Certified Financial Planner (CFP) Education on the Cheap

Over the long weekend, a few conversations rekindled my curiosity about gaining a Certified Financial Planner (CFP) designation. Now, I really don’t want to be a financial planner. I’m quite happy with my current career right now. I primarily want the CFP knowledge to help me manage my own finances, but to be honest I might be willing to pay a little extra to put the initials after my name.

According to the CFP website, the three main steps are (1) the education requirement, (2) passing the exam, and (3) the 3-year experience requirement. The education requirement can be fulfilled by a $2,000 online course that takes 6-8 weeks, or can be skipped if you are a CFA, CPA, ChFC, or CLU already. The exam costs $595 to take. The 3-year experience requirement is the most difficult for me, as I won’t have time to rack up 6,000 hours of “experience in the financial planning process” unless writing this blog counts. Annual renewal fees are $325 a year.

What if I just want the education at the lowest cost? There are several online CFP Board-Registered programs each with their own curriculum, but they tend to share the same six overall course topics. Both Boston University and UCLA Extension make their textbook lists public. 6 courses times 6 textbooks times ~$110 a textbook = $660. But we all know that publishers like to simply do some light housekeeping and pop out a new edition every other year to force students to pay up. The older edition usually at least 95% the same, but at a fraction of the new price. I took the BU textbook list and went comparison shopping:

Introduction to Financial Planning
Personal Financial Planning Theory and Practice, Dalton
6th edition (2009) costs $125 new at Amazon
5th edition (2008) costs $30 used at Half.com

Risk Management and Insurance
Introduction to Risk Management and Insurance, Dorfman
9th edition (2007) costs $157 new at Amazon
8th edition (2004) costs $2.50 used at Half.com

Investments
Investments: An Introduction, Mayo
10th edition (2010) costs $183 new from AbeBooks
9th edition (2007) costs $7 used from Half.com

Tax Planning
Prentice Hall’s Federal Taxation 2012: Individuals, Pearson
2012 edition costs $155 new from Amazon
2011 edition is $55 used from Half.com

(I can see the benefit of having the most up-to-date tax book, but it’s not like I’m going to buy the latest version of this book every year. I’d just try to keep up with any changes.)

Retirement Planning and Employee Benefits
Retirement Planning and Employee Benefits for Financial Planners, Dalton
6th edition (2010) is $75 new from Amazon
5th edition (2008) is $18 used from Amazon Marketplace

Estate Planning
Fundamentals of Estate Planning, Fontaine
12th Edition (2010) is $67 used from AbeBooks. (Couldn’t find it new?)
11th Edition (2008) is $4.20 used from AbeBooks.

Adding up the used prices for these 6 books, the total comes to about $120 (plus shipping and taxes, used prices change regularly). This seems like a more economical way to achieve the knowledge for the DIY set. Chances are, you could even use them with an official course if you really wanted to.

I’d be willing to bet that I could read through these previous editions of textbooks and pass the CFP exam. It’s 10 hours long, but I read that it’s also all multiple-choice. I wish I could try. However, it appears that just to sit for the exam, I must pay for a $2,000 course that seems to primarily consist of some online videos. I can definitely see the benefit of videos for audio/visual learners though, as I’m sure the textbooks can be pretty dry stuff.

Comments

  1. I’ve been looking into the exam myself, as I have the experience, and the educational components, but just need the certificate to take the exam. The University of Georgia usually has some pretty good deals on the entire package if you pay up front for the entire course, and a lot of community colleges offer the certificate program at reasonable fees as well.

    Regarding the publishers popping out new editions every year, I would be very cautious. If you look at the specific examples you used in the post, there was a gap of 2-3 years for most of those books. Like you said about taxes, there are always new laws being enacted and updates to existing ones each year, and I would be quite surprised if there weren’t significant changes in the other sections within those 2-3 years between updated books. Finance is heavily regulated so you can be sure that you will miss out on some pretty important changes by going with the older books, but if it’s mainly for your own knowledge, then I say go for it!

  2. Oh, almost forgot this…the education requirement isn’t the certificate course. It’s having a Bachelor’s Degree from a CFP accredited program in business or a related field. The certificate is to make sure that you know the principles of the different components of Planning so that you may sit for the exam.

  3. Interesting research. It does seem that the CFP is not practical unless you are a working financial planner and are able to deduct these expenses.

    How does CFA compare to CFP? Are they considered complimentary, or am I correct the CFA is more involved?

    Also, these books can likely be obtained via interlibrary loan at most libraries.

  4. To earn the CFA designation candidates must pass three exams based on a self-study course that covers statistics, economics, accounting, corporate finance, investments and portfolio management, and ethics.

    The first two levels consist of multiple choice questions and the third level is half multiple choice and half essay. The first level is offered twice a year, so the quickest a candidate could complete the exams would be 1.5 years (it used to take three). Candidates must also have four years of industry experience to earn the designation. CFA Charterholders also have to maintain membership with the national organization and their local chapter (if possible) to remain charterholders.

  5. Seems like that if you are just wanting to do it to better manage your own finances, you would be better served by reading the books, and keeping your $2K. Especially since getting the 3 years of experience would be really difficult.

    Like you, I had thought for a while that it would be a nice thing to do, but I just really don’t think it’s worth actually getting unless you intend to do it as a career.

  6. I agree with Seth. If you just want the education, don’t worry about the CFP exam. It will be useless to you unless you’re going into the industry. I’d just read the books and keep trying to figure out how the ideas apply to your own situation. And yes, go with past editions – just be sure to Google any figures that change annually (taxes, contribution limits, etc.). Also, some rules might have changed since the edition you’ll use, so just double check before making any decisions

    However, if you want to take it, I would suggest doing some case studies/mock financial plans first. Having taken and passed the CFP exam, I can tell you that you’ll need more than just the knowledge. You need at least a little experience trying to apply the knowledge. Yes, it’s multiple choice but most of the answers are not easily eliminated.

    @Steve: The CFA is more involved than the CFP when it comes to investments, but it does not really cover any of the broader areas (retirement planning, taxes, insurance, estate planning, education planning, etc.). It’s most useful if you want to go into investment management at a mutual fund, hedge fund, or something similar.

  7. I have some 2009 and 2010 CFA mock exams and answers for level I and Level II CFA exams that I could send your way. Just let me know where to send them and maybe you can post them for everyone.

  8. Looks like your interested in CFP and not CFA, my mistake.

  9. I thought about this since I would also be exempt from the education requirement once I become a licensed attorney. I would still need the three year’s experience and have to pay to take the exam so it wouldn’t really be worth it unless I planned on actually becoming a financial planner.

  10. Well, I went down this path in 2004 and quit my stressing but very well payed job in IT. I manage to take classes online from Kaplin University for about $2400 to satisfy the education requirement but didn’t find it that good. So I bought the books from BySys , studied and passed the exam.
    Finding a job was so hard but I eventually got one for $10/hr … I thought I could take the 80% pay cut for a year for the cause but the work environment killed the whole deal.
    To summarise it: t’is not worth it unless you start do it in your 20′s when you don’t know better.
    I’ve been back in IT for 6 years now and I regret wasting the time pursuing the CFP.

  11. Baughman says:

    After hearing the investment advice of CFPs, the allure of the designation has lost its appeal to me. Maybe I’m suffering from sample selection bias, but it seems like they often don’t practice what they preach. Conflicts of interest abound in the industry, so I don’t blame them for trying: financial planner has to try to beat the market by investing in sexy actively managed funds to justify his 1% commission. Sounds like a loosing strategy to me.

    One CFP I know suggested that I buy a million dollar home (on a single salary) with an interest-only loan back in 2006. When I chatted with him a few weeks back, he said straight faced “I have always told my clients, a home is not an investment, it’s a place to life.” What a joke.

  12. EP, could you send me the sample exams/solutions for CFA at stgrimes at indiana dot edu? Thanks in advance.

  13. I thought about getting a CFP years ago, but never did. I’ve always had an interest in personal finance and take about every personal finance magazine out there.

    I suppose if you’re already in the industry is some kind of capacity (stock broker, insurance, etc), it might make some sense to pursue a CFP to get better educated and to have some more initials after your name, but I wouldn’t do it first and THEN look for a job. At best you’ll probably end up at some commission job (think Ameriprise) and be miserable. Most probably won’t even find a job. It’s a tough market out there.

  14. I am a CFP(R) certificant, as well as a CPA, PFS, and have passed 2 levels of the CFA exam. The CFA is by far the hardest to complete but is solely focused on investments. Most practical use is to manage money (brokerage house, mutual fund, etc.).

    The CFP(R) designation is a good one to have and a gold standard in the industry. Insurance folks, brokers, lawyers, etc. try to give advice like they know what they are talking about. Unless they are a CFP(R) certificant, they are generally NOT held to the same fiduciary standard.

    @Baughman, it sounds like that practitioner should probably be brought up on suitability issues. This can, and should, be reported to the CFP Board. The the mark shows that you are well studied, passed a pretty rigorous exam, and are held to a high standard, doesn’t mean that these professionals are perfect. We have to hold ourselves to the higher standard and if not, our clients and the public needs to in order to maintain the allure of the mark.

    To the writer, most likely you will not pass the exam with a simple read of several outdated materials. I recommend Dalton Education @ http://www.dalton-education.com or one of their partnering universities such as NYU, UGA, UCLA, Northwestern, etc. These classes can be taken online or via traditional classroom. There are also self-paced study options. Lastly, they provide a great comprehesive review about 1 month prior to the exam in various parts of the country as well as online.

  15. Jenna, Adaptu Community Manager says:

    If you do choose to do it. I hope you blog about your experiences with studying and your success in taking the exam.

  16. Do it when you have enough to retire. So, do it just for fun, and money isn’t a problem.

  17. Interesting. This reminds me of Personal MBA where you can essentially compile a reading list that will enable you to learn about becoming a MBA. Here’s the reading list: http://personalmba.com/best-business-books/

  18. I have taken some of the CFP courses at a local college for the personal aspect vs a career change. The best benefit I got out of it was the local knowledge from the other people in the class and the instructors. There is nothing really cutting edge in the books, but knowing how it actually gets applied is of much more benefit.

    It is still worth reading the books to get exposure to the terminology and range of financial issues you should be considering.

    The courses are also a good way to understand how the financial planning industry works (the all key AUM: assets under mgmt) and to see some of the people that could be on the other side of desk w/ your money. A lot of people there just want the “credentials” since each company usually has its own approach to what the client gets.

  19. I also looked into a CFP designation, but I’m not 100 percent certain that it’s the route I want to take. Without that certainty, I’m loathe to invest time or money into the program.

    Like you, I feel that studying the material and taking the test would be fun; getting 3 years of full time experience is the kicker that stops me. I’m a full-time freelance writer and I can’t imagine going back to the traditional workforce.

  20. Cabron James says:

    Is there a “syllabus” that corresponds to which pages/chapters of these 6 books is relevant to the CFP exams? I would imagine that not every chapter of these books is relevant.

    If these 6 texts are designed solely for the CPF exam, then maybe every chapter is relevant. If the texts have alternate uses, such as a course for a BS in Finance, BS in Insurance, etc; than many chapters may not be relevant.

    For those of us that would be spending the time “self-learning” the material “for fun”, we wouldn’t want to be spending time on the irrelevant chapters.

    I would imagine that latest edition of every book could be borrowed through Interlibrary Loan.

  21. playcentric says:

    I am retired but would like to learn this and even to become one as a job (help myself and others in financial planning and also make some money.

    My degrees are in Math, Statistics, and Computer Science.

    Would like to get your advice on the best method/cost/time/place to get there.

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