CFP Board Publishes New Book on Psychology of Financial Planning

The book seeks to help advisory professionals understand the psychology of financial planning, and its publication coincides with the first time the topic of psychology is factored into the CFP exam.

By DJ Shaw

The Certified Financial Planner Board of Standards has announced the release of “The Psychology of Financial Planning,” a six-part book published by ALM.

The book is a resource for financial planning professionals on the psychology of financial planning, a new “principal knowledge domain” introduced by the CFP Board in 2021.

Approximately every five years, the CFP Board conducts a practice analysis study—the largest research project in the U.S. related to the body of knowledge needed for high quality financial planning. The study establishes the principal knowledge topics that define the content of the CFP certification requirements. The psychology of financial planning is currently the eighth principal knowledge domain.

CFP professionals can leverage the book to improve their own practices, and candidates for CFP certification will benefit from a deeper understanding of the key knowledge domain.

According to the CFP Board, effective client communication requires mastery of the psychology of financial planning. The six parts of the book dive into the principal knowledge topics that make up the expanded principal knowledge domain, including client and planner attitudes, values and biases, behavioral finance, sources of money conflict, principles of counseling, general principles of effective communication and crisis events with severe consequences. The sections also cover practical applications of each, such as navigating a client’s risk tolerance and helping couples and families achieve greater financial transparency.

The results of the March 2022 CFP certification exam were also announced by the CFP board and, notably, this was the first to test candidates on the psychology of financial planning. The exam was administered during a March 8 to March 15 testing window to 2,705 candidates, with 7% of candidates testing remotely. The pass rate for the March exam was 65%.

According to the March 2022 post-exam survey, most test-takers (67%) are pursuing CFP certification to become more skilled at their jobs and to better serve their clients. Over 70% of test-takers reported some level of financial support from their employers during the examination process.