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Becoming a Certified Financial Planner - A Guide

By Edited Nov 13, 2013 0 0

certification certificate
Credit: investopedia.com

What does a Financial Planner Do

Certified planners provide direction and advice as well as information to help individuals reach there finance goals.  Planners spend most of their time gathering as much information about their clients as they can before making any kind of assessment.  Each individual has a unique financial situation as well as a different set of goals , so it is important that a financial analyst first understand each persons specific needs and aspirations before determining an appropriate plan of action.

Becoming a Certified Financial Planner

Any individual can call themselves a financial planner.  The very term, by nature, lends itself to a very general connotative description of anyone who provides advice or a plan related to guiding one towards reaching personal financial goals. 

The word "certify" can also be a misnomer, because many states do not even require that individuals obtain any form of license unless offering certain specific products such as insurance or securities.  In reality an accredited financial planner must often pass an extensive exam from one of the five major professional designation organizations:

Certified Financial Planner (CFP)

Top professional designation with knowledge of investments, estate planning, retirement, and insurance and taxes.  Must complete extensive courses and exams.

Chartered Financial Consultant (ChFC) Must complete courses and exams on finance planning, investments, insurance, and tax and estate planning. Minimum 3 years work experience in financial planning.
Certified Public Accountant (CPA) Certified in public accounting with required exams and coursework.
Personal Finance Specialist (PFS) CPA with additional coursework needed to specialize in financial planning.
Charter Life Underwriter (CLU) Employed with life insurance companies and completed coursework in variety of similar financial planning topics as the ChFC designation.

financial planner certification
Credit: fintech-infrastructure.com

CFP Exam Makeup

CFP exams are made up of various criteria that are required by the board of certification.  To receive certain professional designations, exams must be passed according to answering a preset required number of questions. 

These questions cover a variety of financial topics that represent  a specific percentage of each exam set by the board.  Examples of typical financial planning topics found in the CFP exam and  respective percentage of questions found are as follows:

Investment 19%
Retirement 18%
Income tax 17%
Estate 15%
General finance 13%
Insurance (Risk management) 10%

CFP exam makeup
Credit: investopedia.com

Types of Financial Planners

There are fundamentally two basic types of financial planners practicing today.  These are mainly differentiated by how they are paid.  These are fee-based and commission-based financial planners. 

Each produces financial plans with recommendations and advice along the way but fee-based are paid a set fee for their services up front and commission-based receive their compensation on the back end as a result of percentages of earnings made from investments, insurance products, etc.

Commission-based planners feel they have a built in incentive  to provide ongoing followup and recommendations.  Fee-based planners maintain they are able to serve there client best because they receive no ongoing commissions or fees, so they can recommend whats in the best interest of their clients rather than what will earn them the most money. 

Whatever type of financial planner you seek out or seek to become, being certified ensures you are professionally accredited and installs confidence.



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