Studying for the CFP® Exam: 12-week Crash Course

Full Disclosure

It took me 2 attempts to pass the CFP® Exam. And it was the most rewarding, emotional, grueling 6-7 months of my life.

The roller coaster that I went through was tough, but also worth it. What I learned after the first time is that I was studying wrong. To paint the picture, I was training for a sprint, when the 6-hour exam at 8:00am is actually a marathon. I had to learn how to train and prepare for the right race.

Below, I’ll share my 12-week, “crunch time” study guide that I used to conquer the CFP® Exam last year.

Let’s Begin

At the top, you should see the focus areas that you’ve probably seen a couple times before. I actually ripped these pie charts from my original CFP results. It wasn’t useful until I looked hard at it, and realized that I was studying inefficiently. It is is super useful:

Your Study Game Plan

Fundamentals + Retirement + Rules of Conduct = half of the exam. Think about that. If you get 100% of those, and then 50% of the rest of the exam, you can still pass. At least that’s how I viewed it.

If you’ve already made it through the material, all you have to do now is learn how to ‘take the test’. The only way to do that is to take (and bomb) practice quizzes – Everyday.

One of my best friends gave me some great advice about studying via practice questions: “you can only ask so many questions about 1 topic.” That means if you’ve seen all of the questions, there is no way that you can be stumped; no surprises.

I have to admit, I didn’t really read any material this time. That’s pretty much all I did last time - Dumb. It’s inefficient to just start reading the text. There’s too much, and they only test you on certain parts that they think are important. So the only way to better prepared for the test is to test yourself everyday – practice quizzes.

Every morning I created a 15-20 question practice quiz, tried really hard to get 100%, then ended up with like a 50%. It hurts the ego. But then you learn why you got the questions wrong and why you got the other ones right (b/c sometimes you guess and you can’t count on luck during the exam). 

Every week you should pick 1 subject, then take practice quizzes on them. Bomb the quizzes, bruise your ego, and then figure out why you did poorly.

Here’s the schedule I used:

1.       (1 week) Read (this is the only part I truly took time to read) the Practice Standards and Rules of Professional Conduct. I think it took me a few mornings to do so. Parts of this section are scattered across the entire exam.

2.       (2 Weeks) Quizzes on Fundamentals. It’s ¼ of the exam and it’s definitely worth two weeks of quizzing. The exam is big on education funding tools, basic economics, and TVM. For example: how much should Joe save each month if he wants to retire with X in 20 years, etc. I can’t stress enough that they love their own Process (6 steps). In a process question, the trick is to always find out which step you're currently in, so you'll know what step is coming next. Again, the CFP® loves to test on their own process.

3.       (2 Weeks) Quizzes on Retirement. I took a Retirement Planning class in college, and it was difficult because there are so many plans and unique rules for those plans. The most common question I saw was: Joe wants an employer plan. His company has X employees, they are mostly X years old, his goals for the plan are ___ and ___. What retirement plan should he have? It’s difficult because it requires a broad knowledge of every employer plan, and there seems to be a million. Also, you need to know if someone is able to contribute to an IRA if they are also contributing to an employer plan.

4.       (1 week) Quizzes on Investments. Not a heavy investments test in my opinion. Standard deviation and beta popped up a lot. Finding interest rates on a bond popped up a couple times. My advice is pretty limited in this section; cut me some slack, the exam was long.

5.       (1 week) Quizzes on tax. For some reason, CFP® loves NQSO, ISO, and RSU questions. Tax is tax, it kind of sucks.

6.       (1 week) Quizzes on Insurance. What can I say? Insurance is insurance. Taxes on Disability, LTC, and Life Insurance premiums/proceeds seem to be popular. But those might be more tax...

7.       (1 week) Quizzes on Estate. Any cheat sheet you may have for ownership/probate/gross estate is mega helpful. I got mine from the live review, you probably have one. Another heavily tested area is the difference between trusts – A, B, C trusts. Also know the differences between a living will, different power of attorneys, and health care directives.

8.       (1 week) Review again of Fundamentals + Ethics

9.       (1 week) Review again of Retirement

10.   Practice Exams. If you bomb, that’s okay. I think I scored 65% on one of the practice exams like a week before the exam. As you can imagine, I did not sleep very well that night. But the key is to learn why you missed those questions. Also, for the questions that you guessed on, learn why you guessed correctly. You don’t want to hope to get lucky on exam day.

Get Ready for Training

Study in the morning. Get your brain ready to be awake and ready during test time. For me, my brain was ready to go by 8:00 (my exam time). Get into a routine. You’re a grown up now, so adopt a big boy/girl sleeping schedule that enables you to be awake and mentally sharp by 6:00 or 7:00am.

The trick is to train your brain for this exam. It was the hardest thing I’d ever done; but now that I’ve done it, I have this new sense that tells me I can do anything.

Good luck.

Edit:  If you've made it this far in the article, odds are you are serious about this exam. When you're within 2 weeks away from the exam, be sure to read this post - it describes my last minute (non-technical) pieces of advice that are sure to take some of the edge off. Let me know in the comments what else you're wanting to learn more about. Happy testing!

Financial Aid in a Nutshell

Understanding how you are going to pay for college is complicated. It is complicated for students, and it is complicated for parents.

The many different forms of loans, grants, and scholarships, can be daunting at times; the confusion and misunderstanding related to educational planning can be a real burden. As a financial planner it is important to have a complete understanding of a family’s options: how to maximize benefits and how to minimize the total cost of education per child.

Where to begin? Naturally, understanding a client’s beliefs and goals, as well as gathering actual educational costs is a good start. Once a good image of what these costs actually look like is established, you move on to the Free Application for Federal Student Aid, or FAFSA.

The FAFSA is the beginning of the financial aid process. The FAFSA is a form that can be prepared annually by current and prospective college students, and this form will determine eligibility for student financial aid.

To be clear, this form is not for a single specific federal aid program, but a gateway to them all.

Within the FAFSA the Expected Family Contribution is calculated. This formula is used to determine how much a family should contribute to their child’s education. It takes into account things like income, assets, retirement funds, and even unusual expenses, such as medical costs and things like that. This will help the government figure out what type of aid a student qualifies for.

What are all the different types of financial aid programs?

The most common form of financial aid is the Stafford Loan. This is financial aid provided by the US Department of Education; Stafford Loans are student loans. A student needs to start paying these back six months after they leave school, or fall below part-time status.

There are unsubsidized Stafford loans and subsidized Stafford loans. Subsidized Stafford loans are given on what’s called a need basis, meaning the expected family contribution, for whatever reason, is low. The interest in this situation does not start until the student is out of school. Unsubsidized Stafford loans do not have this feature, and the interest begins the moment the student receives the funds.

Another route that can be taken for education payments are Parent Loans for Undergraduate Students (PLUS). This program is designed for parents who can afford to make a loan payment, but may have not saved anything for their children’s education. They are loans given to the parents that are used to pay for their children’s education.

There are also the Federal Perkins Loans; similar to subsidized Stafford loans they are on a need basis. These loans carry a fixed interest rate of 5% for the duration of the ten-year repayment period. These loans are subsidized by the Federal Government and have a nine-month grace period. These Perkins Loans are eligible for Federal Loan Cancellation for individuals choosing to work in a number of different public service occupations.

Yet another form of financial aid is the Pell Grant. A Pell Grant is funds the U.S. Federal Government provides to students with financial needs, who have not earned a bachelor’s degree. Pell Grants are not loans.

These are just a few of the many different forms of financial aid that may be available to current or future students. As a financial planner it is important to understand how an individual is able to apply and/or qualify for these benefits. 

Confessions of an Advertising Man

I recently finished reading ‘Confessions of an Advertising Man’ by David Ogilvy. I am a huge fan of the TV series, Mad Men, and I learned that Ogivly is considered to be a loose inspiration for the show’s main character, Don Draper.

Widely considered the “Father of Advertising,” Ogilvy changed the advertising industry for generations to come. Given the fact that the advertising industry is largely a sales culture, I was truly impressed by Ogilvy’s integrity throughout the book.

While I originally bought the book for entertainment, ‘Confessions of an Advertising Man’ was filled with timeless wisdom that’s worth sharing. Chapters like, “How to Get Clients,” “How to Keep Clients,” and “How to Rise to the Top of the Tree - Advice for Young People,” although meant for the advertising industry, could be directly translated for aspiring financial planners searching for success.

Learn Your Clients before you Give Advice to them
“When KLM Royal Dutch Airlines decided to change agencies, they invited Ogilvy, Benson & Mather and four others to prepare speculative campaigns. We were first on their tour of inspection. I opened the meeting by saying “We have prepared nothing. Instead we would like you to tell us about your problems. Then you can visit the other four agencies on your list. They have prepared speculative campaigns. If you like any of them, your choice is easy. If you don’t, come back and hire us. We will then embark on the research which always precedes the preparation of advertisements at our agency.”

This is the attitude financial planners should have with all of their clients. “Tell us about your problems. After that, we’ll be glad to come up with what’s best for your situation.”

Stay Candid with your Clients
“I have never wanted to get an account so big that I could not afford to lose it. The day you do that, you commit yourself to living with fear. Frighted agencies lose the courage to give candid advice; once you lose that you become a lackey.”

In the advice-giving business, the ability to be candid is essential; no matter what business you’re in, your clients pay you to give them the absolute best advice. Always nurture a relationship that allows all parties to speak freely.

Good Listening Pays
“It pays to listen more than you talk… There is one stratagem which seems to work in almost every case: get the prospect to do most of the talking. The more you listen, the wiser he thinks you are.”

Excelling in a New Industry

“Most of the work you do in an agency will be routine maintenance. If you do it will, you will make gradual progress, but your golden opportunity will come when you rise to a great occasion. The trick is to recognize the great occasion when it presents itself.

Be patient.

Learn to make good presentations… learn to write them by studying the work of your masters… learn to deliver them well by observing the techniques of the professionals.

 Pick a subject about which your agency knows too little, and make yourself an authority on it. 

It is important to admit your mistakes and to do so before you are charged with them.
Big ideas are usually simple ideas.”

Ogilvy’s Favorite Traits
At the very beginning of the book, David Ogilvy explicitly listed the behaviors and traits he admires most:

• people who work hard
• people with first-class brains
• people who work with gusto
• self-confidence
• people who hire subordinates who are good enough to succeed them
• people who build up their subordinates
• people with gentle manners who treat other people as human beings
• well-organized people who deliver their work on time

 
Although originally written for the advertising industry, the wisdom and advice is clearly applicable to aspiring financial planners and professionals, in general. If you are new to the industry and exploring new ways to learn and excel, I would highly recommend ‘Confessions of an Advertising Man” by David Ogilvy.