I get asked pretty frequently about what the requirements are to become a Certified Financial Planner™ and what I went through to achieve the designation.
Knowing there are over 800,000 people who can be considered “financial advisors” to some degree, I knew I had to differentiate myself.
But, it wasn’t all about being different; it was also about having a deeper understanding and appreciation of the financial planning process.
But before we dive into how, let’s take a step back. Let me tell you more about how I got inspired to become a CFP.
For those of you who don’t already know, here is what a CFP does, and how they are different than other financial planners.
I love my job. I can’t tell you how lucky and fortunate I feel to be able to truthfully say this.
Is my job easy? H-E-Double-Hockey-Sticks no!
Being a financial advisor requires a certain skill set I had no idea I had until I got started in the business.
But I’m not here to tell you how successful I am.
What I want to do is to address the most common question I get from prospective advisors:
I’m interested in becoming a financial advisor. What do you consider the best way to get started in your industry?
Whew. That might seem like an easy question to answer, but SO much has changed since I got in the business over 15 years ago.
How I Got Started: A Look Back In Time
Pretty soon it would be the end of a good run — graduation was approaching. I had just had one of the best interviews of my life with A.G. Edwards and Sons (they were purchased by Wells Fargo).
It was so good, in fact, I felt I had secured a position with their corporate office in St. Louis, and I would soon be living the dream of riding the corporate ladder to the top.
It all looked good; then the “Dot Com” bubble burst.
Things changed. And not for the better.
A. G. Edwards, at the time, had a been in existence for 117 years and never had any company layoffs. Never.
That is, until, I was getting ready to graduate. Of course, right?
My future, which once had visions of me living in St. Louis, was gone. Now what I’m going to do?
Um… How about Plan B?
Part of me getting the opportunity to have a great interview was because I was already interning at the local A.G. Edwards office in my hometown.
I landed the internship as kind of a desperate measure between my junior and senior year. I had one of those pucker moments where I realized that other than my work history of local retail jobs and my military experience, there was nothing really outstanding on my resume.
It hit me how I would be graduating in a year and I still needed to get up and do something, and I needed to do it now.
Through a connection, I inquired about a summer internship at the local A.G. Edwards branch, and I was lucky enough to get it.
It was like any other internship you would imagine: filing, paper shredding, all the administrative tasks that no one else in the office wanted to do.
Although the tasks were remedial, I treated the internship like a real job. I showed up on time, dressed the part, did everything which was asked of me (and above), and made a lot of good impressions on the staff.
Amazing What a Little Bit of Effort Will Do
Along the way, I was asked by one of the assistance of the top producers in the branch if I could help file away some financial statements which had been piling up on them. I’m the intern, of course, I’ll help.
As I started to file them away, I realized their filing system was a little bit out-dated. In fact, it was a mess.
So I took it upon myself to re-setup their file system which I thought would help them out in the long run. Turns out, the little extra effort made a very good impression.
As it turns out, the top producer was looking to hire someone part-time to help out his assistant with their day-to-day tasks.
At this time, I was getting ready to be a senior in college. I was already working 15 to 20 hours a week at a mall job. But I thought it was good opportunity to get my foot in the door.
My senior year, I was hired to work 8 a.m. – noon, Monday, Wednesday, and Friday (most of my classes were on Tuesday and Thursdays), and then I would also work at my mall job in the evenings and weekends.
I didn’t think much of the job at the time, about what it may turn into. Turns out it would lead to much, much more.
I continued working for them and helping them out with just their day-to-day tasks. Then, along the way, the broker had asked me if I’d be interested in cold-calling for him.
I had never done anything of the sort, but I thought, oh, what the heck, we’ll give it a try.
Every once in a while I would call randomly from a list he had purchased of residents in the local community. I was calling just to set appointments for him, with a basic spiel; and, to both his and my amazement, I landed him a few appointments.
That’s when it started to happen.
My first nameplate – how exciting!
As graduation was getting closer, it turns out this producer who I had helped with his filing, was looking to hire a junior broker.
He had asked if I was interested, but initially I turned him down, primarily because I had bigger dreams. I had planned on working a corporate job up in St. Louis, and also I felt I was way too young to handle people’s money.
I had noticed many of the top clients who came in the branch were at least twice, if not three times my age. I felt I had no business advising them on their retirement planning.
So I kept plugging away, hoping for the next bigger and better thing.
As graduation approached, I realized the bigger and better thing was not coming. I didn’t want to graduate without having something lined up, so I accepted his offer.
I was going to be a junior broker.
I didn’t have the same ring as “corporate executive” or “investment banker”, but I was still excited for the prospects of what could come.
Most everything in life I’d ever tried out, or even attempted, I had always succeeded; so naturally, I thought this would be no different.
I still didn’t know if this was what I would do for the rest of my life, but I was excited for the opportunity to see what could happen.
And as they say, “the rest is history.”
If you’re at the same point in your life, where you’re truly considering the possibility of becoming a CERTIFIED FINANCIAL PLANNER™, you might be wondering what exactly the process looks like from beginning to end.
Well, here’s exactly what it takes.
The Steps You Need to Take To Become a CFP™
1 | Complete the Education Requirement
Before you can even apply to the CFP® program, you have to satisfy the preliminary education requirements.
At the point in my career, I decided to pursue the CFP® certification, I was more than five years removed from college, with my Bachelor’s in finance, so I easily satisfied the education requirement.
Currently, the CFP Board allows three different paths to achieve these requirements. Taken directly from the CFP.net website:
Complete a CFP Board-Registered Education Program
- There are more than 300 academic programs at colleges and universities across the country from which to choose.
- These programs include credit and non-credit certificate programs, undergraduate and graduate degree programs.
- They use various delivery formats and schedules, including classroom instruction, self-study, and online delivery.
- Many of CFP Board’s Registered Programs also offer in-house educational programs for individual companies.
Academic degrees and credentials which fulfill the educational requirements include:
- Certified Public Accountant (CPA) – inactive license acceptable
- Licensed attorney – inactive license acceptable
- Chartered Financial Analyst® (CFA®)
- Doctor of Business Administration
- Chartered Financial Consultant (ChFC)
- Ph.D. in business or economics
- Chartered Life Underwriter (CLU)
Request a Transcript Review
Certain industry credentials recognized by CFP Board, or the successful completion of upper-division level college courses, may satisfy some or all of the education requirements set by CFP Board.
Bachelor’s Degree Requirement
A bachelor’s degree (or higher), or its equivalent,1 in any discipline, from an accredited college or university2 is required to attain CFP® certification.
The bachelor’s degree requirement is a condition of initial certification; it is not a requirement to be eligible to take the CFP® Certification Examination.
After you pass the CFP® Certification Examination, you will be required to provide evidence (official transcript from the degree-granting institution) you hold a qualified bachelor’s degree or higher degree.
Jim Blakenship, CFP® and author of Getting Your Financial Ducks in a Row, shares his experience on achieving the CFP® designation:
I took the American College Chartered Financial Consultant (ChFC) course which fulfilled the education prereq. The ChFC course was provided by my employer at the time (an insurance company). I followed this up with a CFP self-study course from Dalton. Then I went to a two-weekend live review from Dalton. The Dalton courses were much more useful than the American College course, in my experience.
2 | Pass the CFP® Certification Examination
Wholey Moley, what an exam!
The CFP® Certification Examination was by far the most challenging exam I’ve ever taken (and hopefully ever will) take.
The two day, 10-hour exam applied all the key areas of comprehensive financial planning. Although all questions are multiple choice, they are arranged in a way where every question “almost” sounds right.
That’s what makes the test so challenging.
The exam is administered three times a year – generally on the third Friday and Saturday of March, July, and November, at about 50 domestic locations.
I took mine at the University of Missouri-St.Louis in November of 2007. The application deadline is approximately seven weeks prior to each exam date (e.g., February 1, June 1, and October 1).
To apply to take the exam, complete the online application, download an application, or call 800-487-1497 to have one mailed to you.
Completed applications, including payment of the $595 fee, must be received by the deadlines printed on the applications – there are no exceptions.
How I Prepared For the Exam
My previous firm had an arrangement with Kaplan University which offered a “boot camp” style class.
Once a month, for nine months, I traveled to St. Louis to sit in on a four-day (8 a.m. – 6 p.m.) lecture. I’ve never drank more Diet Coke and coffee in my life!
Our instructor was insanely smart and helped us trudge our way through all the concepts. Imagine learning about estate planning for 9+ hours a day. Are you jealous, yet?
After all the sessions, we then had a final recap with a different instructor a month before the actual exam.
Reflecting back, I really don’t know another way I could have absorbed so much information in such a small amount of time. If I had to do the CFP program by self study, I would probably still be without the designation (no joke).
Richard T. Freight, CFP® who also authors the blog Think Beyond the Numbers, confirms my suspicions by sharing his experience with the CFP self-study program:
After failing to discipline myself with self study, over the course of 3 years I took the individual courses (5 in 1998) at 3 different community college and universities, often traveling an hour each way, twice a week, to pass the exams. Then I took Ken Zahn’s “blitz” 3-day course to pass the overall exam. I know it sounds like the old walking uphill both ways to school in the snow, but it wasn’t a cake walk by any means. My overall exam had a pass rate of 49% across the U.S. that year.
I sat for the exam in November of 2007 and didn’t receive my test results until early January. Talk about suspense.
I just happened to be home the day when the mail came. I remember seeing the thin, little white envelope from the CFP Board and my heart sank.
Why was the envelope so thin? Was it a bad sign?
I nervously paced inside and finally just ripped the envelope open….Congratulations you passed.
I screamed with excitement and then called my wife to share the good news.
Typically, each testing period has about a 50% pass rate and this was about the same with my group. This is why I was so thankful I passed.
When you receive notice you passed, you then have to satisfy the remaining requirements.
3 | Meet the Experience Requirement
In March of 2007, I began the Kaplan University CFP® course. At that time, I had been a financial advisor for already five years, which satisfied the experience requirement.
The CFP Board requires you have at least three years of qualifying full-time work experience.
According to the website, the experience can be gained in a number of ways including:
- the delivery of all, or of any portion, of the personal financial planning process to a client.
- the direct support or supervision of individuals who deliver all, or any portion, of the personal financial planning process to a client.
- teaching all, or any portion, of the personal financial planning process.
Joe Pitzl, CFP® shares how he got a head start in completing his experience requirement:
To get a head start on fulfilling my experience requirement, I held three financial planning internships and filed tax returns in a tax firm for two years while in school (it counted for about a year collectively). I then worked for a year as a full-time financial planner before taking and passing the exam. Six months later, I had officially fulfilled the 3-year requirement and became a CFP®.
4 | Background Check… Do You Pass?
Applicants for CFP® certification must pass CFP Board’s Candidate Fitness Standards, which describe conduct which may bar an individual from being certified.
This is one of the aspects which makes being a CFP® professional so much more prominent; we are held to a higher standard than your typical financial advisors.
The board will conduct a background check as you make your commitment to adhere to the CFP Board’s Code of Ethics and Professional Responsibility and Financial Planning Practice Standards.
Brian Plain, CFP® shares a similar accelerated approach to achieving his designation:
Apparently I’m a glutton for punishment as I fulfilled my education requirement through the accelerated 9-month program at Northwestern and then did a 4-day live review course prior to taking my exam…for the first time. Getting the “fail” letter in the mail was deflating, but it was also made me appreciate the experience so much more when I received my “pass” letter the next time I sat for the exam. Needless to say, I still have the letter!
5 | Time to Pay Your Dues
After you verify those three steps, it’s time to pay up (yeah, the $595 fee from before was just to apply).
You’ll have to pay a one-time, non-refundable initial certification application fee of $100 for the background check.
In addition, you will be responsible for a biennial certification fee of $360. To me, this cost is minimal, compared to the amount of knowledge I have gained through the whole process.
Jason McGarraugh, CFP® gives a detailed account of his path to becoming licensed:
I went the Degree Plan rout. After spending 4 years getting a BBA in Corporate Finance at Texas Tech I graduated without any of the Financial Planning knowledge that I wanted. Circa 2000 I discovered that Texas Tech actually had a Masters program in Financial Planning. I spent 2 1/2 years working on my Master of Science in Personal Financial Planning which included the necessary CFP® courses with additional classes to round out the degree plan. After graduating I spent a semester working for a private school in Singapore that taught the CFP® courses there.
I moved back to Lubbock in May of 2003 and began the two month live review with the professors at Tech to prepare for the July exam. I made enough money In Singapore to pay for the review and a few months of rent with some friends that were also taking the review. I studied 6 days a week for two months and passed the exam on the first go round. I probably put in about 250 hours of study and class time. I made it a point to take one random day off a week to relax.
It took about a month to get the results back and during this time I was interviewing for jobs. By early October 2003 I was fully licensed for insurance and securities and working with Waddell & Reed in Fort Worth, TX (plan B). I reached my 3 years in October of 2005 thanks to 12 months of experience as a Peer Financial Counselor with Tech’s Red to Black program.
6 | Congratulations! You Are Officially a CERTIFIED FINANCIAL PLANNER™ Professional
Once everything is complete, you will get a notice you are officially a CFP® and you can refer to yourself as one.
After making it this far, you deserve it.
Now it’s time to order new business cards and make the appropriate updates to your website. I never thought I would be so excited over “three little letters” but all the time invested to achieve those letters makes them extra special.
7 | Continuing Education Requirements for a CFP®
Once you pass the exam, you’re not done, however.
Every two years you’ll have to satisfy continuing education requirements to keep your CFP® credentials. The CE requirements consist of:
- 2 hours from a CFP Board-approved program on CFP Board’s Standards of Professional Conduct.
- 28 hours from one or more of the accepted subject topics.
It’s up to you where and how you complete the CE requirements, you just have to make sure it’s a pre-approved program by the CFP board. There are plenty of resources nowadays to do this.
One of my favorites is mini quizzes found in trade journals such as Financial Advisor Magazine and the Journal of Financial Planning.
It’s always nice to learn something new and get credit for it, too!
Are you still considering becoming a financial planner? Think you’re ready? Keep reading.
Going Solo – The True Costs of Starting Your Own Financial Planning Firm
In 2011, I embarked on one of the most exciting business transitions of my life – I formed my own registered investment advisory firm. I get a lot of questions from advisors wanting to know about the process.
- How does it work?
- How much does it cost?
- Is it worth it?
Plus, I have friends and blogging friends who are also curious and would love a look behind the scenes of starting a financial planning business. Since I have over 5 years underneath my belt of starting my own firm, I thought I would share a little bit of how it all went down.
I’m also trying to get a sense of how much I have spent in the past year in doing so… thank goodness for my CPA!
Before I begin, let’s first start with a jump back to my story so you can understand exactly what had happened since getting my “three little letters” approved.
The First Step
In 2007, three others advisors and I left A.G. Edwards and Sons, which had recently been bought out by Wachovia (now Wells Fargo) and started Alliance Investment Planning Group. We were an independent financial planning firm under the independent broker-dealer, LPL Financial.
LPL Financial was the largest independent brokerage firm and the big difference between them and an Edward Jones or a Merrill Lynch (or any major brokerage firm), at least from the advisor standpoint, is they allow you to create your own company at the local level.
That’s why we operated as a DBA (doing business as) Alliance Investment Planning Group.
Essentially, in the relationship, I was an independent contractor utilizing their services, and then LPL held my licenses: my Series 7, and my insurance licenses.
Keep in mind many advisors don’t take this step, although it’s becoming more popular. From a payout standpoint, it definitely pays to take some risks.
Let me explain…
With A.G. Edwards, my payout was 40%.
That meant for every commission or fee earned, I would give the company 60% of every dollar. That was my price for having the company name behind me, back office support, my fully furnished office (phone, computer, desk, etc), a receptionist and anything else you would need to run an office.
For many, it takes away all the added pressure of running a business so you can just focus on your existing clients (and also acquiring more).
Unfortunately, if you’re an obsessed entrepreneur like myself; it just wasn’t quite enough.
Moving to LPL meant we now became true business owners.
We had to find our own office building, buy our own computers, desks, printers, filing cabinets, phone systems, 47″ TV’s (I will argue to this day it’s a necessity!), receptioni