The title of CERTIFIED FINANCIAL PLANNER™ is an indicator of fiduciary trust to prospective clients. Arguably the most recognized distinction in financial services, a CFP® certification will open up doors for you professionally and provide you new opportunities to scale your firm. It also gives you a competitive advantage, as only 20% of financial planners in the United States are certified. In this post, we’ll review the requirements and benefits of a CFP® certification for advisors.
Education, Experience, and Testing for CFP® Certification
Nothing good in life comes for free. CFP® professionals are viewed as elite in their profession because of the level of work they need to complete to become certified. In addition to earning a bachelor’s degree, you are also required to complete a CFP Board-registered education program.
If you hold a CPA, CFA®, or Ph.D. in finance, business, or economics, you can bypass most of the coursework in the CFP Board educational requirement. Those who qualify for this exemption will still need to complete a financial plan development Capstone course.
Once you’ve fulfilled the educational requirements, you can sit for the CFP® exam. This is a six-hour pass/fail test administered by the CFP Board three times per year. Applicants are then required to put in 6000 professional hours and pass a background check.
Benefit #1: CFP® Professionals Have Knowledge and Experience
It requires three years, working forty hours a week, to complete the experience requirement for CFP® certification. CFP® board-registered education programs usually take between eighteen and twenty-four months. You can earn a bachelor’s degree in three to four years.
Applicants are allowed to take the CFP® Exam prior to earning a bachelor’s degree, but there’s a five-year window to obtain that degree after passing the test. You’ll still need to complete the CFP Board-registered education prior to sitting for the exam.
The knowledge and experience that a CFP® candidate gains during this process are two of the key benefits of a CFP® certification. This time spent learning the trade can help you to perform improved services for your clients while instilling trust in your clients.
Benefit #2: CFP® Earners are Trusted Fiduciaries
The term “fiduciary” is tossed around quite a bit, but not all financial advisors have earned the right to use the moniker. In financial services, a fiduciary is defined as a person who has a legal or ethical obligation to his or her clients.
The final step in the CFP® certification process is a criminal and employment background check, coupled with an agreement to adhere to the professional and ethical standards of the CFP Board. This is a legal and binding contract, designed to ensure that a CFP® is a trusted fiduciary.
We live in a world where consumer confidence is low. Distrust of Wall Street is at an all-time-high. Clients are searching for trusted fiduciaries and many know that CFP® professionals fit that description. By completing the CFP® certification course, you can join that trusted group.
Benefit #3: CFP® Professionals have a Competitive Advantage
Knowledge, experience, and fiduciary status give you a clear competitive advantage over financial planners who have not completed CFP® certification. Once you’ve satisfied all the requirements and passed the test, you can proudly display CFP® next to your name.
The distinction doesn’t just set you apart from the rest of the field. It positions you as an authority in financial planning. Clients won’t be the only ones seeking out your services. Your peers will also look to you for leadership and guidance.
Practices that are owned by or employ CFP® professionals scale faster. If you’re not planning on taking the exam yourself, consider hiring a CFP® to enhance client services at your firm. Advisory firms average 44% more revenue when they add a CFP® to the team.
Benefit #4: CFP® Professionals Get Paid More
According to a recent study by the Aite Group, CFP® professionals on average earn 14-33% more than non-CFP-holders during the course of their career. Higher fees are not the primary reason, though they are justified. CFP® professionals earn more because they work primarily with HNW clients.
Prospects with over $1 million in liquid assets don’t want just anyone handling their money. Retirement isn’t a simple matter of taking 401(k) disbursements. There’s typically real estate, hard assets, tax issues, and succession plans to deal with. CFP® advisors can handle all of those correctly.
Another reason that CFP® professionals make more money is the number of channels they have to prospect for new clients. There are networks and professional organizations, for instance, that only accept those with the CFP® certification. Each of these is a potential lead source. Increased lead generation leads to higher revenue.
Benefit #5: Clients Need Financial Planning
Clients care about their investment portfolio, but what they really need is financial planning. Becoming a CFP® puts you in the driver’s seat to capture some of that business.
With current market volatility, you don’t want to be judged by portfolio performance alone. Planning will add value to your service offering, whether you’re a CFP® or not. If you choose to forego CFP® certification, consider outsourced financial planning with Good Life Companies.
Grow Your Practice
Looking for ways to get a competitive edge and grow your practice? Good Life Companies is an independent financial advisor network offering a full suite of services and tools to transition, support, and grow independent financial advisor practices.
Contact us today to learn more.
Frequent Asked Questions
A Certified Financial Planner (CFP) certification is a prestigious and globally recognized credential in the field of financial planning, indicating that an individual has met educational and professional requirements and demonstrated high competence in various aspects of financial planning.
To obtain a CFP certification, individuals typically need to complete a comprehensive education program in financial planning and accumulate several years of relevant work experience, which includes 6,000 professional hours. This process is in addition to adhering to a strict code of ethics and professional standards.
Yes, CFP certifications often lead to higher earnings for financial advisors, with studies showing that CFPs can earn 14-33% more than non-CFPs, primarily because they work with high-net-worth clients and have increased opportunities for lead generation.