What are the career prospects for a Certified Financial Planner?
Do you want to pursue a career in Financial planning? But you do not have enough information on what you should do to build your career.
This conversation is between the founder of Apnacourse.com, Satish & Chartered Accountant cum Certified Financial Planner, Lakshmi Narayanan. The discussion is about what will be the future of Financial planning industry and why anyone should pursue a career as a Certified Financial Planner.
Satish: Hello everyone, welcome to the knowledge series on ApnaCourse. I’m Satish the CEO and founder of ApnaCourse.com, and today’s session we will focus on the Certified Financial Planner, CFP. I have with me, Mr. Lakshmi Narayanan. Hi Laksmi
Satish: He is a Chartered Accountant and a Certified Financial Planner. He is also the Finance Expert at ApnaCourse. The idea of these knowledge series is to help CFP participants’, or those who are aspiring to be CFPs, to understand what CFP is, what are its prospects, why should somebody do a CFP, and is there a future potential for CFP holders. Let me start with the basics of financial planning. What in your views is Financial Planning?
Lakshmi: Financial planning is a very simple process wherein, we design a financial plan for an individual and their family. We evaluate their existing financial position, ascertain their goals and help them achieve their goals. This is the basic process of a financial plan.
Satish: There are few terms, say, wealth management and financial advisor. Do you think these terms are interrelated or there is a difference between a financial planner and a financial advisor and a wealth manager?
Lakshmi: Every process starts with a financial plan. Terms such as wealth management, financial advisors are an extended arm of a financial planning. Basically the process starts with a financial plan and once financial plan is done, it moves on to wealth management.
Satish: Oh okay. In a country like India, do you see potential for financial planners? Are people looking at financial planners or wealth managers to ascertain their wealth management, or there isn’t there much potential here?
Lakshmi: Oh yes absolutely, there is a lot of potential. Currently in our country there are less than thousand practicing Certified Financial Planners and if you compare it with the population that needs the financial planning, there is a big gap and hence there is a big requirement for Financial Planners in our country.
Satish: What are the certifications for say for our financial planners?
Lakshmi: The primary certification that is necessary is a Certified Financial Planner which is popularly known as CFP, which a person should pursue in case he wants to get into the industry.
Satish: Which organization gives all those CFP certification?
Lakshmi: It is Financial Planning Standards Board India FPSBI that gives the certification. It is a Gold Standard Certificate that means once you get the certificate. It is valid throughout the world.
Satish: Okay, so it means as a CFP holder, I can not only prey for opportunities in India but I can also go to Australia or the US and show the CFP certification and it’s valid?
Lakshmi: Yes, absolutely.
Satish: Okay Fantastic, but would there be difference in the structure of the course in CFP India vis-a-vis CFP Australia or CFP US? In India, the investment or the tax slabs would vary with the structure in US. Would the curriculum be same across countries?
Lakshmi: Basically we concentrate on constructing a financial plan. The way the plan is constructed remains the same across the world. Of course there would be differences in terms of tax laws, differences in terms of investment avenues, which can be matched upon later on. The basic plan construction remains the same.
Satish: Is it safe to say that a person who’s done a CFP from India and he wants to work in an Australian firm, he goes to Australia. All he has to do is learn the tax laws in Australia and he is eligible to do the financial planning in Australia?
Satish: Okay, fantastic. Apart from CFP, we have heard of other certifications like the FRM, and CFA. Which in your view is prima facie, the most important standard for financial planners?
Lakshmi: As far as financial planning is concerned, CFP is the primary qualification requirement. CFA deals more with analyzing a particular company. It is more into a company financial structure I would say. When it comes to individual financial planning, CFP stands ahead. Again coming to FRM, it is about risk management, again for corporate not for individuals. In CFP itself you deal with risk management for individuals exclusively.
Satish: Okay. CFP also has a competitor in the wealth management space called CWM. What are the differences between a CFP and CWM, and which certification is probably higher valued in a country like India?
Lakshmi: CWM stands for Certified Wealth Manager. It is prevalent mainly in US and the UK. It deals with more of behavioural finance, and it also deals with bequeathing the assets to the next generation. It is widely accepted in US and UK but in India I think CFP stands ahead of CWM as on today.
Satish: On the opportunities for somebody who’s done a CFP, what would be the best place to apply for. Would it be any financial institute, or would it be specific banks, or would it be wealth management and advisory firms? What are these opportunities?
Lakshmi: A qualified CFP has many options. First he can either practice on his own as a certified financial planner. Secondly he can join a wealth management firm as a certified financial planner. Thirdly he can join a bank in a financial planning wing. Fourth he can join any of the corporates in the planning. All the four avenues are open to a certified financial planner.
Satish: Is there some eligibility that is needed to be a CFP? Is there some work experience required, and say some practicing presence that a person should hold to be eligible to write this CFP certification?
Lakshmi: There are two ways in which a person can appear for the CFP exam. One is the regular pathway and there is something called challenge status. A person who has a minimum work experience of five years is eligible to take up a challenge status program. A person who doesn’t have this minimum qualification, minimum work experience, he can take up a regular pathway. In a regular pathway, he takes up individual examinations before the final examination. In a challenge status since he has experience criteria, he can directly take up the final examination, that’s the basic difference.
I would say a person who is a fresher probably who’s in his early 20s can take up a regular pathway which would pretty much take about eight to twelve months time frame to complete all the exams. A person who has good number of experience and who would like to save time, he can choose the challenge status program, wherein he should be able to complete it in about three months.
Satish: Oh okay. How many exams should one give for a regular pathway vis-a-vis a challenge status? Challenge status I’m assuming is one exam.
Lakshmi: One examination. In a regular pathway he would appear for five exams, including the final examination.
Satish: That would be similar to the challenge status?
Satish: Okay, so it’s four exams plus the final exam, similar to a challenge status?
Satish: Okay, so what would be for some modules … What are the modules that get covered in those four exams?
Lakshmi: First module talks about insurance and risk management. The second module talks about retirement planning in entirety. Third module talks about investment planning. Fourth module talks about tax and estate planning. Pretty much all the avenues for a planner are covered in these individual modules.
Satish: Typically he does one exam every two months, so he completes the entire CFP regular pathway certification in about ten to twelve months.
Lakshmi: I would put it this way that, he can attend one exam every month the individual exam and the final exams, he can take about three months time.
Satish: Oh okay. Lakshmi: Three to four months time.
Satish: As soon as he completes that CFP exams, he’s immediately given a CFP title, or he has to undergo the work experience and only then he is awarded the CFP?
Lakshmi: Once he completes the examination in the regular pathway, he has to meet the 3 years work experience criteria, once which the certification is awarded. Until then he will be given a certificate called AFP, Associate Financial Planner, which he can use it in his practice.
Satish: OK fantastic and so AFPs are not devalued, it’s only that they do not have the right experience?
Satish: So, once they get that experience, then they will be termed as a CFP?
Satish: Okay, and in CFP that is a concept of a continuing education, meaning you attain a CFP this year, next year are you supposed to keep learning and enhancing your CFP skillset, or it’s just a once in a lifetime certification, you forget about financial planning modules itself?
Lakshmi: There is a concept of continuing professional education. Wherein every month as a Certified Financial Planner, you receive a financial planning journal in which there are a set of questions, there are a set of topics that are being discussed. As a certified financial planner, you have to participate in those discussions by way of filling up the forms, answering the queries, etc. and that would form a part of your CPE.
Satish: Do you see a potential in the future for more CFPs to enter the Indian market? Do you think that with the number of, say the millionaires in India growing rapidly, the need for financial planners would drastically increase, and so there would be a huge demand for CFP holders?
Lakshmi: Yes, as I already mentioned, there is a huge gap between what is required and the number of practicing CFP as on date. There is a lot of awareness that is created these days on the financial planning front and every household is starting to believe that they need a financial planner to handhold them throughout their financial life. This would definitely increase the demand for certified financial planners.
Satish: Fantastic, so CFP is a growing certification space and it would only continue to grow from where it is.
Lakshmi: Yes and in US it a major product, in India yes it is growing, and it is growing at a faster pace.
Satish: OK, that is good news then. Fine Lakshmi, we had a fantastic session with you, I think I probably covered most of the queries that the participants have or had. Are there some points that you want to add to these, probably some tips of how participants can prepare for the CFP, or what they need to keep in mind while attempting the CFP certification?
Lakshmi: One point that comes to my mind is whether to go for a regular pathway or a challenge to take this program, even though they are eligible for a challenge status challenge program. My personal view is that he should still opt for a regular pathway because each subject is dealt with in detail. That will definitely help him in his practice, post qualifications. If he takes up, probably he may spend additional three to four months in completing these examinations but it is definitely recommended over the challenges status program. That is one input I would like to give for the viewers sake.
Satish: Great, so it’s been a wonderful time having you on this knowledge session. Well I will get back to our participants, and probably ping you in for any future sessions again on the financial planning space. Until then, all the best, thank you so much for your time.
Lakshmi: Thanks, pleasure.