. The Capstone Course culminates with a final project — developing and presenting a comprehensive financial plan.

Finally, those candidates who have met the experience requirement of the certification process (discussed in No. 4 below) can move directly to the final project. This is known as the Capstone Alternative.

3. Aspiring CFP Professionals Must Pass the CFP Exam

Anyone seeking to earn the CFP designation must pass the CFP exam. That’s the case regardless of the coursework track followed, whether it’s the full 12 to 18 months, the Accelerated Path, the Capstone or Capstone Alternative.

The exam is offered three times a year in March, July and November. There is an eight-day testing window and candidates can choose the specific day they want to sit for the test. The exam consists of 170 multiple-choice questions and is administered in two 3-hour sessions at more than 250 locations across the country.

The CFP exam is a comprehensive test of the candidate’s knowledge of financial planning in practical client situations. It’s a pass-or-fail test and about a third of first-time takers don’t pass, so rigorous preparation and thorough studying is necessary. The CFP Board recommends that candidates spend 250 hours preparing for the exam.

It costs $825 to register for the test ($725 if you register early) and there is a $100 penalty if you register late. Candidates interested in sitting for the exam should plan accordingly.

There will be alternative remote testing available during the COVID-19 pandemic.

4. Industry Experience Is Required

The timing of this requirement is flexible. It can happen before a candidate begins or after a candidate completes the required coursework. It can happen before or after a candidate sits for the exam. But all candidates for the CFP designation must demonstrate that they have real life experience in the financial planning profession.

That experience can come in the form of two different pathways. The Standard Pathway requires 6,000 hours working in the personal financial planning process. This can be satisfied by either working with actual clients or by teaching. The CFB Board is rather flexible about the exact nature of how a candidate gains this experience. But for the most part, it’s really all about being a financial planner.

The second pathway to gaining experience is the Apprenticeship Pathway. As its name suggests, this experience comes from working under the direction of a CFP professional. The experience must be practical, working with clients, engaged in actual financial planning activities. The Apprenticeship Pathway requires 4,000 hours of experience.

The speed at which a candidate gains this experience is also very flexible. The timeline to achieve it can be completed up to 10 years before and up to five years after a candidate passes the CFP exam.

As a practical matter, those who are serious about making a career in the financial planning profession should have no problem meeting the experience requirement. After all, it is the whole point of seeking the CFP designation.

5. Candidates Must Pass a Background Check

Of all the requirements to become a Certified Financial Planner, this is the easiest. Candidates must sign an ethics declaration and the CFP Board will conduct a thorough background check that looks into their employment history and any criminal record.

The important point about the background check is that CFP professionals are financial fiduciaries committed to putting the interests of their clients first. Someone with a different mindset shouldn’t bother going through the long process to obtain certification.

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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:

  1. Establishing and Defining the Relationship with the Client
  2. Gathering Client Data Including Goals
  3. Analyzing and Evaluating the Client’s Financial Status
  4. Developing and Presenting Financial Planning Recommendations and/or Alternatives
  5. Implementing the Financial Planning Recommendations
  6. 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 does the CFP exam cover?

The CFP exam has a total of 170 multiple-choice questions separated into three sections: case studies, short scenarios and stand-alone questions, all of which test your ability to apply financial planning principles to real-life scenarios. Here are the topics the exam covers:

  • Professional conduct: This section tests your knowledge of the laws that protect your clients and ethical guidelines you need to uphold as a CFP.

  • General financial planning principles: You may need to apply knowledge about managing debt and cash flow and communicating with clients through the financial planning process.

  • Education planning: How to save money to fund college education and financial aid are components of education planning.

  • Estate planning: You may need to know how to transfer property and what estate planning documents entail. This section may also include estate planning for relationships, such as marriage.

  • Tax planning: The exam may test your knowledge of tax law, income tax or minimum tax. You may also need to know how tax deductions work in charities or philanthropic endeavors.

  • Investment planning: In this section, you may apply your comprehension of investment risk and different investment strategies, as well as how to measure investment returns and build investment portfolios.

  • Retirement planning: Topics such as Medicaid, social security and the types of retirement plans may appear in this section.

  • Insurance planning: You may need to know the fundamentals of life, health and disability insurance. The section may also test you on how businesses use insurance.

CFP® Exam Cost

The standard registration fee for the CFP® exam is $925, but there’s an early bird rate of $825, which is available until six weeks before the registration deadline. There’s a late registration fee of $1,025 for the two weeks before the registration deadline. You can register for the CFP® exam with CFP Board online or by phone before or after you complete the education program coursework and become eligible for the exam. If you register before you finish the coursework, you must send CFP Board proof of your completed coursework. CFP Board will notify you when your eligibility is confirmed.

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

Choose Your Path to Certification

Here are some of the most common paths to CFP® certification. Typically, it takes 18-24 months to become a CFP® professional, but the certification process offers flexibility so you can make it work for you.

The Reason to Become a CFP Certificant

You don’t need to be a CFP professional to be a financial advisor. However, the credential shows clients and prospects that you have invested a lot of time, energy, and money in your career. It shows dedication and a desire to remain at the top of your game.

Financial advisors that take their careers seriously seek professional designations like the CFP credential to demonstrate to clients and prospects that they are in the top percentile of professionals in the business.

Certified Financial Planners take professional development seriously and they must adhere to the highest ethical standards to maintain the accreditation. This is beneficial to building a solid, successful practice. Putting the interests of clients first is a practical necessity to thrive in the very crowded financial advisory profession. Holding the CFP designation can go a long way to having a rewarding career as a financial advisor.

Is There a Difference Between a Certified Financial Advisor and a Certified Financial Planner?

Yes, in general, there is a difference between a financial advisor and a financial planner; however, there is no financial advisor certification, only one for a financial planner. That is because every financial planner is a financial advisor but not every financial advisor is a financial planner. Financial planners help individuals and companies achieve their long-term goals. This involves managing money, creating savings plans, helping to buy a home, and help planning retirement. A financial advisor on the other hand has a much more narrow view, which is simply helping you manage your money.

How is it Different From a Financial Advisor?

Your financial status will always be a part of planning your future. Many of us need help with this and can find it from a CERTIFIED FINANCIAL PLANNER™, or CFP® professional. While a financial advisor may help clients reach their personal financial goals by primarily focusing on investments, CFP® professionals take a more holistic view and approach to their clients’ financial health.

A CERTIFIED FINANCIAL PLANNER™ professional can advise their clients on risk management, retirement, estate planning, taxes, insurance, budgeting and more – and how all these factors affect their client’s ability to save and grow their money.

If you are interested in working as a financial advisor, is becoming a CFP® professional worth it? A CFP® certification can elevate respect in the industry because it represents additional education and commitment to the client. In a word? “Credibility,” Facini said. “The term advisor is so loose; anyone can say it. But to be a CFP® professional, you’ve taken courses, did a capstone and then sat for the exam. Knowledge and experience, and ongoing education, are required annually, along with strong ethics.”

These good ethics are reflected in the fiduciary standards to which the CFP® professional is required to adhere. The fiduciary standard means that as a CERTIFIED FINANCIAL PLANNER™ professional, you are obligated to put your clients’ needs ahead of your own. “Some advisors only get paid through (the) commission of selling certain products they’re incentivized to sell, that aren’t necessarily in the client’s best interest,” Facini said. “The fiduciary standard has eliminated that concern. (A CFP® professional is) working with your best interests in mind.”

Free eBook: Is CFP® Certification Right for You?

Are you considering CFP® certification, but are unsure if you can handle it? Get a sneak peak at the beginning of the College for Financial Planning®a Kaplan Company education program to get a feel for whether CFP® certification is the right fit for you. This free eBook will provide you with information about the financial planning process learned in FP 511: General Financial Planning Principles, Professional Conduct, and Regulation. It also includes several analytical problems that will allow you to apply your knowledge to real-life scenarios.

Download Free eBook

What Does MBA Stand For?

Business

If you’re looking to further your career in business, earning an MBA degree can be an important first step. Explore the value of a Master’s of Business Administration degree and discover how they can offer opportunities across a broad range of businesses and industries.

Resources for Aspiring Advisors

A great organization I’m a proud member of is the Financial Planning Association. It’s a tremendous resource for consumers and financial professionals. For someone who is hoping to get in the financial planning business, FPA offers a residency program (think of it as an internship) which is a client-centered training experience using comprehensive and detailed case studies.

By completing the 6-day internship program, candidates will be eligible for 30 hours of CFP Board continuing education credit or three months of financial planning work experience. You can learn more by visiting the FPA’s website.

Step 3. Pass the CFP Exam

Although you can register for the CFP Certification Examination before completing your bachelor’s program, you are required to have the CFP Board coursework complete before applying. When you submit proof of completion after initiating the registration process, the CFP Board will notify you of your eligibility to take the exam.

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The test itself is given in a computer-based format and consists of 170 multiple-choice questions that you must complete within two 3-hour sessions separated by a 40-minute break.

The Board recommends that candidates spend at least 250 hours studying for the test.

Questions cover real-world situations that require you to apply what you learned from the required educational component.

As of late 2019, the standard registration fee for the exam was $825.

Obtaining New Business

Finding clients who need those services and building a customer base is crucial to experiencing success as a financial planner because referrals from satisfied clients are an important source of new business. Whether you find new clients by giving seminars or lectures, through social or business contacts, or simply by cold calling, find them you must.

Having a broad social network is one reason many successful financial planners enter the field after working in a related occupation such as accountant, auditor, insurance sales agent, lawyer or securities, commodities, and financial services sales agent.

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