Certified Financial Planner Exam

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History

The Certified Financial Planner (CFP) Certification Examination was introduced in 1991 by the CFP Board, which was created in 1985 by the International Association for Financial Planners.[1] The examination received accreditation by National Commission for Certifying Agencies (NCCA) in 1995.[2] In 2008, the Standards of Professional Conduct for CFP professionals received a substantial update, including a requirement that CFP professionals adhere to a "fiduciary standard of care."[1]

Since 1987, the CFP Board has conducted at least five Job Analysis studies to identify the skills and knowledge most crucial for the career of a Certified Financial Planner. These periodic Job Analysis studies have informed several major updates to the CFP exam since its inception.[3]

Although the CFP exam has long been a paper-and-pencil examination, it will transition to purely computer-based administration in November 2014.[4]

Function of the Test

CFP Study Guide

The CFP examination is one of the four major components of the full CFP Certification application. (The other components are "Education," "Experience," and "Ethics."[5]) Although no laws in the United States prohibit people from advertising themselves "financial planners," candidates who achieve full CFP certification receive the privilege of calling themselves "Certified Financial Planners," which is a protected and nationally-recognized term.

The CFP examination is commonly taken by candidates who are completing or who have recently completed a bachelor's degree in a program of study registered with the CFP board. Candidates who pass the examination do not automatically receive any special rights or privileges. They must finish the full process of CFP certification first. For example, after successfully completing the CFP exam, candidates have five years in which to fulfill the professional experience requirement for CFP certification.[6]

About 4,000 people take the CFP exam each year, and about 67.5% of candidates pass the exam on the first try.[7]

Test Administration

CFP Flashcards

Before registering to take the CFP examination, candidates must first complete an education coursework requirement through a program registered with the CFP board which addresses the major financial planning areas identified by the most recent CFP Job Analysis Study.[8] Several other requirements must be met before achieving full CFP certification, but most of those requirements may be met after successfully completing the CFP examination. Only the completion of coursework is required before registering for the CFP exam.[8]

The CFP exam is in a period of transition. The final round of paper-and-pencil testing was completed in July 2014, and the first round of computer-based testing (CBT) will begin in November 2014.[4] The current exam fee of $595 will not be changed in the transition to computer-based testing.[4] Under the new CBT protocol, the CFP exam will be offered in three 5-day testing windows per year: one in March, one in July, and one in November. Candidates may schedule to take the exam at over 250 Prometric testing centers.[4][9]

The computer-based exam will comprise 170 multiple-choice questions presented over the course of six and a half hours. There will be a scheduled 40-minute break in the middle of the exam. The computer-based test will not be adaptive, meaning that candidates will be able to go back and change their answers to earlier questions.[4] Unofficial results will be provided immediately following the exam, with official results to be posted online approximately ten business days after the close of the exam window.[4]

Unsuccessful candidates must retake the entire exam and pay the full exam fee for each retake. Candidates may only take the CBT exam a maximum of five times, and candidates may only take the exam three times within a 24-month period.[10]

Candidates who require special accommodations for a disability may request appropriate accommodations using the CFP Board's Special Accommodations Request Form.[11] Requests must be submitted at least six weeks in advance of the registration deadline.

Test Format

Sections of the CFP Test
CFP Test Subject Areas Percentage
Establishing and Defining the Client-Planner Relationship 8%
Gathering Information Necessary to Fulfill the Engagement 9%
Analyzing and Evaluating the Client's Current Financial Status 25%
Developing the Recommendation(s) 25%
Communicating the Recommendation(s) 9%
Implementing the Recommendation(s) 9%
Monitoring the Recommendation(s) 5%
Practicing within Professional and Regulatory Standards 10%
Total 100%

Test Environment

The CFP Board offers both a computer-based and a paper and pencil based form of exam in Prometric testing centers. Candidates are expected to show up at least 15 minutes early for their scheduled exam. Two forms of identification must be presented for admission, one of which must be a government issued, photo ID. In both the paper and pencil as well as the computer-based exams, there are 170 multiple choice questions. They will be administered during two, three hour sessions that are separated by a 40-minute break.[12]

Test Structure

The Certified Financial Planner Exam is made up of eight different domains of practice: Establishing and Defining the Client-Planner Relationship; Gathering Information Necessary to Fulfill the Engagement; Analyzing and Evaluating the Client's Current Financial Status; Developing the Recommendations; Implementing the Recommendations; Monitoring the Recommendations; and Practicing wthin Professional and Regulatory Standards.[13]

Test Content

  • Sample CFP Questions
  1. A married couple would like to set up 529 Plan college education accounts for their two young grandchildren. For 2010, what is the maximum amount they could have contributed in total to both 529 plans without incurring gift tax?
    A. $13,000
    B. $26,000
    C. $130,000
    D. $260,000
  2. According to the Internal Revenue Code, Section 170(C), which entity is not considered a Qualifying Organization for purposes of charitable contributions?
    A. A cemetery company
    B. An organization created to prevent cruelty to animals
    C. Local Chamber of Commerce
    D. A public park
  3. All of the following are true regarding an S Corporation except...
    A. S Corps are limited to 100 shareholders
    B. an S Corp provides limited liability for shareholders
    C. any classes of stock are permitted
    D. income is passed through to the shareholders
  4. Which is not a characteristic of a recession?
    A. Business inventories decrease
    B. Interest rates fall
    C. Commodity prices fall
    D. Capital investment falls
  5. Your clients, ages 70 and 72, are discussing their estate planning needs with you. They’ve been married only to each other and have no children. They would like to leave any remaining assets at the end of their lives to charity. Currently, their estate is worth about $500,000. What do you suggest?
    A. They should meet with an attorney to create a QTIP trust
    B. They should begin a large annual gifting program to charity now, rather than wait until death
    C. Because of their age, it's unnecessary to have their attorney draft living wills for each of them
    D. their attorney should discuss creating, or updating, their durable powers of attorney
  6. Currently, unemployment is at a 10-year high and continues to increase, Businesses are operating at their lowest capacity levels. The current business cycle is best described as...
    A. recession
    B. trough
    C. depression
    D. recovery

Scoring

According to the CFP Board, there is no pre-determined pass rate or percentage of questions which must be answered correctly in order to pass the examination. Rather, the CFP Exam has undergone Standard Setting, a process by which the minimal competency level required to pass the exam is determined. A candidate's performance is compared to the minimal competency level to determine whether he or she has passed or failed the examination.[9]

The pass rates for first-time test takers has remained very consistent over time, hovering around 67.5%:

CFP exam pass rates[7]
Date First time takers Pass rate
March 2012 1,175 67.5%
July 2012 1,397 66.9%
November 2012 1,645 68.3%
March 2013 1,121 66.6%
July 2013 1,076 68.0%
November 2013 1,297 67.8%
March 2014 1,123 67.7%
Average 1,262 67.5%

The pass rate for repeat test takers is approximately 50%.[7]

All of the examinations listed above were administered as paper-and-pencil tests. However, no change in difficulty is anticipated for the computer-based test.[4]

Recent/Future Developments

Starting November 2014, the CFP exam will be administered solely by computer.[4] The Test Administration section of this article details the procedures and requirements of the new computer-based exam.

Answers to Sample Questions

1;D 2;C 3;C 4;A 5;D 6;B

References

  1. ^ a b About CFP Board: History August 6 2014
  2. ^ About CFP Board: NCCA Accreditation August 6 2014
  3. ^ About CFP Board: Certification Milestones August 6 2014
  4. ^ a b c d e f g h CFP Board: Frequently Asked Questions: Computer-Based Testing (CBT) August 6 2014
  5. ^ Become a CFP Professional: CFP Certification Requirements August 6 2014
  6. ^ Become a CFP Professional: Experience Requirement August 6 2014
  7. ^ a b c CFP Examination Statistics August 6 2014
  8. ^ a b Become a CFP Professional: Education Requirement August 6 2014
  9. ^ a b Become a CFP Professional: November 2014 Exam August 6 2014
  10. ^ Become a CFP Professional: CFP Exam Requirement August 6 2014
  11. ^ CFP® Certification Examination: Special Accommodations Request Form August 6 2014
  12. ^ Exam FAQ 21 August 2014
  13. ^ Exam Certification Requirements 21 August 2014