Alphabet soup

These days, it seems like everyone in the financial services industry has a few letters after their name, indicating they have some kind of professional designation. There are CPA, CFP, CLU, ChFC, PFS, CMFC just to name a few. Like alphabet soup, there are a lot of letters and they don’t really seem to spell anything. Many people do not understand what these designations, such as “Senior Specialist” or “Retirement Advisor,” mean or what it takes to earn and retain the various designations.

Today, there are more than 90 designations, titles, degrees, certifications and accreditations available in the financial services industry. For this reason, investors should be very careful not to assume that just because a person has a few letters after their name, they are an expert in managing their financial needs. Some designations represent a legitimate experience, while others are simply marketing tools. To learn more about the meaning of various designations, visit the FINRA website, click on the “Investor Information” tab and search for “understand professional designations.” You will be able to type the letters of the designation that you would like to learn more about the issuing organization, prerequisites and education requirements, continuing education requirements, and exams that need to be passed.

Here are some good designations to look for:

CFP or certified financial planner

The CFP is the most comprehensive financial planning designation a professional can earn. Requires a candidate to complete a series of courses approved by the Certified Financial Planner Standards Board. Each course requires the passing of a final exam, and then a full final exam must be passed at the end. A CFP has studied all areas of financial planning, including: retirement planning, estate planning, investing, insurance, and taxes. Candidates must also have 3 years of personal financial planning experience and a bachelor’s degree, or have 5 years of personal financial planning experience.

Another great benefit of working with a CFP is that they must act as trustees for their clients. This means that they must do what is in the best interest of their customers, no matter what. This reduces the risk that an advisor will sell something to a client that may not be in the best interests of the clients, all because the advisor was thinking about how they would be compensated. CFPs are required to complete 30 hours of continuing education training every two years. This helps keep them at the forefront of changes in the industry.

ChFC or Chartered Financial Consultant

The ChFC designation is issued by The American College, an accredited university that specializes in financial education. A candidate must have at least 3 years of full-time financial services business experience in the 5 years prior to the award of the designation. They must complete 6 core courses and 2 elective courses that cover most of the same information that a CFP will study. Each course has a final exam, but a full final exam is not required. 30 hours of ongoing training is required every 2 years, which also helps keep an advisor at the forefront of the financial services industry.

Be cautious

Be wary of designations that require a few days of classroom study or a few hours of self-study, plus a fee to earn. These types of titles are generally just marketing tools to mislead people into thinking they are working with an expert (and a way for the issuing organization to make money). Do some homework and don’t be afraid to ask a few questions, you’ll be so glad you did.