Continuing education (CE) helps planners stay abreast of the latest changes in industry rules and regulations while providing instruction on new products and planning techniques. However, licensed or credentialed financial professionals often have a negative reaction when they are required to complete their continuing education coursework.
In this article we'll examine four continuing education requirements for financial professionals, with the first two being mandated by the Financial Industry Regulatory Authority (FINRA). They are the regulatory element, the firm element, state-approved education for insurance professionals and, finally, CE for professional designations.
As you'll see, there are ways to streamline the process so that when your continuing education deadline rolls around, you won't find yourself buried under a pile of rules and regulations.
Differing Continuing Education Requirements
The frustration that can surround CE credits is often a result of the fact that each license or designation comes with its own separate continuing education requirement.
The Regulatory Element
The FINRA-approved regulatory element is divided into three subsections:
1. Series 6 licensees
2. Series 7 licensees
3. Those who supervise securities licensees.
All licensees have 120 days to complete this portion of their continuing education requirements, after they have been licensed for two years. These requirements will then come due every three years for as long as the licensee maintains their FINRA registration. The regulatory element covers essential rules and regulations, compliance, sales and communication issues, as well as supervisory topics for registered principals.
(To learn about the initial testing requirements to get your license, check out Breaking Down Financial Securities Licenses.)
The Firm Element
Firm element CE applies to a financial professional considered by FINRA to be a "covered person." Covered persons include anyone involved in the sales or trading of securities in virtually any capacity. Firm element training is created either by the company or obtained from outside sources, then implemented at the broker-dealer level on an annual basis.
This education focuses on important changes within the industry from one year to the next. It tends to be more relevant for planners, because this type of training covers practical topics such as new product training or the latest financial planning strategies that may generate new business for planners.
State-Approved Education for Insurance Licensees
There are no uniform federal requirements for insurance continuing education and each state has its own separate CE program that agents and brokers must satisfy in order to maintain licensure in that state. Each state has a minimum number of required hours of CE that must be periodically met by all licensees. It is the responsibility of the licensee to know what the CE requirements are in all states where he or she intends to do insurance business.
Continuing Education for Professional Designations
Financial planners who have earned professional credentials such as the CFP®, Chartered Life Underwriter (CLU) or Chartered Financial Consultant (ChFC) designations, will have additional continuing education requirements that go beyond what is needed to maintain their licensure.
For example, Certified Financial Planner® practitioners must complete at least 30 hours of continuing education every two years. Two hours of this coursework must be in ethics training, while the remaining 28 hours can be derived from any financial educational topic or coursework that has been approved by the CFP® Board of Standards.
All other professional designations, in addition to those listed above, have separate continuing education requirements as well, such as the CPA, Enrolled Agent (EA), Life Underwriter Training Council Fellow (LUTCF) and Registered Health Underwriter (RHU).
Complete the Courses Online
Fortunately, continuing education requirements are now much easier to complete than they were in the past. The internet has effectively streamlined what was once a cumbersome bureaucratic process. There are a number of excellent providers of approved CE material online, such as WebCE.com and AI Insight. These sites allow you to select and pay for a relevant course and quickly complete the final exam online. The completed hours are often reported directly to the required states or designation boards.
Getting Credits Across Multiple Designations
It is important to note that many hours of coursework can be credited toward more than one license or designation. For example, a great deal of the coursework approved by the CFP® Board of Standards for continuing education also counts toward fulfilling insurance or securities CE requirements. These hours may also count for other designations, such as the CLU or ChFC. However, it's important to note that the same course will probably be credited a different number of hours by different institutions.
For example, consider a CFP® practitioner with a life insurance license, who takes a course on life insurance from an online provider. The licensee will discover that while their resident state may grant a particular course six hours of CE credit, the CFP® Board of Standards may only consider the course to be worth four and a half hours of credit toward fulfilling its CE requirements. To maximize the efficiency of your coursework, it is therefore important to know how many hours of credit each institution will allow for a given course.
The Bottom Line
Although the compliance department of any broker-dealer will be very proactive in making sure that all CE requirements related to licensure are met, independent agents and brokers must assume this responsibility themselves. Online completion of CE requirements and careful coordination between all required licenses and designations can make the CE process faster and more convenient.