CFP designation just one ‘building block’ for today’s integrated advisors

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This article originally appeared in FinancialPipeline.com.

The CFP or Certified Financial Planner certification is the most widely recognized financial planning designation in Canada. It’s considered the gold standard for the profession.

About 17,000 Canadians hold this designation. They are part of a global network of more than 192,000 in 26 territories around the world (as of mid-2023). Among the most common roles occupied by CFPs are financial consultant, financial planner and investment advisor.

Family offices require a variety of professionals to address the myriad needs of their ultra-high-net-worth clients, and one of the building blocks for the “integrated advisor” role needed at most family offices is the CFP, experts say.

The CFP designation is granted by FP Canada, which is authorized to grant certification in Canada on behalf of the Financial Planning Standards Board (FPSB), based in Denver, Colo. FP Canada operates in all provinces except Québec, where its standards are applied in partnership with the Institut québécois de planification financière (IQPF), the only body in Québec authorized to confer financial planning diplomas.

CFP professionals have proven they possess the necessary knowledge, skills, experience and ethics to examine a client’s entire financial picture at the highest level of complexity required of the profession, and the ability to work with clients to build them a suitable financial plan.

Obtaining the CFP designation

The CFP exam is pass or fail — no grades are given. The criterion-referenced methodology used by FP Canada does not employ a bell curve. Performance is scored against an established passing standard rather than relative to others writing the exam during a single sitting.

The passing standard is determined by a committee composed of CFP professionals from across Canada, using widely accepted psychometric principles and methods for standard-setting.

To be eligible to write the CFP exam in Canada, candidates must complete one or both of the following FP Canada Institute courses, as required for their certification path:

• Introduction to Professional Ethics: Introduces the specific professional obligations of CFP professionals, why they matter and what they mean in practical terms.
• CFP Professional Education Program: Prepares candidates to handle complex scenarios by understanding the key behavioural factors that affect client decisions. It’s equivalent to a single-semester university course and takes an estimated 75 to 95 hours to complete.

While there is no maximum time limit to complete the CFP certification, there are currency requirements and time limits for some steps along the way, which are detailed in FP Canada’s CFP Certification Policies.

The exam itself

The CFP exam is a comprehensive six-hour competency-based test that consists of open-response questions (70 to 80 per cent) and multiple-choice questions (20 to 30 per cent). It’s administered over three two-hour segments on a single day. The exam is written in English, but is available in French upon request.

CFP exam questions are competency-based, not knowledge-based, as the goal isn’t to test technical knowledge but rather the application of that knowledge.

Candidates are expected to:

• Apply knowledge to determine client needs in multiple scenarios;
• Know the options and find the best solution for a client; and
• Assess the potential impact of any recommendations made to a client.

The exam focuses on complex financial planning situations, with a full breakdown as follows:

• Basic, 4 per cent to 14 per cent – Application of knowledge of various facets of financial planning to straightforward situations. Questions might focus on specific content areas and may require basic calculations, evaluation across a single or a small number of topics, or making simple recommendations.
• Moderate, 35 per cent to 45 per cent – Application of knowledge in situations with multiple variables. Requires the assessment and processing of different elements to identify a solution or formulate a recommendation. Questions focus on more complex situations and may require multi-step calculations and the assessment and integration of multiple variables and interrelated factors.
• High, 46 per cent to 56 per cent – Application of advanced knowledge to unique situations involving multiple variables and considerable integration of financial planning practices to analyze situations and form recommendations. Questions will focus on sophisticated situations that may require complex, multi-step calculations and understanding of complicated family or business situations.

Note that there are other avenues to the CFP designation. Individuals who hold a relevant financial or other professional qualification (e.g. CPA, CFA, FCIA, LL.B./J.D. or Foreign CFP Professional) may be eligible to pursue an alternate path to CFP certification.

Work experience requirement

Those seeking accreditation must have three years of qualifying financial planning work experience at the time of applying for CFP certification.

FP Canada stipulates that qualifying work experience must involve the application of the knowledge, skills and abilities described in the FP Canada Standards Council Competency Profile and should help candidates in the application of financial planning processes that best meet client needs.

Qualifying work experience includes the following:

• Financial management;
• Investment planning;
• Insurance and risk management;
• Tax planning;
• Retirement planning; and/or
• Estate planning.

These activities can be done in a supporting role as long as it benefits the client-planner relationship, such as managing, training or assisting planners, all of which would qualify.

Teaching financial planning courses at a post-secondary institution will qualify for up to two years of relevant work experience as long as the courses include the application of the knowledge, skills and abilities described in the aforementioned Competency Profile.

Financial planning research may qualify as relevant work experience, depending on the specific nature of the research. This determination is made on a case-by-case basis.

Work experience outside Canada will be considered, provided it is deemed equivalent to the type of work experience that could have been gained in Canada.

Timeline to earn CFP certification

A candidate working in the financial planning industry, who has already satisfied the work experience requirements, would be looking at a time frame of about two years as the fastest possible option.

Those outside the financial services industry are likely facing a minimum timeline of four years between the necessary exam prep and the recommended study time.

Continuing education requirements

Given the stringent and regularly updated requirements for successful completion of the FP Canada Institute’s Professional Education Program, most professionals who obtain the CFP certification after January 1, 2020, under the new paths to certification, are exempt from all continuing education (CE) requirements for the year in which they pass the CFP exam and the following two calendar years.

Thereafter, CFP-certified financial planners are required to complete 25 hours of continuing education each calendar year, although there are some exemptions for those who successfully complete the CFP Professional Education Program.

Any candidate who does not obtain certification within two calendar years of the year they pass the CFP exam is not eligible for the CE exemption.

To learn more about the CFP designation or how to locate a financial planner in Canada, click here.

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