An Alphabet Soup of Designations and Credentials – Annapolis Estate Planning

You may have noticed a long list of initials behind your financial advisor’s name in their signature block or below their signature on paper letters. Those initials stand for organizations that award designations. You should know what they are and how relevant they are to your financial needs.

A recent Forbes article takes a close look at different types of designations awarded to financial advisors in the article “What Designations Should Your Financial Advisor Have?” For those who are looking for a financial advisor, the credentials can provide some insight into their standards of care and knowledge.

To make matters more confusing, in addition to the designations, there’s a wide range of job titles used to show their expertise. Titles are unregulated and can’t be treated as verifiable proof of someone’s credibility or authority to serve your financial needs. Instead, look at the professional designations. These letters behind the advisor’s name are a more standardized way for these professionals to convey their expertise. However, not all letter combinations require the same degree of knowledge and training. Most financial professionals have some combination of letters on his or her business card. Here are three of the most meaningful designations (listed alphabetically) for financial advisors offering comprehensive wealth management services.

1. Certified Financial Planner (CFP®). This designation is the most comprehensive designation for financial planning. This certification requires participants to complete a series of financial planning courses and pass a two-day board exam. The course covers general principles of financial planning, education planning, insurance planning, investment planning, tax planning, retirement savings and income planning and estate planning. The CFP Board also mandates that its participants have three years of professional experience related to the financial planning process or two years of apprenticeship experience that meets additional requirements.
2. Certified Public Accountant (CPA). These financial professionals have highly-sophisticated backgrounds in taxes and accounting. Before taking the CPA exam, candidates must successfully complete a minimum of 150 semester hours of relevant course work. The CPA exam covers auditing and attestation, financial accounting and reporting, regulation and business environment concepts.
3. Chartered Financial Analyst (CFA). Many financial professionals think that this designation is the toughest credential to earn. CFA candidates must pass three exams, which requires roughly 900 hours of study. The tests have a passing rate of only 44%. The graduate-level curriculum for CFA candidates concentrates on investment and market topics, such as portfolio management, economics, financial analysis, quantitative methods and corporate finance. Before being permitted to use the designation, these candidates must complete four years of professional work experience in investment decision-making.

These three designations are considered the ‘gold standard’ for financial advisors. They require the advisors to adhere to a strict code of ethics, keep their knowledge up to date with continuing education and have extensive knowledge in their field. Consumers can also go to a website brokercheck.com to check on whether or not an advisor is registered with FINRA (Financial Industry Regulatory Authority) and if there have been any complaints filed against them.

Reference: Forbes (January 29, 2019) “What Designations Should Your Financial Advisor Have?”

Holden & Campbell, LLC – Annapolis Estate Planning