CFA and CFP (June, 2009)

The monthly memo was designed not only to share our thoughts on certain issues but also to keep you informed of new developments within our company. In that light, we wanted to share some important things going on at The Alder Financial Group this spring.

All of us here feel it is very valuable to continually increase our industry knowledge. Besides industry seminars, conferences and continuing education workshops, we also strive to obtain specialized credentials. While there are many available designations, this month’s article focuses on the two we feel are the most prestigious: CFP® (Certified Financial Planner) and CFA (Certified Financial Analyst.) These are highly sought after designations requiring substantial dedication to acquire either of them. One of our principals, Alan Gaylor, has held the CFP® designation for many years, and Lori also took the CFP® exam in March. Rachel just took the Level I CFA exam this past Saturday. Studying for these exams has been a very important part of our lives in the past year, so we hope this Monthly Memo gives you some insight into these two important designations that we have been pursuing.

As some of you already knew, I have been studying for the CERTIFIED FINANCIAL PLANNER™ Two weeks ago I received the highly-anticipated letter in the mail informing me of my score. Words can not express the feeling I had when I read the first line: “Congratulations, you have passed the CFP® exam.” All my hard work and long hours of studying definitely paid off! exam which I took in March.

Rachel has also been diligently studying for a difficult exam, the Level I CFA test, which she took on Saturday. There are three levels of exams that must be passed to acquire the CFA designation, so Rachel has a few more years of studying in her future! Since we’ve both been consumed with studying this year, we figured it would be a good time to shed some light on these two designations, what they mean, and their importance in the industry.

CFP®

I’ll start by giving you the basics on what it takes to become a CFP® Certificant. There are six prerequisite courses you must pass to be eligible to sit for the exam. These include Financial Planning, Insurance and Employee Benefits, Investment Planning, Income Tax Planning, Retirement Planning and Estate Planning. It generally takes an individual a year and a half to complete all six. The exam itself is a rigorous 10 hour exam taken over two days. The exam seeks to assure the public that the CFP® Certificant is able to apply financial planning knowledge to real-life situations. Upon passing the exam, you must prove that you have a Bachelor’s degree and 3 years of full-time, relevant financial planning work experience. Every two years you must renew your certification which requires 30 hours of Continuing Education. This assures that CFP® designees are continuously educating themselves in the area of financial planning.

So what is the importance of obtaining the CFP® designation? The key point of the CFP® The amount of time and effort required to achieve the designation ensures that all holders have demonstrated a high level of commitment, ethics, and professionalism. Certification prepares financial planners to meet the ever-changing needs of their clients and focus on long-term relationships. The term “Financial Planner” has recently become very widely and loosely used, but when you see the designation CERTIFIED FINANCIAL PLANNER™, you now know this person is subjected to the standards of the most recognized and respected financial planning organization in the world. designation is to further the knowledge and study of comprehensive financial planning.

I’ll now turn it over to Rachel to describe the CFA designation.

CFA

The Certified Financial Analyst designation is possibly the most difficult certification to acquire in the finance world with at least three years of exams and a passing rate of only 35% for the first level. More than 50,000 financial analysts around the world took the Level I exam this past weekend. When I took the test on Saturday with 700 other candidates, it was definitely nerve-wracking to look around and realize that only about 245 of us would pass! However, after studying for eight months, I felt well-prepared. I am very proud of both Lori and myself for dedicating ourselves so fully to studying, and I know it made all the difference for both of us. The CFA Institute will not release my score until the end of July, so I am beginning the long and anxious wait to find out if I passed!

There are a total of three levels of exams that must be passed to be awarded the CFA designation. For the first CFA exam, there are eighteen subjects that most be known in acute detail. These subjects include Financial Statements, Portfolio Management, Ethics, Fixed Income Investments, Equity Investments, Derivatives, and Economics, just to name a few. The Level I exam is offered twice a year, in June and December. The Level II and Level III tests are only offered once a year, in June, and these tests cover those eighteen subjects and others in even more detail. Since the pass rates for Level II and Level III are also very low, it is rare for a candidate to pass each test on the first try and it is very common for a candidate to need four to five years to pass all three exams. This requirement of constant dedication for numerous years is one major reason for the difficulty of these exams. Candidates must keep their eyes on the prize, even if the prize is many years away!

The CFA Institute maintains a high focus on ethics at each level, and being awarded the CFA Charter means the charterholder is committed to the highest ethical and professional ideals. While the curriculum at each level ensures that the candidate understands complex financial computations, the CFA Institute is more concerned with determining that each CFA Charterholder understands the deeper interpretation of these computations within the context of the individual portfolio, the industry, and the world economy. The CFA exams are comprehensive in scope, and the CFA Institute hopes to assure clients and prospective clients that a CFA Charterholder has committed him or herself to thorough and extensive knowledge of all pertinent financial subjects.

Since acquiring the CFA designation requires years of effort, it will be quite a while before I may join Lori in saying that I achieved my goal. However, I will not let this deter me and I hope to report in two months that I get to move on to Level II! In the mean time, I want to congratulate Lori on her achievement… she showed an uncommon commitment to studying for the CFP® test and all of us at The Alder Financial Group are proud of her for achieving her goal!