A Certified Financial Planner (CFP) is someone who has received certification from the Certified Financial Planner Board of Standards, Inc. This qualifies them to help their clients to manage their personal finances, estates and investments. This is also referred to as assisting with ‘wealth management.’
What does a CFP do?
A Certified Financial Planner helps their clients to make financial decisions pertaining to savings, investment plans and similar financial considerations. They start by establishing the financial goals of their clients, analyzing their net income, basic expenses and spending habits and then advise them on how to budget and invest their funds in order to achieve their goals. They assist their clients with both short- and long-term financial goals, including positive goals such as retirement plans and college funds for the children, as well as less pleasant considerations such as divorce, funerals and inheritance.
Although a CFP is similar to a CFA in some ways, they differ in that a CFA focuses on investment management for institutions and businesses while the CFP is designed around holistic financial planning for individuals. The CFP is also considered to be an easier exam than the CFA.
Some of the tasks they perform can include:
- Assisting with retirement plans
- Debt management
- Researching and advising on investment options
- Researching and advising on insurance options
- Tax advisement
- Retirement planning
What can’t CFP do?
A CFP cannot work in public accountancy, meaning that they cannot present their clients before the IRS or sign tax forms or audit statements.
Why become a Certified Financial Planner?
A CFP certificate demonstrates that you have the knowledge and skillsets necessary to manage the investments of your potential clients. It will also look good on your resume when you are applying for positions in investment firms or other accounting or financial positions, as well as serving as a basis for better terms in wage negotiations. Additionally, just the fact that you enhance your knowledge base is already a boon, as it will help you to understand the financial and investment world more proficiently.
With that said, a CFP certificate is geared towards promoting a specific skillset, in that it is meant to help you with your competency as a financial planner. If that is the field that you are hoping to go into, or if you work in industry, then this might be useful for you. If you are planning on pursuing public accounting, then it might not be.
How to become a Certified Financial Planner
There are several requirements that a CFP candidate needs to fulfil before they can apply for certification. Firstly, they will need to acquire both a bachelor’s degree from an accredited college or university, as well as complete the CFP Board-approved coursework. Next, they will need to pass both sections of the CFP exam.
Some of the coursework covered by the program includes professional conduct and regulation, general principles of financial planning, risk management and insurance planning, investment planning, tax planning, retirement savings and income planning, estate planning, psychology of financial planning, financial plan development, among others.
The candidate will also need to complete one of two work experience pathways. The first is 6,000 hours of professional experience related to the financial planning process, or alternatively, 4,000 hours of apprenticeship experience that meets additional requirements. This experience can be gained at any stage of the CFP certification process. It can be reported at any time as well.
The final requirement is to submit to a background check and to sign the CFP Board’s Ethics Declaration once you are approved. After all of these steps have been completed, the applicant can submit their application form and pay the certification fee.
The full requirements can be found here.
Taking the CFP Exam
Unlike other accounting and financial certifications, both parts of the CFP exam are taken on the same day. Overall, it comprises of 170 multiple-choice questions that are divided into two 3-hour sessions. The exam includes stand-alone and scenario-based questions, as well as questions associated with case studies. You will get one free practice exam along with your exam registration. There are also a few CFP Board-approved exam preparation courses to choose from.
When you can take the CFP exam
The CFP exam can be taken three times a year and can only be taken after the educational requirements have been fulfilled. Typically, the exam periods are a week-long, and are held in November, March and July. Further information can be found here.
How long should you study for the CFP exam?
Most courses seem to recommend taking about 120-140 hours of pre-study to prepare for the CFP exam.
What are the fees for CFP certification?
Exam registration fees:
- Early – $825 USD
- Standard – $925 USD
- Late – $1,025 USD
General CFP certification fees:
According to the CFP Registered Programs Reporting and Fees pamphlet:
What is the pass rate for the CFP exam?
In July 2022, there was a 66% pass rate for the CFP exam, with 1,1712 out of 2,596 candidates passing the exam.
How much does a Certified Financial Planner earn?
According to PayScale, the average annual salary of a CFP is $68,864 USD.
Do you need to renew your CFP certificate?
Yes, the CFP certification needs to be renewed according to a 3-year cycle.