After the Great Recession of 2008, people began to worry that they didn’t know how to manage their money. By earning your degree as a financial advisor or planner, you’ll gain the knowledge and skills you need to assist people who want to better manage their money and investments.
Not everyone knows how to take care of the money they have or how to make it work for them on a long-term basis. Once you complete the educational requirement and initial certification, you will have that knowledge. Your education in college will be thorough and challenging. After you graduate and begin working, the next step will be preparing to take your certification exam to become a CFP professional.
And, once you have your certificate hanging on the wall in your office, you’ll be able to counsel your clients, figure out what assets they have, and develop a comprehensive and workable financial plan that allows you to give them the guidance they need in order to reach their financial goals.
What is a Financial Planner?
This specialist is a certified professional financial advisor who gives clients planning advice that work for their goals. If this is your career goal, you may also go through your clients’ financial situations and develop suggestions on how they can make them better. You may suggest planning for education funding for their children or you may help potential clients plan for retirement. You can also engage in income tax planning for those with complex tax issues, employee benefits planning, advise on financial investments, and provide other pertinent financial services, market portfolio management, and investment advice to individuals.
What Does a Financial Planner Do?
When clients come to you as a financial advisor, you’ll interview them extensively to find out what their current financial picture looks like. You’ll learn about their current needs so you can help them to clean up any outstanding debts and talk to them about their future financial and retirement plans; do they want to retire sooner rather than later? Once they have retired, do your clients know what they want to do? Will they travel, stay at home and enjoy their lives, or even start a new business? This can be a long process in terms of time spent but is necessary to give you the chance to give them the big picture view on their future from a financial professional.
If you decide to specialize in one area (some work specifically as investment advisors giving only investment advice), you’ll focus on just one aspect of your clients’ finances. Some financial advisors work on simplifying potential client's tax picture, or you may become familiar with their investments and begin to guide them so that they experience fewer losses.
Digging a little deeper, you'll determine their risk tolerance or how strong their finances are against risks. If you help them to find the investments that they should be making, they can make their investments grow by putting their savings into bonds, stocks, and other annuities you identify for them. Don’t forget about asset allocation, estate planning, or tax planning either, which are all options.
Education Requirements to Become a CFP
- Degree Necessary
Before you take your CFP exam, much less begin working as one, you’ll need to hold a bachelor’s level of education as the minimum education requirement. The Certified Financial Planner Board standards specify that this degree can be in any discipline, though it should be from an accredited university or college. No matter how high your level of education, even if you complete a master's of business administration, if it doesn’t meet this last requirement, you may not be allowed to sit for the certification examination.
You also have to complete an education program that has been registered by the CFP Board. After studying for the comprehensive exam, you should be able to easily pass the test. You’ll also need to show that you have relevant work experience as a financial analyst or providing financial advice to an individual and pass the candidate fitness standards of CFP - this includes ethics standards including a code of ethics and code of conduct that all CFP professionals choose to agree to before they receive initial certification.
- Subject Focus
Your CFP study guide and the exam both focus on what you need to know as a financial advisor. CFP exam topics focus primarily on critical thinking and problem-solving. Thus, you aren’t going to see true-false questions. The company that gives this exam wants its students to know and understand how to be personal financial advisors inside and out.
Each question on the exam concerns at least one of the Board’s Principal Knowledge Topics (of which there are eight). Topic areas include investment planning, education planning, general financial planning, professional conduct and regulation, retirement savings/income planning, estate planning, risk management/insurance planning, and tax planning.
You’ll also be tested on several tasks including client-planner relationships, working within professional/regulatory standards, gathering the information you need to help your client, developing recommendations, analyzing/evaluating your client’s current financial situation, discussing your recommendations, and carrying out and monitoring your recommendations.
You have some flexibility on exam dates for the CFP exam; it’s offered three times each year, in March, July, and November. By signing up as early as you can, you may receive an early bird special. Otherwise, if you wait to register later in the year, your exam fee will be higher.
If you have an idea of when you’ll be done studying for your exam, you should be able to register even before you finish. The CFP Board has to have proof of your coursework completion by the education verification deadline so you can sit for your exam. The exam is given on site at a testing center and is not available in an online format.
The exam itself contains 170 questions. These are multiple choice questions but that doesn’t mean they won’t require significant thought before you give your answer. On top of that, the exam is broken up into two 3-hour sessions, taken in one day, which would be a grueling time frame for any test.
How is the CFP Exam Scored?
Hopefully, once you’ve taken your exam, you’ll be able to be confident that you passed it. Once you submit your answers, you’ll receive your preliminary results. Your official results will be sent via mail, and you should receive them about 4 weeks after the testing window closes.
If you didn’t pass, the CFP Board will mail a diagnostic report of your results. These diagnostics cover the Principal Knowledge Topics and show you where the weaknesses and strengths are in your answers. This helps you to zero in on the areas where you need to improve your knowledge base and learning for the next time you take the exam.
Passing scores for the CFP exam are “based on a minimal competency level required to pass the exam. . .” according to the CFP Board. The overall passing rate in 2018 was 60%; for first-time test-takers it was 64%. If you don’t pass your exam, you are able to take it two more times in two years.
Study Resources and Preparation for the Exam
Before you begin studying for the Certified Financial Planner exam, you need to know you’re going to spend significant time for several months studying. You should plan to spend about 1,000 hours studying before you do sit for your exam.
Memorization is not key. In fact, the CFP exam requires you to know the material well enough that you can break it down to apply it to real-life scenarios. Here, recall and application are both vital activities for you as you study.
As you study and take practice tests, strive to earn the highest grade of which you are capable. The CFP exam is different from licensing exams, which are then assigned a percentage grade, which means that those test takers need to earn a minimum percentage to pass. However, with the CFP, you won’t receive a grade for your exam. You’ll get a letter telling you if you failed or passed.
Make sure to check for and take advantage of review courses. By doing so, you’ll be provided with pointers on how to apply reasoning in the case study questions. You may also find out how much importance, or weight, is given to each exam section. Because of how much material is presented in the CFP exam, some topics may only get a few questions. If you understand which topics are likely to be given less importance, you’ll be able to focus on the remaining topics. Don’t cram for the exam.
- On test day: Follow your gut; answer all questions; know material on taxes.
- CFP website: https://www.cfp.net/-/media/files/cfp-board/cfp-certification/exam/exam-candidate-handbook.pdf
This exam is difficult. Because it contains so much material that is sourced from professional experience and education, you’re going to use your own professional knowledge just as much as you use your education.
Because of the exam’s difficulty, focus on the big stuff. Don’t let the minutiae bog you down. As you look through the CFP Board’s 8 Principal Knowledge Topics, you’ll notice that some have a 17% weight for the exam; these are the sections that will have the highest number of questions, so you can focus your studies there until you’re sure you have them down pat.
Because of the exam’s difficulty level, some students study for as many as 5 hours each week until exam day.
When you register for the exam, you’ll have to pay a registration fee. If you signed up after the early bird period has ended, you’ll pay $825. If you sign up during the early bird rate, you’ll only pay $725. Students who register late will pay a fee of $925.
During your first registration, you’ll be asked to pay a non-refundable fee of $125. After you have earned your initial certification as a CFP, the annual re-certification fee will be $355 - CFPs are required to update their certifications annually.
Career & Salary
- Where Might You Work?
When you accept a job offer as a financial planner, you’ll have a variety of workplace options. You may work for a national wire house, a credit union, or for a small firm. Or you could find work with a large, nationally known bank.
Once you have been working as a CFP for a few years, you may decide to branch out on your own and open your own firm. You may also decide to return to school to earn your masters and doctoral degrees so you can work as a financial researcher or as a professor.
- Career Outlook
Certified financial planners are easily able to find employment in a company that offers financial services. For instance, in securities, commodity contracts, and other financial investments and related activities. There are 144,000 CFPs employed in the US; this is 15% of industry employment.
The job outlook for the financial planning industry is slated to increase by 27% between 2012 and 2022. Due to a drop in funds for both state and corporate pensions, the CFP industry is expected to grow because of the numbers of people who will need financial planning assistance.
Financial planners who have taken the time to earn their CFP will set themselves up to receive the best job offers before 2022. Consumers said in a study that they were more likely to look for the CFP certification before choosing their financial planner than any other certification.
After the Great Recession, people lost investments and retirement accounts. They needed some skilled guidance and advice to rebuild what they lost. A knowledgeable financial planner is able to focus on rebuilding, estate planning, and targeted budgeting. And, for those who are worried about their own holdings, a financial planner is able to help them to structure their finances for the future. The newest tax laws make financial planning a necessity as well.
- Personal Financial Planner:
This employee creates well-rounded financial plans for their clients. These financial plans should be customized to the unique financial needs and goals of each one of their clients.
Average annual salary: $63,000
- Client Services Advisor:
Employees in this position create financial plans for clients to review and carry out and meets with clients. After creating financial plans for their client, they keep track of the progress of their plans, ensuring that they are increasing their net worth.
Average annual salary: $59,000
- Wealth Management Advisor:
This financial expert relies heavily on their ability to develop close working relationships with their wealthy clients. This is necessary due to their clients’ needs to develop and maintain their investment portfolios.
Average annual salary: $64,000
- Associate Advisor:
The associate works in tandem with a team to create workable financial plans, then creates presentations and brochures for each client. These are used in client meetings to show what the associate advisor, along with their team members, will do to help their clients grow their portfolios.
Average annual salary: $50,000
- Investment Specialist:
This finance specialist focuses mainly on investment opportunities for their clients. As a CFP, you’ll now have the education and experience to seek out the right investments for your clients no matter what their portfolio looks like.
Average annual salary: $50,000
- Personal Financial Planner:
- Certified Government Financial Managers