Once candidates for a CFP designation have completed
the required coursework, or hold a qualifying degree, they
take a two-day, 10-hour exam covering all areas of financial planning. The pass rate for first-time test takers hovers
around the mid-50% range, Mohrman-Gillis notes.
Once an advisor has been certified, he or she must complete 30 hours of continuing education every two years
to maintain the certification. The CFP designation is
business model and compensation neutral, meaning that
advisors in any business channel, such as a wirehouse, independent broker-dealer or RIA, can earn the designation, as long as they adhere to the professional standards
prescribed by the program.
“Our code of professional conduct is very similar to the
fiduciary standard that has been in place for the past 70
years for RIAs,” Mohrman-Gillis says. She adds that the
CFP Board also maintains a strict disciplinary and ethics
review process in the event that someone should raise a
complaint about an advisor.
“If there is a problem, we open an investigation and, if
necessary, conduct a hearing about an advisor’s conduct,”
Mohrman-Gillis explains. “Our sanctions range from
revoking the CFP certification to public or private censure.
There are real teeth behind the designation and we hold
our advisors to the highest standards,” she explains.
Investment Management Focus
If you plan to build your practice primarily around
investment management (actively selecting securities for
client portfolios rather than outsourcing money management to third-party providers), you may want to consider
the CFA designation. Stephen Horan, head of university
relations and private wealth for the CFA Institute in New
York, notes that the designation tends to appeal to financial advisors who first and foremost identify themselves as
investment managers.
“Having the CFA charter gives advisors the knowledge, skills and ability to serve their clients’ investment
needs better using state-of-the-art tools and techniques,”
Horan says. “It also gives advisors confidence that they are
making investment recommendations that are not only
suitable but that also place their clients’ interest ahead of
their own,” he adds.
“Charterholders adhere to a strict ethical code that
obligates them to avoid conflicts of interest and fully
disclose any conflicts that can’t be avoided, while main-
taining client confidentiality,” Horan says. “One way that
advisors can communicate the value to clients is by talk-
ing openly about ethics and standards, for example, while
working through an investment policy statement.”
“In looking at all available
data, we find on average
that a single high-quality
designation may increase
your earning power by as
much as 27%
Jack Hondros
The American College
In addition to appealing to advisors who work with
high-net-worth clients, the CFA may also appeal to those
working with international clients, Horan notes. “The
Economist has dubbed the CFA charter a ‘global passport,’
because it allows advisors to cross borders and receive
the same level of recognition and reputation from one
jurisdiction to the next,” he says. “It’s a principles-based
curriculum that introduces an analytical framework that
U.S. advisors can apply to client portfolios in all countries
across all asset classes.”
In Horan’s view, the CFA charter carries a lot of weight
with high-net-worth investors looking for portfolio
management and wealth planning. “Investors with $1 mil-
lion to $5 million in liquid assets make up the biggest
category of clients served by advisors with a CFA char-
ter. The second-largest category of clients is $500,000 to
$1 million,” he says.
Earning the CFA designation requires passing three
levels of exams, with pass rates for each level ranging
from 30% to 50%, according to Horan. However, the ultimate completion rate from start to finish is less than 20%
because it’s an extremely rigorous program and some
people change focus along the way. “The CFA program
requires candidates to have four years of relevant work
experience before earning the charter. The examinations require a minimum of two years to complete, but the
average completion time is closer to four years,” he explains.
