Financial Advisor Credentials: Which are Most Important?

Retirement Planning | Taxes & Tax Planning | Retirement Tax Planning

 Plancorp team By: Plancorp team

You may have noticed that advisors go by many different professional titles, which are often followed by a trail of different three-letter acronyms representing special designations. They seem important—but not all titles and credentials are as valuable as they sound.

It’s important to keep in mind that titles are unregulated. Firms can make up whatever job titles they want for various positions, so you can’t judge an advisor’s experience or qualifications based on the title they use. Professional designations, however, can tell you something about the advisor’s training and experience. Some designations require years of experience, continued education, and testing, which can help you gauge an individual advisor’s potential expertise, training, and skills.

Here are three of the top designations to look for:

Certified Financial Planner (CFP)

This is the most comprehensive financial planning designation, and earning it requires advisors to:

  •  Complete courses in topics such as investment planning, saving for retirement, and education planning
  • Pass a two-day board exam
  • Demonstrate three years of related professional experience or two years of apprenticeship

When you see this designation, you can feel confident the advisor is well-versed in the broader wealth management issues that arise at every life stage, including topics like insurance, taxes, retirement, and estate planning.

Chartered Financial Analyst (CFA)

This designation focuses on issues related to investments and the financial market, such as portfolio management, economics, financial analysis, quantitative methods, and corporate finance. Advisors generally consider this credential the most difficult to earn because it requires candidates to:

  • Complete 900 hours of study
  • Pass three exams
  • Have at least four years of professional experience in making investment decisions

The benefit of working with a CFA is that you can expect them to be extremely knowledgeable and competent with the most complex issues related to investments and financial analysis.

Certified Public Accountant (CPA)

This designation focuses on the accounting side of wealth management, and requires advisors to:

  • Complete at least 150 semester hours of course work
  • Pass an exam on topics such as financial accounting, auditing, and regulation

Advisors with this designation should have deep knowledge of taxes and accounting and can assist in strategic decision-making focused on tax planning. While an advisor who’s also a CPA won’t file taxes on your behalf, that background proves useful if you’re looking to develop a tax efficient financial plan.

Ethical Standards

In addition to continued education and exams, these three important designations require advisors to meet rigorous ethical standards. Advisors with the CFP credential is also required to deliver the fiduciary standard of care.

Some advisors will even go a step further to demonstrate their commitment to meeting the fiduciary standard with an additional fiduciary designation such as the Accredited Investment Fiduciary (AIF). Advisors with an AIF designation must complete training and pass an exam, plus meet a code of standards and ethics.

Resources:

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Disclosure:

This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors

 

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