Certified Financial Planner

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The Certified Financial Planner (CFP) designation is a professional certification mark for financial planners conferred by the Certified Financial Planner Board of Standards (CFP Board)[1] in the United States, and by 25 other organizations affiliated with Financial Planning Standards Board (FPSB),[2] the international owner of the CFP mark outside of the United States.

To receive authorization to use the designation, the candidate must meet education, examination, experience and ethics requirements, and pay an ongoing certification fee.[3] The information relates specifically to CFP certification in the United States.[4] In the UK, the CFP licence is available to financial planners through membership of the Institute of Financial Planning.[5]

Education requirements

To earn the CFP Board designation, candidates in the United States must meet several requirements—the first of which is the educational requirement, which requires candidates to have a bachelor's degree (or higher), or its equivalent in any discipline, from an accredited college or university.[6] In Canada, no formal university or even community college educational requirements are needed. The majority of CFP holders in Canada lack formal university education in business or commerce; however, many do possess some level of local community college training. The bachelor's degree requirement in the United States may be completed after passing the CFP exam (within five years) and is also not a requirement to be eligible to take the CFP Board Certification Examination. [1] As a first step to the present CFP certification criteria, students must master a fairly rudimentary list of approximately 100 topics on financial planning.[7] The curriculum taught must be the equivalent of 18 semester credit hours (e.g. 6 courses). The topics cover major planning areas such as:

  • General Principles of Finance and Financial Planning
  • Insurance Planning
  • Employee Benefits Planning
  • Investment and Securities Planning
  • State and Federal Income Tax Planning
  • Estate Tax, Gift Tax, and Transfer Tax Planning
  • Asset Protection Planning
  • Retirement Planning
  • Estate Planning
  • Financial planning and consulting

Individuals holding professional designations pre-approved by the CFP Board, which include attorneys, Certified Public Accountants (CPA), Chartered Certified Accountants (ACCA), Chartered Accountants (CA), Chartered Wealth Managers (AAFM), Chartered Life Underwriters (CLU), Chartered Financial Consultants (ChFC), and Chartered Financial Analysts (CFA)) are all entitled to register for and take the exam without having to complete the education requirements by using the CFP-board's "challenge" status.

Despite the relatively rudimentary prerequisite educational requirements, only PhDs in business or economics are exempted from the educational requirements. The CFP board excludes Bachelor or Masters MBA degrees from accredited universities in Finance, Business, Economics, Commerce and Accounting as part of its educational exemption list, thus limiting the overall appeal of the designation for university educated finance, economics, & business professionals and creating a generally negative perception of attempted Credentialism on the part of the CFP board.

Individuals who seek to challenge the CFP certification exam after March 2012 will be required to take a financial planning Capstone course before sitting for the exam.[8]

International degrees may be substituted for a U.S. degree if they receive equivalency from a third-party organization. The CFP Board began requiring a college education in 2008. In the early years for the first 25,000 CFP members, candidates could take the 5 courses and achieve certification without a comprehensive exam. In 1991 a comprehensive exam became required for new students.[9]

In recent press, the CFP Board and other organizations have communicated with the CFPB Consumer Financial Protection Bureau to augment accredited degree standards and ranking of professional designations.[10]

Examination

The CFP Certification Examination is a 10-hour multiple choice exam that contains 285 questions. The exam is divided into one four-hour session (Friday afternoon) and two three-hour sessions (Saturday). The exam includes two case studies, multiple mini-case problem sets and stand-alone questions. The exam is designed to assess the student's ability to apply his or her knowledge of the aforementioned areas to financial planning situations. The exam was set as a requirement in 1993 and at that time CFPs were grandfathered without having to pass this exam. Prior to 1993 the certification exam(s) consisted of six 4-month study topics with a four-hour exam following each topic for a total of two years of study and 24 hours of exams which included both multiple choice and written analysis of case studies.

Effective November 2014, the CFP Certification Examination is being converted from a paper-based test to a computer-based test, and the exam length will be cut to only 170 questions to be taken in a 6-hour testing period (two 3-hour segments with a 30-minute break),[11] a 40% reduction from the prior exam length and duration.

The pass rate for the CFP certification exam fluctuated historically between a low of 42% and a high of 66%.[12] The pass rate tends to be slightly higher for first-time test takers and lower for repeaters.

Work experience

The candidate must demonstrate that he or she has extensive experience in the financial planning field. The CFP Board defines work experience as "the supervision, direct support, teaching or personal delivery of all or part of the personal financial planning process to a client"[13] and such experience must fall within one or more of the following six primary elements of financial planning:

  • Establishing and Defining the Client Relationship
  • Gathering Client Data and Goals
  • Analyzing and Evaluating the Client's Financial Status
  • Developing and Presenting Financial Planning Recommendations and Alternatives
  • Implementing the Financial Planning Recommendations
  • Monitoring the Financial Planning Recommendations

After the student passes the exam and meets one or more of the six primary elements of financial planning, he or she must also have completed the following:

  • Three years full-time or equivalent (2,000 hours per year) part-time experience in the financial planning field
  • Two years of full-time experience under the "Apprenticeship Experience" option, which requires experience focused exclusively on personal delivery of all the steps of the personal financial planning process to a client under direct supervision of a CFP professional (the Apprenticeship option became effective September 1, 2012)[13]
  • Be approved by the CFP Board during initial certification, which also involves an extensive background check—including an ethics, character and criminal check.

Ethics and continuing education

The final components are the ethics and continuing education requirements.[14] Students and certificants are required to adhere to the CFP Board Code of Ethics and Professional Responsibility and to the Financial Planning Practice Standards. Registered investment advisors have a fiduciary duty to care for investments.[15] The CFP Board has the right to enforce them through its Disciplinary Rules and Procedures.

To maintain certification, license holders are also required to complete thirty (30) hours of continuing education, of which two (2) hours the Board of Standards approved ethical information, on an ongoing basis in addition to paying a licensing fee every two years.

Related designations

There are over 208 designations available for financial-services professionals.[16] These are some of the more common designations.

See also

References

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  7. ↑ "Financial Planning Topic List", CFP.net
  8. ↑ Lua error in package.lua at line 80: module 'strict' not found.
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  13. ↑ 13.0 13.1 Lua error in package.lua at line 80: module 'strict' not found.
  14. ↑ "Ethics Requirements for CFPs", CFP.net
  15. ↑ "Choosing a Financial Advisor", Financialadvisorbooks.com, Accessed: Jan 21, 2010.
  16. ↑ Lua error in package.lua at line 80: module 'strict' not found.

External links

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