Certified Financial Planning (CFP)
| Holland Webb Modified on March 23, 2022
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Certified financial planners (CFPs) hold the highest professional credential in their field. As of 2021, about 20% of financial advisors hold CFP certification. These finance experts must meet strict education and experience requirements. CFPs must also pass a rigorous six-hour exam.
The nonprofit Certified Financial Planner Board of Standards sets the requirements for the CFP designation. Founded in 1985, this organization represents about 90,000 CFP professionals.
Most people who earn financial planning certification work as financial planners. Job titles may also include wealth manager, financial consultant, and personal financial advisor. These specialists often focus on investments. They may also offer guidance in areas such as retirement, taxes, insurance, and risk management.
Regulatory agencies do not require planners to hold CFP certification. However, this designation can lead to higher salaries and wealthier clients. The Bureau of Labor Statistics (BLS) reports that financial planners earned a median annual salary of $89,330 as of 2020. The BLS projects a 5% job growth for this profession from 2020-2030.
Why Get CFP Certification?
- Competitive Advantage
- CFPs may earn more than other financial professionals. A 2016 Aite Group study found that CFPs earned 26% more than other equally experienced financial planning professionals. Practices with CFPs on staff also generated 40% more revenue and attracted 53% more high and ultra-high net worth investors than their competitors.
- Client Confidence
- As financial professionals, CFPs hold ethical, legal, and professional obligations toward their clients. Once a financial planner has earned certification, they may use the term "CFP" after their name, potentially boosting client confidence. In the Aite Group study, 70% of CFP respondents believed the designation increased client trust.
- Expanded Knowledge
- CFPs need a bachelor's degree or higher, often in a finance-related field. They must also complete a CFP Board-approved course. Candidates need 4,000-6,000 hours of professional experience before receiving their certification. Finally, CFPs must pass a six-hour, 170-question exam.
How Do You Get Certified in Financial Planning?
Becoming a CFP requires education, experience, and an exam. Candidates need a bachelor's or graduate degree in any field. Before the exam date, test-takers must finish CFP Board-approved coursework. Candidates may conclude their bachelor's degree within five years of passing the CFP exam.
The CFP exam consists of 170 multiple-choice questions. These questions assess a candidate's ability to apply financial planning knowledge to real-world scenarios. Certification also requires 4,000-6,000 hours of relevant professional experience.
Certification as a financial planner calls for at least a bachelor's degree. CFP Board does not stipulate a specific major. However, candidates with degrees in accounting or a related field may be better prepared for their examination and professional experience.
People who already hold a bachelor's degree may wish to pursue a master's degree or doctorate in business or accounting. Graduate education may qualify professionals to teach financial planning. Teaching can count toward a certification candidate's required experience hours.
- Read about bachelor's degree programs in accounting.
- Read about master's degree programs in accounting.
- Read about doctoral degree programs in accounting.
The path to CFP certification includes four major points: education, exam, experience, and ethics.
Candidates must gain 6,000 hours of experience on the traditional pathway or 4,000 hours on the apprenticeship pathway. Providing direct client service, supporting a financial planner, or teaching financial planning can all count as experience. Finally, candidates must agree to perform their duties with the highest level of professional ethics.
What Does the CFP Exam Cover?
CFP exam-takers must demonstrate the knowledge and competence to practice as a CFP. The exam comprises 170 multiple-choice questions covering eight principal topics. Each question relates to one or more of these topics.
Volunteer subject matter experts craft each question based on the principal knowledge domains. Members of the Council on Examinations also review and approve all exam questions. The questions emphasize critical thinking and problem-solving skills. Instead of memorizing facts, test-takers apply their knowledge of financial planning principles to real-life situations.
On exam day, test-takers must present a government-issued identification card. Test center administrators take examinees' photos and fingerprints, then conduct a brief body scan. Candidates should bring a non-programmable, battery-powered calculator.
Items such as water, snacks, and notes must remain in the candidate's locker except during the scheduled 40-minute break. Test-takers may take additional breaks, but the clock will continue to run during those breaks.
The exam includes three hours of testing, 40 minutes of break, and another three hours of testing. The break begins after the test-taker has answered the first 85 questions or after the first three hours, whichever comes first. Candidates may finish the exam early if they wish.
Scoring the Exam
Test-takers pass or fail the CFP exam based on their performance across all sections. Each is worth one point. CFP Board determines the minimum competence level required to pass.
Because the exam consists of multiple-choice questions, test-takers receive preliminary results immediately after completing the exam. Official results arrive in the mail about four weeks later. Each candidate sits for the exam in a Prometric testing center under a live proctor's supervision.
About 62% of test-takers pass the CFP exam. In July 2021, 2,539 people registered for the exam, and 1,576 passed it. Test-takers who do not pass receive a diagnostic report indicating areas of strength and weakness.
Candidates who do not pass the exam may retake it up to three times in a 24-month period or a maximum of five times altogether. When registering to retake the exam, candidates must pay the full fee.
How Do You Register for the CFP Exam?
Each year, CFP Board offers the CFP exam during three eight-day windows. Test applicants must register for the exam, pay a registration fee, and schedule their testing appointment. To register, applicants need to create an online account with CFP Board.
Applicants can pay their registration fee online by credit card. After paying, registrants receive instructions for selecting their appointment using the Prometric website.
By scheduling the exam at least six weeks in advance, test-takers can save on registration costs. Before picking a test date, applicants should make sure that they can meet all their certification requirements by the deadline.
Test-takers who do not complete their approved coursework before the exam must pay a $250 postponement fee. Fees apply to candidates who withdraw or reschedule their tests except in qualifying emergencies.
Paying for the Exam
Exam costs depend on when test-takers register. Early-bird registration costs $825 instead of the standard fee of $925. Late registration costs $1,025. Applicants can pay the early-bird rate from the time registration opens until six weeks before the test. Late registration fees apply during the two weeks immediately before the exam date. CFP Board offers scholarships for qualifying applicants.
How Can You Prepare for the CFP Exam?
Test-takers should schedule enough study time before the exam. As with most other tests, studying early is the best way to prepare. Other tips for scoring well on the CFP exam include seeking out a mentor, joining a study group, and examining relevant case studies.
- Work Through Case Studies
- The test includes no essays or written responses, but many CFP exam questions originate from case studies. In addition to learning facts using flashcards or video courses, students should practice answering multiple-choice questions about financial planning case studies.
- Study CFP Board's Code of Ethics and Standards of Conduct
- Test-takers should familiarize themselves with CFP Board's code of ethics and standards of conduct. CFP Board publishes this information on its website. Readers can also review sanctions, disciplinary procedures, and anonymous case histories on the site.
- Create an Efficient Study Plan
- The CFP exam covers eight categories. Each category includes a percentage of the questions on the exam. Knowledge categories include topics such as professional conduct and regulation, investment planning, and tax planning. Make sure to devote time to each subject.
- Focus on Applying What You Know
- CFP test-takers must apply their financial planning knowledge to situations they might encounter on the job. The exam includes questions from short scenarios and case studies. When preparing for the test, students should emphasize application over memorization.
- Select a Study Course
- CFP Board offers many resources to help test-takers get ready for the exam. These resources include webinars, practice exams, an online forum, and a mentor program. Other test-preparation companies also offer both free and paid study aids such as books, courses, and practice tests.
Practice Exams and Study Resources
CFP Board offers two full-length, 170-question practice exams based on previous CFP tests. Students can access these practice exams online. Instant feedback allows test-takers to see which questions they missed and read explanations of the correct responses.
Test-takers can enroll in CFP Board's mentor program three times a year. Mentors provide support for 3-4 months. Candidates connect with their mentors at least three times, either online or in person. The mentor shares their own experience of preparing for and passing the exam.
Kaplan offers many free and paid resources to help test-takers study for the CFP exam. Users can access webinars, practice exams, and a study guide. Interested students may call a Kaplan designation specialist to discuss which of these resources best suits their needs.
What Is Needed to Stay a Certified Financial Planner?
After earning the CFP designation, CFPs need to maintain their certification. These professionals need to complete 30 continuing education credits during each two-year reporting period.
Two continuing education credits must cover financial planning ethics. The remaining 28 credits should cover one or more of CFP Board's principal knowledge topics. CFPs who do not meet the continuing education requirement must retake the exam to maintain certification.
Should You Get Multiple Certifications?
The term "financial planner" does not denote any specific credential. However, the CFP certification indicates that a financial planner holds many years of industry experience. CFPs focus on financial planning, but their clients may also need help with taxes, business development, or other wealth management areas.
Holding additional credentials can help financial planners offer more services. For example, CPA licensure can equip financial planners to help optimize their clients' taxes. Becoming a chartered financial analyst may boost a financial planner's investment portfolio management skills.
Frequently Asked Questions About CFP Accounting
How hard is CFP certification?
One of the most challenging exams in the financial planning industry, the CFP exam consists of 170 questions. Test-takers must complete the exam within six hours. During the test, examinees may use the tax tables and formulas the tester provides but no notes.
How long does it take to become a certified financial planner?
Becoming a CFP requires a four-year degree along with about three years of full-time financial planning experience. To sit for the exam, applicants must also complete a CFP Board-registered program or hold another qualifying degree or certification.
Is getting certified in financial planning worth it?
CFP certification can confer marketplace credibility for financial planners. Certified planners can use their CFP designation to set themselves apart from non-certified peers.
What is the CFP exam for?
Passing the CFP exam meets one of the requirements to become a certified financial planner. The exam covers key personal finance topics like taxes, investment, retirement, and estate planning.
Featured Image: MoMo Productions / DigitalVision / Getty Images
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