How to Make a Career Transition to Financial Planner
Why Consider Financial Planning as a Second Career
- Certified financial advisors may expect good job security for the foreseeable future, as the Bureau of Labor Statistics notes that employment of personal financial advisors, which can also be referred to as financial planners, is projected to increase 4% from 2019 to 2029. The BLS attributes this growth to the aging population and major shifts in retirement account options, and although digital financial advising tools are available, people will continue to seek advice from financial planners for complex advice. Becoming a CFP may boost your credibility and set you up for success in this ever-changing industry.
- A range of job opportunities may be available to those with financial planning training and certification. Such opportunities include working closely with individual clients, helping them choose insurance plans or investments. Working as a wealth management advisor means constructing financial portfolios for high-net-worth clients or you may perform a variety of investment research and management on behalf of your firm or its clients.
- As of May 2020, the median annual personal financial advisor salary was $89,330, according to the BLS. Gaining experience, or earning a Master of Business Administration (MBA) degree may lead to career advancement and growth opportunities.
Do You Need an MBA in Financial Planning to Change Careers?
How to Make a Mid-Career Change to Certified Financial Planner
So how do you start a career as a financial planner? Every person’s path to becoming a Certified Financial Planner is different, but there are a few steps in the process that don’t change. These are the five basic steps an aspiring CFP might want to complete before starting their career in this field:
- Complete the Education Requirements
The education requirement for becoming a CFP involves two parts:
First, earn your bachelor’s degree. While the CFP certification accepts a BA or BS in any discipline, a degree in business, finance, accounting, or a related field may help prepare you for a career in financial planning. Be sure to select an accredited bachelor’s degree program.
Second, complete a CFP Board Registered Program. This is a separate requirement that ensures you acquire the skills and knowledge necessary to serve your clients’ financial planning needs. Topics covered in the coursework include estate, investment, insurance, tax planning and much more. Some degrees and credentials may allow you to bypass some of this coursework.
- Pass the CFP Exam
The CFP exam ensures that you have attained the knowledge and skills necessary to provide expert financial advice to your future clients. Currently, the CFP exam consists of 170 multiple choice questions and must be completed in one day with the exam period split into two, three-hour sessions. Test questions cover all areas of financial planning, including tax, estate, retirement, investment, education and insurance planning. Only students who have completed a CFP Board Registered Program of study are allowed to sit for the exam. You may register to take the exam before completing the education requirement, but CFP must receive coursework completion verification before the listed Education Verification Deadline for your exam date.
- Complete Work Experience Requirement
There are two pathways to gaining the work experience required for CFP certification.
The 6,000-Hour Standard Pathway: Hours are accumulated by working directly with clients, understanding their circumstances and goals, and then developing, presenting and implementing those financial planning recommendations. Other options for gaining experience in this pathway include supporting or supervising other financial planners, completing an internship or residency program or teaching college-level financial planning courses. Because most colleges require instructors to have at least a master’s degree, this is another opportunity when an MBA would be helpful!
The 4,000-Hour Apprenticeship Pathway: On this pathway, hours are accumulated by working directly with clients in all seven primary facets of the personal financial planning process. All hours must be completed under the direct supervision of a Certified Financial Planner.
- Sign the Ethics Declaration
When your exam and work experience requirements are met, you’ll then complete the application for CFP. The application includes an Ethics Declaration that says you commit to acting in the client’s best interest at all times (among other things). At this point, a thorough background check is conducted as well. Once the background check is complete, you may be notified whether you meet CFP Board’s Fitness Standards. If your background check meets these standards, you move on in the process. If not, you may be contacted to discuss any issues flagged in the background check.
- Pay Your Fees and Earn Continuing Education Credits
Once your education, professional training, exam, work experience, Ethics Declaration and background check are completed, you’re asked to pay the application fee and initial certification fee. At that time, you may be notified when your first year’s membership expires (currently, it’s 12 months after the last day of your next birthday month).
Six Skills That Financial Planners Use
- Communication Skills. Financial planners interact and communicate with clients every day and often find themselves explaining complicated concepts to people with limited financial literacy. Being able to translate financial jargon into plain language is critical when helping people understand their financial challenges and options.
- Interpersonal Skills. Clients count on their financial planner to protect their assets and investments so building trust with clients is critical to a financial planner’s success.
- Analytical Skills. A good financial planner must evaluate all options and angles to develop effective plans for their clients’ portfolios. This may include analyzing trends, forecasting, shifting regulations and making adjustments accordingly to maximize their client’s portfolio.
- Attention to Detail. A financial planner works with many clients simultaneously, constantly monitoring their portfolio performance and looking for opportunities to make improvements. Staying up to date on markets and investments, coordinating communications with clients and creating performance reports for all clients requires the utmost attention to detail.
- Problem-Solving. Each client presents unique situations and challenges. One client may be far behind on their retirement planning, and the next client needs you to help them figure out how to send three children to college. You may find yourself thinking outside the box to develop creative solutions for your clients’ financial problems.
- Strong Ethics. People place a tremendous amount of trust and responsibility in their financial planner’s hands. When you sign the CFP Ethics Declaration, you make a promise to act as a fiduciary. This is a commitment to maintaining high ethical standards, including taking action that is always in your clients’ best interest.
Maintaining Your New Career as a Certified Financial Planner
- Two hours of Ethics training
- 28 hours covering the CFP Board’s Principal Topics