One of the first things you’ll notice when evaluating prospective financial advisors—including LPL advisors—is the wide array of professional designations that follow their names. Understanding these credentials, which often appear as acronyms, can help in your search for a financial advisor.
There are more than 160 financial certifications and professional designations, and distinguishing between them can be difficult. Is “chartered” better than “certified” or “registered”? Is there a discernible between a Certified Financial Planner (CFP) and a Chartered Financial Consultant (ChFC)?
Some financial certifications denote an advisor has attained a certain level of education and/or passed a certification exam. However, not all courses and exams are equally rigorous. Other designations denote that an advisor has committed to adhering to a set of ethical standards. However, that doesn’t necessarily mean that one advisor is more ethical or trustworthy than another.
The “shelf life” of some designations is also questionable, as not all require advisors to complete continuing education to stay up to date. So, how do you determine how important financial advisor’s credentials are and how they affect the financial advisory services you need?
The Financial Industry Regulatory Authority (FINRA) website is a good option for learning about the various credentials financial advisors may hold. It provides an alphabetical list of professional designations and certifications, including the accredited ones required by some state securities and insurance regulators. The site also lists the names of the sponsoring organizations, requirements, and other information. To dig deeper, go the websites of the sponsoring organizations.
Below you’ll find a brief overview of some of the more common designations you’re likely to encounter in your search for a financial advisor. Keep in mind that a professional designation is only as good as the organization behind it, and a financial advisor’s capabilities don’t hinge on a single acronym—or even multiple acronyms—after his or her name.
The Certified Financial Planning Board of Standards (CFP Board) issues the CFP designation to financial advisors who have met required on-the-job experience with clients, complete ongoing CFP coursework, and pass an exam that covers a broad spectrum of financial issues. Individuals who hold the CFP certification also agree to abide by the CFP Board’s Standards of Professional Conduct as a key component. The CFP Board is responsible for interpreting and enforcing the ethical duties and standards it imposes on CFP professionals. You can verify if an advisor’s CFP designation is in good standing on the CFP Board website.
The CFS designation, offered through the Institute of Business and Finance, indicates an individual has demonstrated his or her expertise in mutual funds and the mutual fund industry. Coursework focuses on mutual fund topics such as portfolio theory and dollar-cost averaging. Continuing education is required. Individuals with the CFS designation often advise clients on which funds to invest in and, depending on whether or not they have their license, they will buy and sell funds for clients.
The Investment and Wealth Institute offers the CIMA designation, an international, technical portfolio construction program for investment consultants, analysts, financial advisors, and wealth management professionals. The CIMA program is one of only a few global certifications in financial services to meet international accreditation and quality standards (ANSI/ISO 17024) for personnel certification programs. Only individuals who are investment consultants with at least three years of professional experience are eligible to obtain this certification. Forty hours of continuing education are required every two years.
CPA certification is offered through the American Institute of CPAs (AICPA.) CPAs are required to pass examinations in accounting and tax preparation. Many also become certified as personal finance specialists (PFS). The PFS certification requires about 200 hours of college-level coursework in nine different personal finance subjects, culminating in a comprehensive exam. According to the American Institute of CPAs, many CPAs with the PFS credential embrace a fee-only approach, charging fees for specific services provided. Others use a fee-based approach, which is a combination fee-and-commission structure.
The CFA professional credential is offered internationally by the American-based CFA Institute to investment and financial professionals. The program covers a broad range of topics relating to investment management and other areas of finance. The CFA program requires individuals to pass three different exams. Three years of qualifying work experience is also required. CFAs must follow strict codes of conduct and adhere to high ethical standards. CFAs tend to work in institutional money management and stock analysis instead of financial planning.
ChFC is the advanced financial planning designation awarded by The American College of Financial Services. Individuals with this designation focus on wealth transfer and comprehensive planning. Requirements include nine college-level courses on a variety of financial topics, ranging from retirement planning to estate planning. In addition to completing an exam, ChFC candidates must have a minimum of three years of experience in a financial industry position. They also must complete 30 hours of continuing education every two years to maintain the ChFC designation.
CIC is a designation awarded by the Investment Adviser Association (IAA) to individuals who have earned the CFA professional designation, are currently working as investment advisers, and have demonstrated investment counseling and advanced portfolio management skills. CICs must work in an eligible position for an IAA member firm, uphold a code of ethical conduct, and submit professional and character references. CICs tend to be some of the major players in the financial world, and manage large accounts and mutual funds.
Offered through the CMT Association, the CMT is the highest level of training within the discipline of technical analysis and is the preeminent designation for practitioners of technical analysis. Earning the CMT demonstrates mastery of a core body of knowledge of investment risk in portfolio management; including quantitative approaches to market research and rules based trading system design and testing. CMTs are likely to be employed in the Sales and Trading department of a sell-side firm, employed as analysts in the research departments of firms that provide technical analysis to their clients, or are portfolio managers and investment advisors.
Professional designations can give you an idea of the types of services a financial advisor offers, and the knowledge base that backs those services. Keep in mind that designations with less educational or experience requirements don’t mean a financial professional isn’t qualified to help you.
Perhaps the most important consideration in choosing a financial advisor is to find one that you feel is trustworthy and gives you the confidence that he or she can help you achieve your financial goals.
Learn about some of the attributes that make LPL Financial advisors stand out from the competition here. If you’re ready to start your search for a financial advisor, go to the LPL Find an Advisor tool.