How can potential financial advisors prepare best for their CFP certification exams?
By embracing the best training and study programs that can hike their chances of passing the exam.
The CFP exam is the gateway to becoming a Certified Financial Planner, and is one of four criteria CFP candidates must pass earn their designation (along with ethics, education and experience).
"In my experience the exam presents the one 'unknown' element of the certification process," says professor Craig Lemoine, CFP, at The American College in Bryn Mawr, PA (the school has been training financial services professionals for more than eight decades).
Lemoine says that in 2012, the CFP exam changed from a topic-based format to a domain-based on, meaning that the exam is based on eight key wealth management domains, such as obtaining clients and collecting investment research data.
"Domains are similar to steps in the financial planning process, like establishing a client relationship or gathering data," he adds. "Candidates should know that domain-based questions can be more difficult to study for than an exam comprised of prescribed financial planning topics. Students looking for their best chance of passing the exam should study from programs which have embraced domain models in their textbooks and curriculum."
Here are some other tips on studying for the CFP exam:
Build a Study Program around Test Dates
The CFP exam, which costs US$595 to take, is administered by the Certified Financial Planner Board of Standards, Inc., and is given every third Friday and Saturday in March, July and November.
The exam covers a variety of topics, the most common of which are investment planning and retirement planning, including estate planning, general principles of financial planning, insurance planning and risk management, and employee benefits planning.
The only academic requirement to take the test is that the applicant holds a Bachelor's degree. Additionally, the CFP applicant must declare he or she will complete five-year qualifying work related to the investment management field. An applicant must also possess three-year’s worth of investment industry experience to take the exam.
Ask the Right Questions First
Since only 50-60% of applicants pass the CFP exams, choosing and following the best study guides and courses isn't a luxury, it's a necessity.
According to the Certified Financial Planner Board, CFP exam takers can choose from a variety of study sources (although it does not endorse any study guide or service), including certificate programs, brick-and-mortar training courses or interactive study courses.
Choosing a Program
When choosing the program that best fits your needs, the CFP Board advises asking – and getting answers to – the following questions before signing on the bottom line:
• What educational level is your curriculum (junior/senior baccalaureate, master's or doctorate level)?
• How long does it take to complete your curriculum?
• How much does your program cost? Does that amount include books, tests and other fees?
• Are you anticipating making changes to your program?
• How do you schedule your courses? How often are courses offered?
• Is your distance education program offered online or is it paper-based?
• What are the credentials of your faculty?
• Does your program have internships or job placement services?
• Overall, how will your program prepare someone to be a financial planner?
Focus on "Questions-Based Training"
Lemoine advises CFP candidates study and complete discrete, set and case style practice questions. "The questions and specific financial planning topics on the actual exam change with each administration and are not known to academic programs or review providers prior to taking the test," he says. "However, students can learn the style of the exam by solving practice questions."
Consider Online Courses
Lemoine's favorite CFP preparation study strategy is interactive online learning, such as in-person web courses, which he things are a great fit for professional students. "These programs allow students to interact directly with an instructor and can be archived in case the student misses a session," he explains. "Brick and mortar may be too rigid for some working professionals. I personally want a program to be rigorous while maintaining relevancy."
Go Price Shopping – but Shop for Value
Most CFP study guides and programs aren't cheap, but in some cases you may have to pay more or risk getting what you pay for. For example, Dalton Education, one of the leading providers of educational study services, charges over US$7,600 for a basic, nine-month CFP study course – and that doesn't cover the costs of textbooks. Online course may be a better bet for the wallet.
For a thorough list of CFP training programs, visit the CFP Board website. There you'll gain access to CFP Board-registered study programs in three categories:
• By state
• By type
• By distance learning options
Get your CFP overview campaign started with guides and workbooks that cost under US$50, but will get you up to speed on what you’ll need to know to master the CFP exams. Amazon.com has a good list here, including "Your Guide To the CFP Certification Exam" (for US$17) and the "CFP Certification Exam Practice Question Workbook" (for US$36).
The Bottom Line
The competition to become a financial planner is hot, and growing hotter. The CFP Board reports the industry will grow by 41% by 2016. That means the sooner you pass the CFP exam, the better off you'll be in gaining a solid foothold in one of Wall Street's fastest-growing sectors.