The CFP exam is for the financial industry what the bar is for the legal industry. Being a certified financial planner, or CFP, is largely considered the gold standard in financial planning. Of the approximately 330,300 financial advisors in the U.S., only about 93,000 are CFPs.
“If you’re serious about personal finance, your education and standing out from the masses, you want the CFP,” says Rianka Dorsainvil, a certified financial planner in the District of Columbia, and co-founder and co-CEO of 2050 Wealth Partners. That said, becoming a CFP is no cake walk.
The certified financial planner exam is likely the hardest test you’ll ever take, Dorsainvil says. “Think of the hardest exam you took in college then times it by 10.”
Preparing to take the CFP exam begins months or even years before you actually sit to take the test. Many prospective financial planners begin preparing for the CFP exam, but not all complete it.
“We’ve done studies around when we lose people in the process,” says John Loper, a certified financial planner and the CFP Board’s managing director of professional practice. “We lose a lot of people after the first and second course, and I think it’s primarily because they underestimate the amount of time and dedication required to pursue the CFP exam.”
To successfully pass the CFP exam, you must get yourself in the proper mindset. That mindset begins with knowing what to expect from the CFP exam.
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About the CFP Exam
The CFP exam is a computerized six-hour, 170-question beast of an exam designed to test your ability to apply a range of financial planning knowledge in real-life situations. It’s offered for eight days, three times per year, in March, July and November, at 265 testing sites across the U.S.
The exam is broken into two three-hour sessions with a mandatory 40-minute break in between for lunch and to restore your mental sanity. You can’t return to the questions in part one after you start your break.
Break commences when you complete the first section or time runs out, whichever comes first. It ends exactly 40 minutes later, whether you are back in your seat or not. You can take more breaks throughout the exam, but your exam clock won’t stop when you do.
“That 40-minute break is a critical time to plan for,” says Courtney Stutts Huge, a certified financial planner at Wealth Enhancement Group in Charlotte, North Carolina, who took the CFP exam to give her confidence as a young advisor and to help her clients feel more confident in her. “Think ahead, before your exam date, about how you want to spend that short period of time.”
She suggests finding any way you can to decompress: Take a walk to get some fresh air, hydrate or eat a snack you brought.
The only things you can take with you into the exam itself are a battery-powered, non-programmable financial calculator and a non-programmable watch. The rest of your life must be checked at the door, where there will be lockers for safekeeping.
While you can’t bring your own notes, you will have access to formulas and tax tables provided by the CFP Board. You can download these tables from CFP.net to use while studying.
CFP Exam Eligibility Requirements
To take the CFP exam you must first complete the CFP Board’s education requirement. While you can register for the exam before completing the necessary education, you can’t actually sit for the test until the CFP Board has verified that you have completed the requisite education.
You can satisfy the CFP exam education requirement by completing a CFP Board-approved program or equivalent coursework.
Alternatively, if you hold one of the following approved professional designations, you may be able to take an abbreviated Capstone Alternative Program in place of the full educational coursework:
— Doctor of business administration.
— Ph.D. in business, economics or finance.
— Licensed attorney or certified public accountant (even if currently inactive).
— Chartered financial consultant.
— Chartered life underwriter.
— Chartered financial analyst.
— CFP from the financial planning standards board.
The CFP Board approves registered education programs but doesn’t offer the education itself, nor does it express an opinion on providers, Loper says. It’s up to candidates to do their own research in selecting the right CFP education provider for them.
“Once you’ve passed all the tests associated with each individual course, you have to study for our comprehensive exam,” Loper says.
CFP Exam Topics
The CFP exam is written with an emphasis on problem-solving and critical thinking as opposed to textbook theories. It’s not enough to memorize the right answer; “you have to understand the rationale behind it,” Loper says.
Each of the 170 multiple-choice questions is linked to one or more of the CFP Board’s eight Principal Knowledge Topics. To determine these topics, the CFP Board surveys certified financial planners about their job and what you need to know to be a CFP approximately every five years.
“We basically ask them, ‘What are the most important components of your job? What is it you’re doing and what’s critical to know?” Loper says.
The latest survey conducted in 2020 and the resulting 2021 Practice Analysis Study led to the CFP exam being structured as follows:
— 18% retirement savings and income planning.
— 17% investment planning.
— 15% general financial planning principles.
— 14% tax planning.
— 11% risk management and insurance planning.
— 10% estate planning.
— 8% professional conduct and regulation.
— 7% psychology of financial planning.
These new topic percentages took effect in 2022. The specifics of the format remain the same as previous years, Loper says.
Once the exam topics have been identified, the CFP Board invites CFP volunteers to question-writing workshops where the actual questions are written. The beauty of the CFP exam is the questions are developed by people in the industry, Loper says. With some oversight by test experts, of course.
“We want to make sure they’re written properly and aren’t trick questions,” he says. To this end, each question undergoes a multiple-stage review process, the culmination of which is a final review by the CFP Board’s Council on Examinations.
The test questions are then reviewed annually and updated when necessary, Loper says.
The CFP exam will also test you on the following day-to-day job tasks:
— Establishing and defining client-planner relationships.
— Gathering information necessary to fulfill the engagement.
— Analyzing and evaluating the client’s current financial status.
— Developing the recommendation(s).
— Communicating the recommendation(s).
— Implementing the recommendation(s).
— Monitoring the recommendation(s).
— Practicing within professional and regulatory standards.
CFP Exam Passing Score
The CFP exam is a pass-or-fail exam. The passing score is determined through a psychometric process used to determine the minimum competency to be a CFP. “We work with test experts at Prometrics, who is our test partner, to make sure in the end, the individuals who pass our exam are competent across those Principal Knowledge Topics,” Loper says.
The CFP scoring process can be frustrating to test takers because there’s no clearly articulated score you need to pass, he says. You find out if you passed or failed, and if you failed, what areas you scored low in, “but there’s not a lot of detail and that’s to protect the integrity of the exam.”
If you fail and want to retake the exam, you must wait for the next testing window. You’ll also need to pay the exam fee and take the entire exam for each retake. You can take the exam three times in one 24-month period up to a lifetime maximum of five times.
How to Prepare for the CFP Exam
CFP exam study tips:
— Choose a good time to take the CFP exam.
— Create a study schedule that plans for life events.
— Study like you’re preparing for a marathon with adequate breaks.
— Verbalize concepts as you study.
— Get help.
— Take as many practice questions as you can.
— Build your own practice exam as you study.
— Test drive the exam site.
— Don’t try to be an “A” student; just try to pass.
Expect to spend three to six months studying for the exam, Loper says. To give yourself the best chance of success, choose your CFP test date with care.
“It’s almost like planning for a family,” Dorsainvil says. “There’s no perfect time, but you know when it’s not the perfect time.”
When she was preparing for the CFP exam the first time, Dorsainvil was in the middle of moving and planning her own wedding, which was scheduled to take place in the midst of her studies.
“Those should have been a lot of red flags saying, ‘Hey you may not be able to truly concentrate on studying for the exam because you have a million other things going,'” she says. “This is a very hard exam, and you have to have as much peace and simplicity (in your life) as possible.”
This doesn’t mean you have to wait until you find yourself in a social void to take the exam, but you should make sure you have enough time around your social life to study.
“You don’t want to completely seclude yourself, but you want to be realistic about how much time you need to study,” Dorsainvil says. “Let your friends and family know you’re about to sit for probably the toughest exam of your life” so they won’t be offended if you turn down more invitations than usual.
Huge offers one more recommendation on scheduling: recent college graduates might want to take the exam sooner rather than later, while you’re still in “student mode” and have perfected the art of hunkering down to study. “The further along you get in your career and personal life, typically the less time you have to devote to studying,” she says.
Once you’ve picked your exam date, Dorsainvil suggests printing out a calendar of the months leading up to the exam and block out a study plan. Write the date you’re going to sit for the exam, then write down any important events between now and exam day.
If you know you’ll be on vacation for a few days during that time and won’t be able to study, factor that into your plan, she says. For instance, you may plan to review CFP flashcards instead of studying new material while you’re out of town.
Your study plan should include when you’ll work through each chapter and when you’ll review it. Most CFP study materials include end-of-chapter exams. Plan to take those but also to review the material in general, Dorsainvil says.
The CFP Board recommends studying for the CFP exam as if you’re preparing for a marathon — and a six-hour test really is a marathon. Give yourself adequate breaks to recover from your “training sessions” and let the material sink in.
It can also help to verbalize concepts as you learn them. Try discussing CFP exam topics with others or expressing them out loud to yourself. This can help you identify gaps in your knowledge.
It’s important to have help through the process, whether that’s through friends, a mentor, someone who’s taken the exam before or your work, Loper says. You don’t want to go through the CFP exam process alone.
In the three weeks leading up to taking the CFP exam, go through as many questions as you can to identify your weak areas, Dorsainvil says. Those weak areas are where you want to focus your remaining study time.
“The more questions you see, the easier it is for you to identify those keywords that change the answer,” Dorsainvil says.
The CFP Board’s website offers a complimentary online quiz with 10 multiple-choice questions from previous CFP exams. It also provides a 170-question online practice exam with immediate scoring and feedback that is complimentary with the exam registration. You can even create your own practice exam as you study by collecting questions that could be asked on the test.
“A lot of people don’t consider how tough it is on your body to sit for that long and how important it is to keep your body and mind engaged,” Huge says. To combat the physical fatigue on exam day, she did two practice exams for the exact time the real exam would take, complete with true 40-minute breaks.
“I think it prepared my body for what it was about to experience when it was go-time,” she says.
Finally, go to the live review. While the CFP Board doesn’t require taking a live review course, Dorsainvil, Huge and Loper all recommend it.
“We don’t require it, but how could it hurt?” Loper says. He didn’t go to a live review before his first attempt at the CFP exam but did the second time around when he ultimately passed the exam.
Live review courses are typically held one month before the exam date and often last three to four days, Huge says. “The instructors revisit and explain every topic from the textbook and online materials.”
But that doesn’t mean you can skip studying and just take the live review. “You’ll need to go into the live review class having read the textbooks and completed quizzes,” Huge says. “It’s not enough to simply rely on the instructors to teach you.”
Her live review instructor was an advisor himself, “so he was able to apply textbook information into real-life scenarios,” she says. “Making those connections and being able to ask questions to an expert is very helpful.”
Her instructor also recommended the pace at which students should cover review materials, how much time to spend on each area and how many practice exams to take. “The live review class really felt like a coach giving me a pep talk and game plan,” Huge says.
You may also want to take a dry-run of the actual test format and test center. Prometric, which proctors the CFP exam, provides an online tutorial of the CFP exam at prometric.com/_layouts/results/index.html.
Prometric also allows test takers to do a 30-minute “test drive” of the test center, which lets you walk through all check-in and testing procedures for $30.
Even if you don’t test drive the actual test center, do a test drive of your commute to it. Drive to the exam site the day before. Locate where you’ll park and how to pay for it. And pay attention to traffic on the way. If it’s far away or you may hit traffic, Dorsainvil recommends getting a hotel nearby.
You don’t want to be stressed on exam day, she says. “You want to go in with a clear mind because the exam is going to stress you out. Think of all the obstacles (you may face) and prep for them.”
Taking the CFP Exam
On exam day, Loper gives the same advice he’d give to someone about to run a marathon: “There’s nothing more you can do now. You’ve either put in the work or you haven’t. So get a good night’s sleep.”
The other advice he’d give is to pace yourself. Know how much time you can afford to spend per question.
Plan to arrive 30 minutes before your scheduled appointment. Bring a valid government-issued photo ID and one or more battery-powered, non-programmable financial calculators with you. You may also want to pack a lunch or snacks for the 40-minute break, although you’ll have to leave them in your car or the provided locker.
You don’t want to risk leaving the exam site to grab lunch because your exam clock restarts with or without you, Dorsainvil says.
The best piece of advice she received for exam day was to not try to be an “A” student. Be that “B” student and just try to pass, she says. “If you try to be that ‘A’ student, you’ll fight the exam.”
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CFP Exam 101: Everything You Need to Know to Pass the CFP Test originally appeared on usnews.com
Update 10/19/22: This story was previously published at an earlier date and has been updated with new information.
