This video by the Financial Planning Association of Singapore (FPAS) titled “An introduction to CFP” was recently brought to my attention. What piqued my interest was a claim that consumers should look for financial advisors with the Certified Financial Planner (CFP) certification.
Here’s the transcript of the exchange:
Guy: “I have a few advisors, and these are the proposals I’m getting. So confusing!”
Friend: “Hey. You need a proper retirement plan. Not just all these proposals. Wait. Are any of your advisors a CFP?”
Guy: “… CFP? What’s that?”
Voiceover: “CFP stands for Certified Financial Planner. An internationally recognised professional certification mark.
CFP holders are individuals who reached a high level of experience, education, professional competence, and ethical standards. A Certified Financial Planner will be able to help you plan for your retirement.
He or she can draw up a comprehensive and detailed financial plan to help you reach your retirement goal.”
Friend: “… You should look for someone who is CFP-certified.”
So, what does a CFP certified agent really mean, and is a CFP agent necessarily better than a someone who does not have a CFP?
Do Financial Advisers Need To Be CFP Certified?
First of all, all financial advisers are licensed and regulated by the Monetary Authority of Singapore (MAS) under the Financial Advisers Act (FAA). MAS has a set of requirements to be an appointed representative of a financial adviser, which is primarily to pass a set of prescribed papers.
While the name “Certified Financial Planner” sounds like something all financial advisers need to practise their craft, CFP is simply one of many internationally recognised certifications that signify an agent’s knowledge and competence in the subjects of finance, insurance and investment.
A CFP certification is NOT required by MAS for providing financial advisory services. Alongside CFP, other certifications include Chartered Financial Consultant(ChFC), Associate Financial Consultant (AFC), and Chartered Life Underwriter (CLU).
How Does One Get CFP Certified?
To get a CFP certification, candidates must meet all four requirements of the certification process: Education, Examination, Experience and Ethics.
Education: Before sitting for the CFP examinations, candidates must first undergo compulsory modules conducted by education providers approved by FPAS. Before registering for the course, candidates need to have at least GCE ‘A’ levels or three years of working experience.
CFP modules are updated periodically in accordance with changing needs of the industry. Currently, the modules are:
Module 1: Foundations in Financial Planning
Module 2: Risk Management and Insurance Planning
Module 3: Tax Planning & Estate Planning
Module 4: Investment Planning
Module 5: Retirement Planning
Module 6: Financial Plan Construction and Professional Responsibilities
Examination: After undergoing the education component, candidates can then apply to sit for the CFP certification examination, which is a series of written tests aimed to assess a candidate’s ability to apply their knowledge to financial planning situations.
Each exam for Modules 1 to 5 are three-hour multiple-choice question papers. Module 6 is a three-hour paper in an essay format.
CFP certification examinations are held three times per year in April, July and October or November. Applicants also need to be existing FPAS individual members.
Experience: This requirement is meant to ensure CFP holders have the requisite real-world experience doing financial planning for clients.
To fulfil this requirement, candidates need to have three years of relevant financial planning experience, which can be before or after the successful completion of their CFP examinations, though experience earned 5 years before or after the examination will not be recognised.
Relevant experience is determined by FPAS and can be in the areas of financial advisory, accounting, banking, portfolio management or taxation.
Ethics: After the first three requirements of the CFP certification is completed, candidates can make the initial formal application. This application requires applicants to disclose past and present legal or agency proceedings and acknowledge the right of FPAS to monitor and enforce its professional standards and code of ethics, as well as to investigate any consumer complaints.
Here is the CFP Code of Ethics, from the FPAS website:
In addition to making the above undertaking, CFP candidates are also required to attend a Code of Ethics workshop within same calendar year from the date of their CFP certification approval. Existing CFP holders who want to renew their certification also need to attend the workshop every two years.
Is A CFP Agent Necessarily Better Than A Non-CFP Certified Agent?
Obviously, any kind of professional development and self-improvement to better serve one’s clients is commendable and a positive thing. So is voluntarily subjecting yourself to upholding a set of stringent ethical guidelines.
However, the CFP system does have its limitations. For one, it relies on self-declaration. As an industry association, FPAS might not have the resources to adequately monitor and investigate non-compliance by CFP holders in Singapore.
In addition, whether a financial adviser acts in their clients’ best interests depends very much on the internal moral compass each individual adviser, regardless of whether they signed an ethics stands undertaking a year ago or not.
There are many reasons why good agents don’t bother getting a CFP certification. They might already have their hands full serving their happy clients and attending to referrals. Or they might find their time and money better spent elsewhere, since many consumers don’t know what the letters “CFP” at the end of someone’s name card means, let alone use the CFP certification as a factor when choosing their financial adviser.
As the body that administers the CFP certification in Singapore, FPAS has a vested in interest in bolstering the importance and value of a CFP certification, which explains the video they made.
Whether the certification is valuable to you, is something you need to decide, along with other factors, like an agent’s sincerity, product knowledge, and track record in serving actual clients.
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