When you are looking around for a financial adviser to hire, you’re likely to encounter an assortment of initials after each financial professional’s name. CFA, CPA, CLU. These letters signify different financial certifications. Curious to know more? Read on and allow us to explain. A matching tool like SmartAsset’s can help you find a financial professional who meets your specific needs.
Financial certifications are signifiers of expertise in a certain aspect of the financial industry. Those seeking a certification typically need to complete hours of coursework and then pass an exam. They also need to abide by professional ethics standards. Holders of certifications need to take continuing education courses in order to maintain their knowledge as well as their certification.
There are many different certifications out there, but which are the best? Here are the top 10 financial certifications to look for when working with a financial adviser.
1. CPA – Certified Public Accountant
A CPA license is for accountants, tax preparers and financial analysts. It is one of the more widely recognized financial certifications in the industry. This certification is administered by the American Institute of CPAs (AICPA). It requires 150 hours of coursework and then passing a rigorous exam. A CPA can be helpful for those looking for financial advice regarding reducing taxes and organizing investments.
2. CFP – Certified Financial Planner
Certified financial planners are well-versed in topics across the financial field. They assess their clients’ full financial portfolio and then provide personalized financial plans. To become a CFP, a professional must complete a set of courses, then pass a seven-hour test. The test is administered by the CFP Board. The pass rate is below 70%. If you work with financial planners with a CFP, you know they know their stuff!
3. ChFC – Chartered Financial Consultant
The ChFC certification was created as an alternative to the CFP certification. The program offers specialties beyond the CFP’s essentials. A charted financial consultant is who you should work with if you have a niche need, such as financial planning for divorce or small business planning. The course is run by the American College of Financial Services and requires four months of study and testing.
4. CFA – Chartered Financial Analyst
A CFA, or chartered financial analyst, is an expert in investments and securities. The certification is administered by the CFA Institute, which calls the CFA credential “the most respected and recognized investment management designation in the world.” The program requires candidates to master 10 investment topics and also pass three levels of rigorous exams. Working with a CFA is an excellent choice if you are looking for an investment manager.
5. CIC – Chartered Investment Counselor
A CIC is a subset of the CFA designation specifically for those working in investment counseling and portfolio management. To be eligible to earn a CIC designation, a candidate must be working at an Investment Adviser Association-member firm and have at least five years’ experience. Candidates also need character and professional references and to work as a fiduciary. You should seek a CIC if you have a large portfolio and need an experienced, high-level expert to manage your investments.
6. FRM – Financial Risk Manager
An FRM is a risk-management specialist. Holders of this certification are likely to be found working in banks as risk analysts. They can also deal with private clients needing investment advice. To earn an FRM, candidates must pass a two-part, eight-hour multiple choice test administered by the GARP. The pass rates are often below 50%.
7. CLU – Chartered Life Underwriter
A CLU is the best certification for insurance agents. There is no comprehensive exam, but candidates have to take eight courses administered by the American College of Financial Planning. Chartered life underwriters are experts in life insurance, estate planning and risk management.
8. CAIA – Chartered Alternative Investment Analyst
The CAIA is for professionals managing alternate investments, such as hedge funds and real assets. The charter program, run by the CAIA Association, takes about a year to complete and includes coursework as well as exams. If you are interested in putting some of your portfolio into alternate investments, these are the experts to work with.
9. CMFC – Chartered Mutual Fund Counselor
If you are looking to invest specifically in mutual funds, you may want to work with a charted mutual fund counselor. Holders of this designation are experts in mutual funds. To become a CMFC, candidates must complete a 10-week course and then pass exams administered by the College for Financial Planning. Coursework specifically prepares designees to understand the complexities of the field of mutual funds and other packaged investment products.
10. CMA – Certified Management Accountant
A CMA is an expert at management accounting. These individuals often work on the corporate side, rather than in a private accounting practice. They use their skills in both accounting and management to make strategic financial business decisions. The IMA administers the CMA exam, which has two parts and tests for 11 financial competencies.
The Bottom Line
It’s important to consider an advisor’s certifications when you’re deciding who to work with. Financial certifications are indicative of a financial advisor’s area of expertise and level of education. For instance, if you need tax advice you might consider working with a certified public accountant. If you’re focused on creating a comprehensive financial plan, consider working with a certified financial planner or chartered financial consultant.
Of course, certifications are just one of numerous things to consider when you’re trying to find a financial advisor who suits your needs. To make the search easier, consider using a financial advisor matching tool like SmartAsset’s. After you answer a series of questions about your situation and goals the program will narrow down your options from thousands of advisors to up to three suitable advisors. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.
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