Becoming a certified financial planner is a bold aspiration. Being responsible for other people’s money, making sound investment and savings advice, creating winning portfolios – the daily life of the best CFPs is rewarding and anything but boring.
Getting to that point, however, isn’t easy. You can’t just wake up one morning, decide you are going to be a financial planner, advertise your services and start creating a network of clients. You have to follow the proper process – which involves study for and writing the CFP exam and receiving CFP designations.
But, what is a CFP exactly and how do you do that?
Why and for Whom is CFP Important?
The CFP designation is not for the meek of heart, all certified financial professionals must successfully complete the CFP certification examination, as well as the board’s Fitness Standards for Candidates and Professionals Eligible for Reinstatement, and then agree to follow the Code of Ethics and Professional Responsibility ad Roles of Conduct. They must also take steps to continue their education and study through regular upgrading and knowledge courses.
Becoming a certified financial planner is a huge time commitment – but for those capable of meeting that obligation, the rewards are great.
What Does CFP Stand For?
A CFP, or Certified Financial Planner, is a financial professional who helps their clients to develop realistic long-term goals to help them in meeting their specific financial goals. Most often, certified financial planners will start their careers working for larger banks or insurance companies in order to gain experience and even to help with getting a few extra credentials or qualifications under their belts.
The downfall of working for a bank or insurance company means that CFPs are almost always only paid on a commission-only basis. Yes, if you are just starting out – this is still a great way to get your feet wet, especially since you wouldn’t need to invest the same amount of time into securing your own clients as someone who works for themselves would have to, but it also means that you sacrifice much of the earning potential that you could see if you started your own practice.
But, before you can even get to that point, you need to follow the proper steps to become a CFP.
In order to qualify for CFP status, you need to compete the following:
- Complete the required education
- Register for and write the CFP exam
- Gain industry experience
- Abide by the board’s ethical standards
Essentially, the above criteria make up with the board refers to as the four ‘E’s:
The overall CFP exam pass rate differs every year both for first-time exam takers and for repeater, being about 64% as of today.
Learn the Basic CFP Requirements before Taking the Exam
The first step in the qualification process is to complete the education component, this simply means that you must have taken coursework at the college level that focuses on personal financial planning and have completed a financial plan capstone development course – you might consider working with an online capstone assistance provider to complete your project.
You must also have obtained a bachelor’s degree. It should be noted, however, that you do not have to have completed the bachelor’s degree prior to writing the first exam – it must, however, be completed before you can receive your designation.
After you’ve completed the required certified financial planner coursework, you will be eligible to register for – and write – the certified financial planner exam which will test you on your ability to apply financial knowledge to financial planning solutions. The results you receive on the exam, along with your educational transcripts, professional experience and ethics will show the general public that you are a competent and responsible financial professional.