How to Become a CERTIFIED FINANCIAL PLANNERTM (CFP®)

This is a guest post by Paul Williams from Provident Planning. He’s a fee-only financial planner in Lancaster County, PA, and regularly writes about personal finance from a Christian perspective. If you want to become a CFP®, he’d be happy to talk with you.

I was excited when Sam invited me to write a guest post for Financial Samurai on how to become a CERTIFIED FINANCIAL PLANNERTM (CFP®). I’ll finally finish the requirements in Novemeber 2010 and be eligible to call myself a CFP® after I fill out the last bit of paperwork.

Sam mentioned he’d like to become a CFP® after he retires from his job, so he’s curious about what he’d have to do. I’m sure some of you might also be interested in becoming a financial planner if you’ve got a strong interest in personal finance.

This post is going to be about the process of becoming a CFP® rather than deciding if you should even become a CFP®. That’s a very different question and one you should have an answer to before you start the process of becoming a CFP®. It’s certainly not a cheap certification to get (in money or time).

Fulfill three requirements to become a CFP®:

  1. Education
  2. Exam
  3. Experience

That’s the order that the CFP® Board lists, and I’d say it’s probably the best order to follow. You can fulfill the experience requirements before you take care of the education or exam requirements. But I think you’ll have an easier time with all three if you focus on the education part first and then complete the exam while you are working in a financial planning firm. (It also makes it easier to get hired!)

The Education Requirement

There are actually two parts to the education requirement. Before you can take the CERTIFIED FINANCIAL PLANNERTM exam, you must complete a CFP® Board registered program first. This amounts to at least 15 credit hours of material.

You’ll cover topics like the basics of personal finance, insurance planning, employee benefits, investment planning, retirement planning, tax planning, and estate planning. I fulfilled this requirement by getting a bachelor’s degree in financial planning, but a simple certificate will suffice for this part of the requirement.

You can get around all or part of this requirement if you hold certain certifications or degrees. Here’s a short list of ways you can automatically qualify to take the CFP® exam:

  • Certified Public Accountant (CPA) License
  • Licensed Attorney
  • Chartered Financial Analyst (CFA®)
  • Chartered Financial Consultant (ChFC)
  • Chartered Life Underwriter (CLU)
  • Ph.D. in business or economics
  • Doctor of Business Administration

Also, you can request a transcript review to exempt you from some of the required courses if you’ve taken classes that cover the required topics. You’ll have to review the topic list I linked to earlier to see if they’ll qualify.  Then you must send in an application along with a $100 fee, your transcript, and course descriptions from the course catalog or the course syllabus if the title doesn’t clearly convey the content you covered.  You’ll need to take additional courses to fill out any of the topics you haven’t covered.

If none of the exceptions applies to you, you’re just going to have to plan on taking the courses from scratch. The easiest way to do this is through a CFP® Board registered program since their curriculum has already been approved.

The CFP® Board’s website lists registered programs a number of different ways so you can find one that works for you. The American College and the College for Financial Planning are popular distance learning options. They’ll run you about $800 – $4,000 depending on what you choose. If you decide to go for a degree program, it’ll be much more.

I mentioned there are two parts to the education requirement. The first is clearly related to financial planning but the second requirement isn’t. You must have at least a bachelor’s degree in any field of study before you can become a CFP®. You don’t have to have one before you take the exam, but you do need it before you’ll get the final approval to call yourself a CERTIFIED FINANCIAL PLANNERTM. After you take the exam, you have five years to complete the bachelor’s degree requirement and the experience requirement.

Obviously, completing the education requirement will help you get a job in financial planning. But it’s not absolutely necessary if you can draw on some relevant experience and can convince someone to hire you. But we’ll talk about experience in a bit.

I completed both parts of this requirement by getting my bachelor’s degree in financial planning at Virginia Tech, which is a CFP® Board registered program. Go Hokies!

The Exam Requirement

The CFP® exam is a three-part exam that lasts a total of 10 hours. Let me tell you – it’s intense! You’ll spend 4 hours on a Friday afternoon for the first part followed by 6 hours on Saturday for the last two parts. I finished each part early but not by much.

There are a total of 285 multiple-choice questions in the entire test and each part has its own case study with several pages of information and 15-20 questions. Most of the questions on the test cover multiple financial planning topics (similar to the real world), so you’ve got to be ready to analyze the situation and pick the best answer.

The exam has about a 42-66% pass rate depending on the year. If you fail, you’ll have to wait about four months to take the exam again because it’s only offered in March, July, and November. If you don’t like tests, you’re not going to like the CFP® exam.

However, it’s not impossible to pass. I recommend taking the exam as soon as you finish your studies. The information will be fresher. And it’s also good to be working in the financial planning industry since you’ll start applying the information immediately. It just makes it easier to understand the complex questions and remember what you’ve learned.

You’ll want to get good review materials and study, study, study! I spent about 1-2 hours every weekday for about four months before I took the exam (and I passed the first time). I used Kaplan’s CFP® review materials without the live review class. Basically, I went the self-study route because I’m good at studying on my own and sticking to a disciplined schedule.

The CFP® exam costs $595 to take (that’s just the exam fee – and it’s higher for international locations). Review materials and/or classes will run you anywhere from $400 to $1,400+ depending on what you choose. Yes, that’s nearly $1,000 just to take one of the most stressful exams of your life. Fun!

You don’t find out what your score was – just whether you passed or not. If you fail, you’ll get a list of general areas (not specific questions) you need to improve on for the next exam.

The Experience Requirement

You’ll need three years of full-time, relevant work experience to get your CFP® certification. It doesn’t have to be full-time, but if you work part-time it needs to add up to 6,000 hours of work. You can count experience gained up to 10 years before or 5 years after you pass the CFP® exam. If you take more than five years after the exam, you’re going to have to ask for an extension or risk losing your candidacy. (And yes, that means taking the CFP® exam again!!!)

So what counts as “relevant” experience? The CFP® Board says that work experience is defined as “the supervision, direct support, teaching or personal delivery of all or part of the personal financial planning process to a client.”

Teaching experience only counts if it is done at the college level for credit and at least one year of it must be for a CFP® Board registered program. Supervision, direct support, and personal delivery are things that would happen if you’re working in the financial industry.

However, you don’t have to be paid for your experience to count. Pro-bono experience qualifies as well but you must have a real client (duh…) and you must be acting as a financial planning professional offering comprehensive, objective advice. Internships and residency programs through the Financial Planning Association can also help you fulfill this requirement.

Your work experience must involve at least one of the six elements of the financial planning process:

  1. Establishing and Defining the Relationship with the Client
  2. Gathering Client Data Including Goals
  3. Analyzing and Evaluating the Client’s Financial Status
  4. Developing and Presenting Financial Planning Recommendations and/or Alternatives
  5. Implementing the Financial Planning Recommendations
  6. Monitoring the Financial Planning Recommendations

There’s more information available on each of these steps on the CFP® Board’s website.

My advice for completing the experience requirement? I do not recommend working on your own or working for a brokerage type company (you know the kinds I’m talking about, right?). You’ll have to focus most of your time on sales and not comprehensive advice.

Instead, I’d recommend finding a fee-only financial planning firm you can work with. Also, be sure you agree with their investment philosophy and compensation methods. It’s just not pretty when there’s not a good fit.

Find the best financial planner you can and try to work as a paraplanner (assistant) to them. This will help solidify your studies and the exam materials while also preparing you to deal with your own clients once you’ve finished all the CFP® requirements. Having a good mentor will help so much more than classes and exams ever will.

Yes, you can work with clients before you finish the CFP® certification (assuming you have your state licenses), but you’re more likely to make mistakes and miss opportunities for your clients. There’s a reason they’ve included this experience requirement!

Miscellany

If you take more than a year to finish all the CFP® requirements after passing your exam, you’ll have to start doing continuing education. That’s a requirement once you do become a CFP®, so you might as well get used to it. It’s just something to keep in mind.

After you’ve completed all the requirements (and any continuing education requirements you accrued), you’ll have to pass the Candidate Fitness Standards and a background check.

Basically, if you’ve been convicted of a felony for certain crimes (financial or violent), had two or more bankruptcies (personal or business), or had a financial or other professional license revoked, then you’re not going to be approved for CFP® certification. You should probably make sure you can pass this requirement before doing anything else…

Your final application requires a $100 fee for the background check plus a $360 biennial certification fee, which you’ll continue paying as long as you’re an active CFP®. Total cost to become a CFP®? Anywhere from $2,260 up to $20,000+ depending on what route you take.

Assuming your background checks out good, then you’ll just have to agree to the CFP® Board’s Standards of Professional Conduct and you’re in! Wasn’t that easy?

Thank you Paul for writing this wonderfully thorough and informative post!  Who would like to join me in trying to get their CFP?  Study buddies anyone?

 

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. David M says

    Paul,

    AWESOME Post! One of the best I have even seen on the internet. Your writing is great, I can understand everything.

    I feel like you are speaking to me even though I know I’m reading it.

    When I read about how intense the CFP exam is, it brought me right back to when I took the CPA exam. This was 3 of the most stressful days of my life! I am happy to say I passed all 4 parts of the CPA exam in one sitting.

    I look forward to reading further post by you!

    • Paul Williams says

      Wow, thanks for the positive feedback, David! I tried to make it as conversational as possible while still covering all the bases. It’s not the most exciting subject in the world (unless you want to become a CFP I guess).

  2. Pat @ Do Not Wait says

    Thanks for sharing this with us Paul. What advice would you give to a recent college grad that is looking to get into the field? Would you go the full-time route or do it on a part-time basis, while trying something else?

    • Paul Williams says

      Hi, Pat! If you can, I’d go full-time. It’s best to immerse yourself in the subject while everything is still fresh in your mind. It may be difficult to find a job in the financial planning industry right now, but you could always try working for free for a couple months to prove yourself. Do great work and keep an eye on how to improve things (while remaining respectful) and you’ll be very likely to get a job.

  3. Everyday Tips says

    Great post- very informative. Sounds like a lot of work, but what a great career if you pass!

    This is something I considered after I graduated with a Finance degree. But, I went to grad school instead, and then life took me in a different direction. It is still something I think about for the future, so this info was quite helpful to me.

    Thank you!

    • Paul Williams says

      You’re welcome! It is a good bit of work when you look at it all at once, but you’ll mostly be doing just one thing at a time unless you’re working during it all.

      Financial planning can definitely be a great career. You need a strange combination of skills – analytical and people, which don’t often go together. Though many people do great in sales type positions with only the people skills. I wouldn’t necessarily call them financial planners though…

  4. The Financial Blogger says

    Great job on the post Paul!

    Being a financial planner, I can appreciate the amount of work it requires to go through the certification. Sometimes, I have the feeling that clients or potential clients don’t realize that we really are professional of finance. Some of them won’t trust your advice but will listen to the guy on TV… that’s weird isn’t?

    • Paul Williams says

      Thanks, Mike! Yeah, I’m not sure most people realize what it takes to become a CFP – they just hear that it’s good if your advisor has the certification. As far as guys on TV, it’s shortsighted to take advice from someone who has no knowledge of your personal situation at all!

  5. RJ Weiss says

    Thanks Paul. Very informal post.

    Right now I’m at the experience requirement stage. Hopefully, I will have that completed this December. If I pass the background check. (:

  6. Darwin's Money says

    Thanks for sharing. This is one of those achievements so many people have probably considered (and continue to lurk), but never fully research it. This will go a long way in either pushing people to make the next step or perhaps helping them realize it’s not for them.

    • Paul Williams says

      You’re welcome, Darwin! It’s certainly not an easy task to achieve if you’re starting from scratch. But even if you already have a bachelor’s degree there’s a lot of work to do. I hoped to make this comprehensive enough that anyone working on becoming a CFP® can use it as a complete resource until they’re finished.

  7. Andy Hough says

    Thanks, I wasn’t aware that being a licensed attorney allowed you to take the CFP exam. Becoming a CFP is something I was interested in the past and might pursue in the future. After I sit for the bar in February I probably won’t want to take another test for quite a while though.

    • Paul Williams says

      Andy, I was surprised as well since the studies don’t really overlap. You’d definitely want to put a good deal of effort into studying for the exam if you want to pass it. There is a bit of business law, consumer protection law, and contract law as well as a lot of estate planning. Those areas would probably be easy for you.

      I’d want to take some time off from exam taking as well. I’ve never looked into what the bar exam requires, but I’m sure it’s difficult!

  8. Financial Samurai says

    Hi Paul,

    Thanks again for the excellent instruction and guide to becoming a CFP! Reading your post over really makes one appreciate how much it takes to become one. The experience component is great, but also a big hurdle to overcome and is only for the most serious.

    What do you think the various CFP level with X yrs of experience make?

    Cheers

    • Paul Williams says

      You’re welcome, Sam! It’s certainly not an easy feat to accomplish, but it’s not out of reach either. The experience component is what would keep most people from getting a CFP certification on the side.

      As far as compensation goes, it’s really going to vary a lot based on where you live and who you work for. But here’s a rough guess:

      On the CFP track (not finished yet, little to no experience but have education): $40-55k
      CFP 3-5 yrs exp.: $50-75k
      CFP 5-10 yrs exp.: $60-100k
      CFP 10+ yrs exp.: $100k+ (can go as high as $400-500k or much more, even to $1M or more, if you’re the top guy, an owner, and have a large, high-net worth client base)

  9. Sunil from The Extra Money Blog says

    good stuff Paul – and good for you Sam for wanting to become one

    i took the exam after getting my CPA – and it surely expedited progress as you mentioned. that said, i do recommend going over all the material no matter what cert you already have currently. the exam is quite extensive and in depth – the material is also fantastic IMO. can never have enough education right ;)

    • Paul Williams says

      Right, Sunil – it doesn’t matter if you qualify to sit for the exam right away. You’re still going to need to study. But any good study materials will do just fine, and if you come across something that’s hard to understand then the Internet will probably have all the info you need beyond your study materials.

  10. Steve Jobs says

    Good for those people who has the interest of being a certified financial planner; this is such a great career, thanks for sharing this, very informative and easier to understand.

  11. Landon says

    GREAT POST! I was very very interested in leaving my job as an engineer to become a CFP based on my interest in personal finance. I even went through a regrettable experience with a company called World Financial Group thinking it would be my pathway to this field.

    I’m now not so sure if I want to go through with it. Based on a comment above, I am already making the same salary as somebody with 5-10 years experience as a CFP. I know money isn’t everything (my mom is a CPA with her own practice and she loves it) but accumulating savings is important in my quest for financial independence. Thanks for the post and much respect for the hard work you went through to become a CFP!

  12. Tracey says

    Paul,

    If I have no prior experience in Finance but have an BS in Electrical Engineering. How difficult do you think it will be for me to complete the CFP and be a successful Financial Planner?

  13. Mark says

    This is an excellent post with a lot of great information. Sometimes, it is so hard to find quality, thorough information online. I really appreciate how detailed, easy to understand, and well organized this post is. Do you have any idea what the job outlook is for people looking to get into a fee-based only company? It sounds like the best option over the others you had mentioned. Thanks again for the informative post!

  14. Shelbie says

    I’m working on my associate degree in Accounting, could you answer a few more question about CFP(R) for me. What are some personal characteristics needed? What is the prospect for growth? What is the prospect for growth in the career field?

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