Financial Advisors 101: Designations
Until there is a definitive fiduciary standard that the financial sector must adhere to, much of the general public is left in the dark in terms of who they can and should trust with their hard-earned money. Who deserves to work with them? If you are looking for a financial advisor, generally you will look for a person who has a few fancy capital letters at the end of their name, but do you have any idea what those mean? It’s easy for them to simply define the titles, but why should that make a difference to you?
Understanding what the knowledge set is behind each of these designations is very important. Some titles are only applicable in certain client-facing financial roles, but others are more appropriate at the corporate-level and won’t be of much use working with individual clients.
Here are the different designations below – all are subject to approval by a specific board, and if an advisor uses ANY of these designations without actually completing the program in its entirety, they are breaking the law and as a general principle should NOT be trusted with your money. All of these designations have some kind of board certification in the form of a certificate. They work hard to achieve it, so usually it’s prominently displayed. If they don’t know where it is…again…RUN.
High-Industry Specific Designations:
CFA (Chartered Financial Analyst) - a professional designation given by the CFA Institute that measures the competence and integrity of financial analysts. Candidates are required to pass three levels of exams covering areas such as accounting, economics, ethics, money management and security analysis. This is one of the most difficult designations to obtain as it is one of the longest and extremely time-consuming programs to complete.
CFP (Certified Financial Planner) - The CFP® is the most respected financial credential for financial planners, financial firms, and those seeking the advice of a financial planner. The CFP designation is awarded to individuals who successfully complete the CFP Board's initial and ongoing certification requirements. Individuals desiring to become a CFP professional must take extensive exams in the areas of financial planning, taxes, insurance, estate planning and retirement.
CPA (Certified Public Accountant) - an accounting professional who has passed the Uniform CPA examination and has also met additional state certification and experience requirements. These are people who are familiar with the U.S. tax code and are qualified to submit tax returns to the IRS. This is not necessary when doing retirement planning or investing, but it is a nice perk knowing that you advisor is very familiar with accounting practices and the tax code.
The following are lesser-known designations, but thanks to the ever-growing fiduciary popularity, these will become more mainstream in the coming years.
Asset Management Designations:
AAMS (Accredited Asset Management Specialist) - Graduates of this program are able to identify client opportunities not only in investments but also in the areas of insurance, tax, retirement, and estate planning, while making recommendations based on all aspects of a client’s total financial picture.
APMA (Accredited Portfolio Management Advisor) – Masters of the portfolio creation and management process after completing a unique 2-part program featuring hands-on practice in analyzing investment policy statements, building portfolios, and making asset allocation decisions.
AWMA (Accredited Wealth Management Advisor) - This designation enables the advisor to address complex financial issues faced by affluent clients. They generally have the confidence to optimize clients’ investments to achieve their goals while minimizing investment volatility.
CMFC (Chartered Mutual Fund Counselor) - The only industry-recognized mutual funds designation, this designation indicates a thorough knowledge of mutual funds and their various uses as investment vehicles.
Retirement Planning Designations:
CRPC (Charted Retirement Planning Counselor) – helps clients to define a “road to retirement,” which enables them to focus on the client’s pre-and post-retirement needs, as well as issues related to asset management and estate planning.
CRPS (Chartered Retirement Planning Specialist) – used to recommend implementation techniques that can be executed into well-structured, company-appropriate retirement plans.
Industry Credential Programs:
RP (Registered Paraplanner) - basic, practical knowledge of the financial planning process and the five disciplines of financial planning.
LUTCF (Life Underwriter Training Council Fellow) - educated practitioners on four practice specialties: life insurance and annuities, health and employee benefits, multiline, and financial advising and investments.