What are the Requirements to Become a CFP?

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Certified Financial Planner (CFP^®) certification plays a major role in the growing demand for financial-advisory professional services. Although it is not legally regulated, and as such it doesn't give special privileges by law, the high standards set by its administrant, the U.S. Certified Financial Planner Board of Standards, Inc. (or CFP Board), makes it a very desirable mark for engaging customers who are looking for highly-qualified practitioners committed to ethics and skilled at working with people. According to “CFP Board's 2004 Consumer Survey”, 28% of upper-income consumers sought out professional financial advice and assistance, which was 3% more compared to 1999. Among the criteria for selecting an adviser, professional accreditation was mentioned by 81% of the respondents. Plus, 84% of those who used a CFP certificant as their primary adviser said they were extremely or very satisfied.

A bachelor's degree (or higher) is a requirement for certification, but you can take the CFP exam before receiving your degree

Earning a CFP Certification can be a crucial step in your career advancement. Reasons are twofold: you would enhance your professional opportunities while acquiring a broad body of knowledge on financial planning, related subjects and professional practice. This document explains the steps required for achieving this rewarding goal.

Note that these are requirements for certification within the United States; Canadian residents and other countries' can consult the Financial Planning Standards Board (FPSB) website, they are the owners of the CFP mark outside of the U.S.

Education

There are two requisites in regards to education: to demonstrate knowledge in all of areas covered by the certification exam, and to hold a bachelor's degree (or higher), or its equivalent, in any discipline, from an accredited college or university. The latter is a condition for certification, but you can take the CFP Certification examination before receiving a bachelor's degree, as long as you get it within five years of passing the exam (an extension may be granted).

Courses vary considerably in their length, difficulty, cost and style. Before enrolling, select carefully, keeping in mind that this is an important investment of your time and money

The first of the education requirements can be attained in one of several ways. The most common is to complete a CFP Board-Registered Education Program. These programs vary considerably in their length, difficulty, cost and style. Some are offered by major universities, others by small colleges and specialty schools. There are distance learning programs, including online courses. Others are classroom only, and many are a combination of the two. Before enrolling, select carefully, keeping in mind that a CFP mark is an important investment of your time and money.

Some programs, many of the online ones, are offered in modular courses. If you are not sure about being able to complete the full study, you can begin by enrolling for one module, and evaluate your possibilities as you go. Even if you figure out that the CFP certification is beyond your possibilities, the partial program will probably be a good investment in your education.

Education for Certified Financial Planner Certification covers a broad list of topics, including the following (in parentheses we give the amount of coverage in the CFP Examination, as stated by the CFP Board in 2006): general principles of financial planning (11%), insurance planning and risk management (14%), employee benefits (8%), investments (19%), income tax (14%), retirement (19%), and estate planning (15%). Knowledge on effective communication with the customer, ethics, and professional practice, complement each one of the topics.

There are other ways to fulfill the education CFP requirement, instead of completing a registered course. If you hold a an academic degree or professional credential approved by the CFP Board, you may sit for the exam without the course prerequisite, by challenge status. These credentials include the CPA, ChFC, CLU and CFA^® charters, as well as attorney licenses. Inactive licenses are acceptable. With regard to degrees, challenge status can be attained with a PhD in business or economics.

On the other hand, if you can demonstrate that you have successfully completed equivalent coursework at an accredited college or university, you may be eligible for partial credit by transcript review. If the CFP Board approves your partial-credit application, you may fulfill the educational requisite by completing, from a registered program, no more than the topics that were not covered on your previous education.

You can find more about the educational requisites at the CFP Board's website. Please check their conditions before making decisions, because this document will not instantly reflect changes they may make after the time of this writing.

Certification Exam

Typically, there are 3 case scenarios and 3 corresponding sets of multiple-choice questions on each exam

The CFP Certification Examination is a thorough, multiple-choice test. Divided in 3 sessions that add up to 10 hours of length, it covers the topics that were mentioned in the previous section, with the use of major case scenarios such as the ones that can be studied here. Each scenario is followed by 10 to 20 multiple-choice questions. Typically, there are 3 case scenarios and 3 corresponding sets of questions on each exam.

Consider taking an exam review course before sitting. The exam has a fee (currently $595) to be paid in full by the application deadline. These fees may be reimbursed to veterans (consult with CFP Board). More information on the test and its logistics can be found online at the CFP Board website.

Experience Requirement

3 full-time years of related work experience are a requisite for certification. The Certified Financial Planner Board defines relevant experience as “the supervision, direct support, teaching or personal delivery of all or part of the personal financial planning process to a client.” On this page they explain these terms in more detail.

Part-time experience is computed as 2,000 hours equaling one year full-time. They require that 6 months of the experience is acquired within 12 months of reporting it, and that the total is gained up to 10 years before or up to 5 years after the exam date. Extensions may be granted.

Visit this page to learn more about the work-experience CFP requirement.

Adherence to Board's Standards

The final component of initial certification is related to ethics. The CFP Board requires applicants to adhere to their Code of Ethics and Professional Responsibility and their Financial Planning Practice Standards, as well as to acknowledge the Board's right to enforce those rules through disciplinary procedures.

A background check, or Candidate Fitness Standards test, is also performed. Candidates will be rejected if they have been convicted for financial-based crimes, or violent crimes within 5 years of application, had a financial professional license revoked, or sustained two or more personal or business bankruptcies. Other reasons for rejection may be: one bankruptcy in the last 5 years, more than one judgment lien, revocation of a non-financial license, suspension of a financial one (unless the suspension is administrative in nature), conviction for non-violent crimes, and felony conviction for violent crimes other than murder or rape that occurred more than 5 years ago. These reasons, unlike the ones before, may not disqualify an individual, depending on the result of a review by the CFP Board staff, for which there is a petition-for-reconsideration procedure.

CFP Board may review your employment record, qualifications and disciplinary history through FINRA's Central Registration Depository (CRD).

Fees

There is an exam fee of $595 and an application fee of $100 (current values as of 07/2009), to which tuition costs have to be added, normally in the thousands of dollars range

As said before, the certification exam has a fee which is, at the time of this writing, of $595, to be paid in full by the application deadline. There is also an initial certification application fee of $100 for the background checks. To those fees, remember to add education costs. Tuition for registered courses is normally in the thousands of dollars range. As we already mentioned, prices vary greatly, but so does quality.

Besides the fees for initial certification, there are renewal ones, as explained below. These are currently biennial, of $360.

Continuing Education and Certification Renewal

Completing the previous steps should grant you a CFP Certification, including the authorization to use the CFP^® and CERTIFIED FINANCIAL PLANNER™ marks, and also the CFP logo. To continue to use them after every 2 years, you must apply for renewal, complete 30 hours of continuing education, and pay a renewal fee (currently $360, as already mentioned). The continuing-education requirement comprises 28 hours of financial-planning topics plus 2 hours from a pre-approved program on CFP Board's Code of Ethics and Professional Responsibility or Financial Planning Practice Standards.

Conclusions

Financial planning is a fast-growing career, dealing with a line of work that affects people's lives significantly. The high value of a recognized, professional certification such as the CFP mark is due to the utmost importance of confidence in this client-practitioner relationship. If you are have a background in finance and are interested in working with people, designing strategies for the fulfillment of their financial objectives, then consider taking this step towards your career advancement.

As already said, before making any decisions, please visit CFP Board's website to make sure that the conditions explained here are up to date. If you spot any inconsistencies, we would appreciate that you let us know.

We wish you all the best on your career development!

(CFP^® is a registered trademark of the Certified Financial Planner Board of Standards, Inc.)

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