OpenCourseWare: Fundamentals of Personal Financial Planning

While reading this month’s issue of Kiplinger’s Personal Finance magazine, I found that UC Irvine offers a free online course on the Fundamentals of Personal Financial Planning:

This course was produced by a generous grant from the Certified Financial Planner Board of Standards and by the Distance Learning Center at the University of California, Irvine under the OpenCourseWare Initiative. The purpose is to make widely available to the general public a course designed to provide a comprehensive but easily understood overview of personal financial planning.

This course is not intended to replace the professional financial planner, but to help to make the general public better consumers of financial planning advice. It tries to help those who cannot afford extensive planning assistance to better understand how to define and reach their financial goals and provides basic understanding so they can make informed decisions. The course can also be seen as a reference for individual topics that are part of personal financial planning.

While it seems to be a pretty good basic resource for novice investors, I was actually disappointed as I was hoping to see some of the actual courses one would have to take to become a Certified Financial Planner (CFP). Is it heavy on the math? Mostly memorization? I’ve toyed with the idea of becoming a financial planner before, but it always seems like it would be hard to start out anywhere else besides a commission-based sales job.

Comments

  1. That’s great news a school finally sees that personal finance education should be free :)

    As for your question about the CFP courses – I took them all and they weren’t too heavy on anything. The most math you’d do would be calculating basis on investments or the time value of money – both really simple concepts. Sure, there are some investment analyst type things (sharpe ratio, CAPM, etc), but if you want to stick with pure financial planning, you probably won’t use those at all.

    There is memorization of course, you need to understand what planning techniques there are and how they help a person. Mostly though, it’s all about dealing with people, recognizing their goals and objectives, and finding a way to get them there.

    As for starting only in a commission based job, it isn’t always true. Granted, it is much harder to get into a fee-only job – mainly due to the high demand that these types of jobs have. Most people want to do fee-only planning, they don’t want to sell (like myself). However, you can start in a commission job and move to a fee-only job when it comes along. Companies like SmithBarney, UBS, Fidelity, etc. are always hiring. If you can’t get in the company you want, they’ll take you. You will be pigeonholed into selling and retirement/insurance, but it’ll get you going.

  2. You have to pay for enrolling courses to become eligible for CFP exam. I have not seen any free courses yet:D. Myself takes Kaplan program. I can say that most of the material requires understanding the concept not memorizing. Yes, there is a financial calculation, not needed really higher math education because mostly we are using financial calculator. It is a matter of how understand we are to use the calculator and of course the concept of the problem. In contrast, CFA, in my opinion, more calculation concept and analysis.

  3. Jonathan,

    Huge fan of the blog, I check it every morning. I am a director of Financial Planning at a wealth management firm, and you are correct in that for the most part it is a sales/commission driven field.

    However, I’d recommend typing in wealth management into any job site, and sift through till you find one that says “no sales”

    Email me if you have any questions

  4. Yes, becoming a CFP is a secret dream of mine as well. Maybe you’d be able to start out by just managing on a referral basis? Start out with family and friends, and then branch out from there? Obviously it wouldn’t start out as a full time job – it seems like it would be something like a hobby….

  5. I was a financial planner and a CFP. The examination does not involve a great deal of complex math other than present and future values, calculation of payment amounts, amortization, cash flow analysis and the like. It is demands that one have an understanding and ability to apply concepts, laws and principals of financial planning.

    It takes estate planning, taxes, retirement planning, budgeting, real world scenerios and a plethora of other planning issues and blends them together during the 1.5 day examination. It is a tough, tough test with a pass rate of usually around 58 percent.

    It definitely is not a matter of regirgitating facts. The test taker must have a deep understanding and ability to apply the many parts of planning if he/she hopes to pass the examination.

    I passed it on my first try but many do not.

  6. Matt W. says:

    I don’t see how to become a CFP without starting off at a company that does sales first. There are licenses that you need in order to give advice legally, and all of the licenses require you to be sponsered by a company. Also, the CFP designation is a pretty hard test which itself requires three years of work experience in the financial planning field.

  7. I was thinking of doing this on the side if I stick with something in physics for my main job. Do you know what the best training for becoming a CFP is? Would a Finance or some other bachelor degree be best? What about an MBA? Or is there training outside of college where you can earn your stripes?

  8. I strongly looked into becoming a CFP right after getting out of the military. There are some companies you can go into without a finance degree or financial background and they will train you. However, many of the companies I looked into were heavy on sales and were almost all commission (though some started you out on salary and weened you away from it as you progressed.)

    In the end, I decided I couldn’t do it. I would have a hard time recommending certain investments to people based on the commission I would earn. For a lot of people, a simple collection of index funds and bonds is the best for their situation – and that doesn’t make the company, or the CFP, any money.

    I would consider doing it if I worked for fee based (by the hour) compensation, and not commission. Then there is less pressure on sales, and more emphasis on keeping customers happy.

  9. Robert P says:

    I took the online CFP course at Boston University, it took about 4 months of evenings and weekends (they recommend 12 months, it depends on how much you destroy your social life). I was able to pass the CFP certification exam after that time.

    I’m not currently intending to become a financial planner, I just wanted to feel very confident in my own finances, and the cost of the course is about the same as the cost of hiring a planner for a year. The course lasts a lifetime, though, unlike a year of advice.

    I did research becoming a planner a bit and you absolutely do not have to start commission-based. The fee-only model is increasingly popular. Some books to read if interested in the business include the textbook “Tools & Techniques of Practice Management” which covers nuts and bolts, Sheryl Garrett’s “Guide to Financial Planning” which goes into some detail on the fee-only business model (she also runs a franchise you can buy for a fee-only practice), and a book called “In Search of the Perfect Model” that goes through various kinds of planner business model. The BU course does not overlap these practical run-a-business books.

    I also founds NAPFA helpful, in particular a couple of their “FOSTER” CDs – if you’re interested in fee-only there are some good details on the “Getting Up and Running” CD. You can register as a student member of NAPFA if you sign up for the BU course or other CFP course, and take advantage of their resources.

  10. Go Gators says:

    The CFP designation is available to anyone. No educational background is required. It is sometimes looked at as just a designation that financial advisors get so that they can look more professional and customer-focues to there clients.

    It would be great to give financial advice on a hourly rate basis, but you probably wouln’t make enough and most novice investors deep down want someone to sell them something and to tell them that they can makes tons of money with no risk, but that is not in the true spirit of being a CFP. That is more of a shady annuity salesman.

    AWESOME BLOG BY THE WAY!!! Just found it a few days ago.

  11. “You have to pay for enrolling courses to become eligible for CFP exam. I have not seen any free courses yet:D. ”

    Sure, I was just hoping to see the curriculum :)

    “I took the online CFP course at Boston University, it took about 4 months of evenings and weekends (they recommend 12 months, it depends on how much you destroy your social life). I was able to pass the CFP certification exam after that time.”

    I thought I read somewhere that you have to have 1 year of experience in the financial industry first before even taking the courses?

    Thanks for all the advice everyone. Hopefully I and others will use it to dig into this further. I simply don’t want to start out commission-based, but at the same time it seems you need three years of experience to get the CFP. I imagine it would be tough to get clients without any letters after your name if you don’t have a company behind you. I could probably start small with some referrals from friends and family. Definitely will check out the Garrett book, NAPFA, and other resources.

  12. If you want to be a financial planner, you don’t need some company telling you how to charge. Even with no letters, it will NOT be tough for you to get clients. You have an instant customer base from this blog! I’m sure there are plenty of people who would pay you right now to plan their finances, even letter-free.

  13. I’m pretty sure you don’t need a sponsor to take the Series 65. At that point you can become a registered investment advisor (RIA), register with the state and hang out a shingle. It allows you to charge a fee for financial advice which is something brokers can no longer do… There are a number of compliance requirements, but it might be an option. As an RIA, you can avoid the sleazy commission based world…

  14. The tricky thing with the CFP designation is that even with the education and passing the national exam you still have to have the required work experience of I belive three years before you can use the CFP designation. This can be prior to passisng the exam or within five years of passing.

  15. Spokane,

    you seem have a bunch of knowledge for taking CFP.
    Do you recommend any books that have CFP Practice Questions and Answers Exam?

  16. Al Olsen says:

    Prior to sitting for the examination you must take the course work which involves several separate courses. Each course is equated to a MBA level
    college course. I took my course work through the College of Financial Planning, which was a correspondence program. They also offered a review
    program which I took in person. It was a five day, all day review session. Again, that option is available via correspondence as well.

    Others take the coursework through local colleges. If this is a route you choose to take I would suggest you contact your local schools and see who
    among them offers the program and then you can also compare prices. The correspondence program is probably the cheapest. Those colleges, in turn,
    usually offer review courses as well.

    Along with taking the necessary coursework prior to sitting for the examination, you must also possess a four year degree.

    As other writers have touched on, there is also a large regulatory world you will need to navigate if you choose to go out on your own, once you meet the
    experience requirements.

    You can be state registered as a Registered Investment Advisor or if you have sufficient assets under management then you must be SEC registered. If
    you are state registered, then you can take clients from that state, and if you desire to handle clients in other states, you must jump through the
    regulatory hoops of those states and pay their fees.

    There is a great deal involved in moving into this industry. Obviously one must thoroughly enjoy reading and staying up on issues. Then if one decides
    to go out on his/her own, there is software, and/or internet based companies that provide systems and tools. One must decide what he/she plans to advise
    clients on i.e. will you be constructing your own portfolios of mutual funds and/or individual equities. Each of these decisions has very large
    regulatory and reporting implications.

    I don’t mean to discourage you, but it is not nearly as easy as some of your responders imply. It is a highly regulated industry, and one must be clear
    on what they can and cannot do for clients, and then one must thoroughly document these issues via signed contracts, investment policy statements,
    and other documents. These documents must be, in turn, always available for regulatory scrutiny and must be designed to respond to potential client
    complaints and lawsuits. Fees must be determined and fully disclosed and all agreements must be carefully constructed and documented. Efficient
    bookkeeping is essential, as well as always being prepared for unannounced regulatory audits.

    I firmly believe that the fee based method, as opposed to being commission based is the best way for the planner and the client. This is not to say
    that one method is absolutely wrong and one is absolutely right.

    The challenge is in bringing in clients. Many, many people lack any trust or respect towards financial professionals and tend to lump them all
    together. Many have never heard of fee based planners and are only aware of “stock brokers.” You will go through some lean times as you build up a
    client base. You must be discriminating in who you agree to take on as a client. You will encounter many who you know you could help, but do not
    want or respect your abilities. Others have misguided, inflated goals and want your help, but you must be aware enough to see the red flags and turn
    them down.

  17. i love free education

  18. I am a CFP practicioner. It is interesting to read these comments.

    First, the CFP cirriculum is available at the CFP Board of Standards website http://www.cfp.net. Second, I took the courses many years ago through the American College, but that is not the way I would recommend. There is a prep company called Insurance Achievement (www.i-a.com) which has great review material. I used them for my comprehensive boards and was quite impressed.

    Some threads I feel compelled to comment on:
    1. I undertand that the mainstream consensus is “fee only”, but I offer my clients both fee-based or commission-based planning. That leaves us free to structure an arrangement which best fits the client and their needs. Both have their place, neither is without advantages and disadvantages, and both used inappropriately will can take advantage of the client. Commission are not necessarily bad, Fees are not necessarily good. It is much more important to focus on the planner, their background, credentials, references, and philosophies than their compensation method. My words of advise… do your due dilligance on the PERSON.

    2. No particular degree is required to become a CFP, but you must have an accredited college degree.

    3. As the last commenter said, this is a very regulated industry. Most people who provide advise as a blogger would be stunned to comply with NASD requirements. Getting your Series 65 would be a great start, but be sure to really investigate what it takes to become a Registered Investment Advisor (RIA). The record keeping alone is enough to make my head spin. An alternative is to represent a corporate RIA as an Investment Advisor Representative (IAR). You have to meet the RIA’s requirements and share compensation, but it leaves you free to focus on the client.

    I love this career, but it is not for everyone and it is harder than most people think. I would be happy to follow up with anyone who choses to contact me.

  19. There have been some very helpful comments in the preceeding remarks. Let me give you some specific information about what I experienced that may be helpful.
    I am a CFP and passed the 2 day test in 2001. I took my course work through Fairleigh Dickinson University in NJ. The classes met once a week for a three hour session and the courses were held in back to back sequence for the 21 months preceeding the exam which I took in July. There were 13 people in my group. Eleven or twelve of us sat for the exam at the same time. Three of us passed on the first round. Of those, two of us were not currently employed in the finance industry. The rest of the class, brokers, trust officers, wholesalers, were.
    I have no proven explanation why the others did not pass the exam on the first round (two more did subsequently) except to speculate that they, perhaps, thought they knew enough from their business experience to pass it. Some of them, too, were very busy, on the road and had little time to study. The exam is difficult and comprehensive. It does not focus exclusively or even primarily on investment vehicles. Rather, it covers the breadth of wealth management: anticipating, acquiring, nurturing, managing, protecting, utilizing and passing on; on interpreting the individual goals and risks of specifically described clients and designing a program to meet their particular needs. In sum, it encompasses the whole planning process.
    Additionally, another aspect of all of the material and of paramount importance to the CFP Board is that of the fiduciary responsibility of the CFP toward clients. In other words, the interests of the client are always superior to that of the advisor. Therein lies the conflict in commission based practices. An employer (brokerage house, insurer) may direct the advisor to push certain products or some of those products may produce higher commissions than others. A CFP is required by the Code of Conduct to operate only in the best interests of the client; a financial advisor who is not a CFP does not have to disclose when his or her interests diverge from or are in conflict with that of the client. (This “Merrill Lynch” exception has been a source of concern to the FPA and CFP Board and is subject to revision by the SEC but changes have not yet been announced). Certainly one can practice honorably in a commission based practice through proper disclosure. But only the CFP is required to.
    On another aspect of qualification, CPAs and lawyers can bypass the course preparation requirement and apply to sit for the exam without taking classes. And, finally, most states will waive the course and examination requirements for brokerage licenses (series 7?, 65? I forget how many) to those who successfully pass the CFP exam.

  20. Estate Planning Lawyer says:

    It will never be completely free. That’s the starting point of all that kind of stuff.

  21. I have been surfing the net this week for information on financial planning and I stumbled along this blog. First, I would like to say this blog is great. There are many exceptional comments posted here. I am trying to get more information about starting a new career in financial planning and becoming a CFP. I have my BS in finance and I have registered for a financial planning certificate program through the University of Georgia. What I am trying to figure out is part 3, how to go about achieving the work experience in the field. Should I wait until after I take the classes and the CFP exam, or should I find something now? I know I need 3 years experience and it can be achieved as long as 10 years prior or 5 years after the exam. For the individuals that are in the field, what would you suggest? Would it be advantageous to work in the field while taking the classes? Does anybody know where would be a good starting point? Any suggestions or prior experiences that I could learn from would be great. Also, do you like your career? What are some challenges that you face?

  22. PFP Researcher says:

    I am currently performing research on behalf of my company/employer to determine the most common types of business models that exist in the personal financial planning industry. My goal is to develop an interactive tool that gives people, who are interested in starting their own business or just getting into the profession in general, guidance on which model is right for them. (IE, registered investment advisor, referral/solicitor, registered representative). Are there any other models that anyone can think of? Thanks!

  23. anil yadav says:

    hi friends
    i came to this site accidently. but found very informative and interesting. i am doing Financial planning course through KAPLAN. which gives me PS146 acrediton. i want to make my career in Financial Planning. to be a CFP what is the most suitable (recommended) course should i join in australia.
    regards
    anil

  24. if pass the exam without having the the bachlor degree , do i get any kind of certificate ?since i can’t get the designation .i understand that i will have 5 years to complete the education requirment . but what will i have until then if i pass the test ?

  25. @Eric: No, if you pass the CFP comprehensive but fail to meet all the other requirements there is no recognition or certificate. It would be something to be proud of.

  26. Hello,
    I am trying to decide between the various providers of the CFP courses. I want to take it online. I like these two the best out of all the one’s I’ve seen:

    1) College for Financial Planning (CFFP)-
    In addition to online & book they have an interactive class twice a week called Mentor. Mentor classes are 6 weeks with 3 week break. If I start 5/4/08 I would finish in 2/09. I would then sit for 7/09 CFP exam.

    2) Boston University –
    Online & book but online demo looks great with multiple quizzes and some audio. Work completely at my own pace.

    My questions are:
    1) Does anyone have any experience with these providers? What did you think?
    2) Is the CFFP better because it forces you to move at a steady pace? Or is the BU program better working at my own pace?
    3) Is having a live class 2x per week better than strictly online?
    4) Referring to online providers, do you suggest any others over those I’ve mentioned?
    5) With CFFP I would finish courses on 2/09, leaving me 4+ months until the 7/09 CFP exam. Is this too much down time?

    Any opinions, comments, suggestions are welcome.

    Thanks,
    Todd

  27. Todd,

    I did not use any of the prep courses, as I was already a CLU and eligible to challenge the boards.

    That said I do not think 4 months is too much time. I preped for the boards studying 1 hr a day, 6 days a week for 6 months. I have to admit that I increased the pace 2 weeks before the exam. Then I went to 2 hours a day, 4 days before I went to 1/2 days studying, and the two days before the exam I was in full time review.

    Maybe it was overkill but I confidently passed my first time.

  28. Prakash says:

    I have registered myself to sit for the Nov 2008 cfp exam (ona challenge basis). I am looking to “borrow” any cds or learning material for the exam. Incidentally, I am planning on taking the series 65 & 3 exams too.
    Does anyone know of a place where I can get the materials inexpensively (ideally, free) to study for the exam? I could not find anythign on losangeles portion of craigslist but did find some on ebay. Any other suggestions? As you can see, I am an extreme form of an economical financial planner. If I can save money, why not?

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