Certified Financial Planner (CFP) | Complete Guide

The Certified Financial Planner (CFP) is a recognized certification given to experts in the fields of financial planning, taxes, estate planning, insurance, and retirement planning. The CFP professionals go through rigorous education, and training and meet ethical standards. A CFP serves as an advisor who holds one of the prestigious certifications for financial planning. Their prime objective is to serve the best interests of their clients today to prepare them for a better and secure tomorrow.

These professionals should have some years of experience in the field of financial planning, clear the CFP exam, and comply with the strict ethical standards amended by the Certified Financial Planner Board of Standards. Unlike other financial advisors, CFPs are obligated to serve the best interests of their clients, it is is fiduciary standard.

Key Takeaways:

• The Certified Financial Planner Board of Standards, Inc. awards CFP certifications is eligible individuals.
• The CFPs serve their clients in managing multiple financial areas for example retirement planning, educational purposes, investing decisions, insurance, and taxes.
• A rigorous training of around 4000 to 6000 hours in total is required to fulfill by a CFP^TM, after which they are eligible for suffixing their name with CFP. Post receiving the CFP certificate, they must continue their education.
• Becoming a CFP requires multiple years of experience, successful completion of CFP exams, showcasing ethical standards, and a formal rigorous education.

CFP is a professional financial advisor who after going through rigorous training and education, achieve their dream job of financial planning. It gives them a sense of satisfaction as they are able to help their clients in the best way possible. Some of benefits of the certification is listed below,

1. Improves Credibility: With this certification, a trust is build among clients and elevates the reputation of the CFP professional.

2. Broader Opportunities: Multiple opportunities lines up after being certified CFP. Different high-paying positions and career paths open up in the field of finance.

3. Improves Skills: As this program demands rigorous training and education, it enhances your financial planning expertise. This gives the power to tackle any financial needs and demands of your clients.

4. Fiduciary Duty: CFPs should comply with strict ethical standards and this professional behaviour builds trust among clients as you are committed to act on the best interest of your clients.

If you are a graduate (possess an undergraduate degree), you will require on an average 18 to 24 months to become a CFP. You can pay a minimum amount of $925 and do not require the pursue the coursework. Further, those candidates who do not possess financial designation, can apply for CFP program but they need to fulfill an experience criteria ranging from 24 to 36 months.

1. Meet the Educational Criteria: Specific courses on financial planning is needed to be completed and a bachelor’s or higher degree from an affiliated university or college is required as specified by the CFP Board. These are the two major components required in the eligibility of education. A flexibility is there that they get a relaxation period of five years after passing the examination to complete their bachelor’s degree. If you have completed related courses in financial planning or possess certain professional designations such as chartered financial analyst (CFA) or certified public accountant (CPA) or even a higher degree such as master of business administration (MBA), you can bypass the CFP Board’s compulsory coursework.

2. Eligibility in Experience: The CFP aspirants need to have a full-time professional experience of atleast 6000 hours (or three years) in the field of financial planning or at least 4000 hours (or two years) of apprenticeship that meets additional requirements. This eligibility criteria needs to be completed either prior attempting the exam (within 10 years) or after clearing the exam (within five years).

3. Process for Registering: For appearing in the exam, there are certain steps which you need to follow. You must first complete CFP Board’s exam registration and then pay the registration fee for the exam. After this, you need to schedule your test date with Prometric. Before getting started, you must have a CFP Board online account where registration is free, secure and fast. The below steps needs to be followed to complete your registration process-

• Create or log in (if previously registered) to your secure CFP Board account for initiating the registration process.
• After log in, in the Account Dashboard, look for the “Exam” section. Here, click on the link “Select Your Test Dates” and fill in the required details and complete the registration form for the exam.
• Pay the required registration fee using credit card or debit card. Online transaction is possible.
• In Prometric, schedule your testing dates or fix your testing appointment. For this step, instructions will be provided on the website.

There is a flexible period of when you want to appear for the exam as the CFP exam is conducted three times in a year (March, July and November) and on a 8-day testing window. In Promteric, first-come, first-serve motto is followed for scheduling your test dates. It would be helpful if you register for the exam at least two months before for choosing the best date and site availability.

4. Fees for the Registration: The standard registration fee is $925. However, till 6 weeks before the registration deadline, an early bird fee of $825 is applicable. During the final week of registration, a late fee of $1,025 is applicable.

5. Comply with the Ethical Standards: Before you are certified CFP, you need sign the Ethics declaration, where you promise to act as a fiduciary for your clients and then the CFP board conducts an extensive background check where you need to pass. The CFP holders and the future CFP holders must comply to the CFP Baord’s standards of professional ethics. Regular disclosure of information related to any involvement in criminal activity, bankruptcies,termination by employers, customer complaints or inquiries by government agencies must be done to the CFP Board.

For the financial planners, two compensation methods are applicable: salaries and payouts. Few organizations offer salaries to their financial planners. Others compensate depending on a percentage of the revenue that they generate, this means based on the productivity and business development success, their financial planners are rewarded.

As per Forbes advisor, a survey was conducted in 2018, where on an average a financial planner charged $235 per hour. An average of $1,871 (between $1,800 and $2,500) was charged for a comprehensive financial plan. For regular service, an annual average of $5,528 per year was charged.

According the CFP Board, based on years of experience, their income differs. For a CFP with 5 to 10 years of experience, their annual average income is $152,000. For 10 to 20 years of experience, a CFP can be paid an average amount of $206,000. Whereas, for CFP professionals who have more than 20 years of experience, earn a median income of $250,000.

A management fee can also be charged by the CFPs to their clients based on the asset value in their account. As per Advisory HQ survey, an average annual management fee ranges from 0.59% to 1.18%.

The CFP exam comprise 170 multiple-choice questions (MCQs) to be solved within 6 hours. These 170 MCQs are from more than 100 topics related to financial planning. The overall areas focussed comprise financial panning principles, risk management, professional conduct and regulations, insurance, education planning, investments, retirement planning, tax planning and estate planning. Further, every topic has different weights are assigned, which you need to check in the CFP Board website. As per the CFP Board, in 2023, on an average around 67% of first-attempters passed the exam.

Remaining questions asked in the examination, test the applicant’s expertise in establishing relationship between the client and the financial planner and acquiring relevant information. Further, their potential to analyze, communicate, develop, implement and monitor the suggestions they offer to their clients.

Further details of the examination is as follows,

• On a single day the exam is held in two sessions. The candidates are allowed a 40 minutes break between the two sessions.
• This CFP exam is criterion-referenced evaluation, where the performance is calculated based on a pre-defined level of competency instead of relative scores of other examinees. This method avoids any advantages or disadvantage that might have occurred if other exams were more or less level of difficulty.
• You are allowed to take additional four attempts if you fail the first one.

1. Don’t rely on multiple sources. Try to use the official CFP Board resources. It consist of handbook for candidates, outline and structure of the exam and sample questions which would familiarize you with the exam format and content.

2. Enrol yourself to a CFP Exam Review course that would act as a supplement to your preparation. Some reputed companies are Kaplan, Dalton Education and College for Financial Planning.

3. Practice sample questions as much as possible to be comfortable with the exam format and content. You can evaluate your preparation using these practice tests.

4. Prepare a study plan and try to stick to it. All areas and topics should be comprehensively covered. Both the weaker and stronger areas should be properly looked into. Here goes a famous quote: “If you fail to plan, then you plan to fail.”

5. Look for peer groups who are preparing for CFP exam. Join their groups or online forums to discuss concepts, strategies, clear your doubts and ask questions. Sometimes, this peer support can keep you motivation to not give up and keep studying.

6. While practicing, focus on time management. While studying and giving practice exams, try to manage your time so that during the actual exam, you are comfortable in managing your time effectively.

7. Regularly keep checking for updates or changes related to the exam (syllabus or pattern) in the CFP Board website and other relevant sites.

To become a CFP, one needs to have education qualification, minimum experience and a strong sense of financial ethics. Clearing the test and being eligible for the CFP program, doesn’t guarantee that the CFP Board would award you the certificate. The final decision is always with the CFP Board.

So prepare yourself well and along with that make a strong personality of being ethically fit. Financial ethics is the most important aspect in this prestigious profession.

How vast is the CFP exam?

The CFP exam is a tough exam as it requires a lot of preparation and one needs to cover a vast variety of topics in depth. To ensure your safe hands in this exam, you should be well prepapred and focus on what is relevant and stick to your study plan.

Is there any difference between CFP and CFA?

Yes. A CFP (Certified Financial Planner) offers financial planning advice such as investment decisions, estate planning, retirement planning and taxes to individuals. Whereas, a CFA is a Chartered Financial Analyst. They work for investment banks or hedge fund and they are experts in financial analysis, modeling, portfolio management and trading services.

What is the difference between a CFP and a financial advisor?

A CFP is a certified professional who have had some amount of experience and is obligated to follow fiduciary standard. While financial advisor is an umbrella term which actually covers different types of financial advisors such as investment advisors, brokers, financial consultant, financial coach, CFP, wealth advisors, portfolio and asset managers, and robo-advisors.