Are you interested in investing in mutual funds, but find them complex and overwhelming? If this is the case, it may be time to turn to an expert. A chartered mutual fund counselor – or CMFC – is a financial advisor who has earned a certification in mutual funds. Her expertise helps her to make educated recommendations for investing your money.
New to investing? Check out our investment calculator.
What Is a Mutual Fund?
A mutual fund is essentially a portfolio of a wide array of stocks or other securities. It is owned by a large group of investors and professionally managed by an investment manager. Purchasing shares in a mutual fund gives investors more diversity in their portfolio at a lower cost than if they were to buy shares in each stock included in the fund. The fund pays investors back in dividends based on the performance of all of the securities that are a part of the fund as a whole.
Due to the complexity of mutual funds and the number of securities each fund contains, it is important that your financial advisor is an expert in mutual funds. A CMFC designation is one mark of a mutual funds expert.
What Does It Take to Become a CMFC Designee?
In order to earn a CMFC designation, financial advisors must take a 10-week course and pass a rigorous test. Students are expected to understand mutual funds, asset allocation, retirement planning, risk and return and other investment topics. To keep their designation, advisors must take 16 hours of continuing education courses every two years. These courses keep CMFC designees up-to-date with the latest technology and other updates in financial management.
Why Choose an Advisor With a CMFC Designation?
Mutual funds can be confusing, and the spread of securities in each requires an expert to keep track. Fortunately, the CMFC program provides specific education to benefit financial advisors. The course emphasizes how to evaluate mutual funds and how to use that information to make recommendations to clients. A credentialed advisor should be able to review your entire investment portfolio and then provide suggestions that give your portfolio balance and minimize your risk.
Also, the College for Financial Planning holds CMFC designees to strict standards of professional conduct. You can expect them to display integrity and professionalism, provide objective advice, be competent and protect your privacy. If your planner holds a CMFC designation, but does not abide by these standards, you can report them to the CFFP. If the complaints are valid, the advisor faces the Ethical Conduct Committee, and could receive disciplinary action. The CFFP publishes a list of advisors who have had their designation suspended or revoked online.
The CMFC program is the only industry-recognized mutual fund credential. It is not something a professional can just pay to join. The College for Financial Planning and the Investment Company Institute collaborated to create the program in 1996. It is widely recognized as a beneficial certification. CMFC designees typically receive more job offers and higher salaries than advisors who do not hold the credential.
Other Factors to Consider When Choosing a Financial Advisor
A search for local CMFC designees will likely turn up a large number of names, considering that there are over 6,500 CMFC graduates. You should choose several to meet with before deciding on one advisor. There are several factors to consider when making this decision.
What other professional certifications does he or she hold? The CMFC is just one of many credentials financial advisors can have. The most prestigious certification is the CFP, or certified financial planner, so that is a credential to look for.
What is the fee structure? Financial advisors charge an hourly fee a flat fee, or a commission-based fee. Each has its pros and cons, so consider which will work best for you. A key consideration is whether the advisor is a fiduciary, meaning they are required to put your best interests before their own.
Also consider if he or she has a questionable history. You could check FINRA‘s BrokerCheck database. The database displays information about the advisor’s licensing, any filed complaints, job history and years of experience.
Finally can he or she walk you through a sample quarterly report? Ask for an example of their work. Have him or her show you another client’s anonymized report and explain the choice of assets and the results.
By meeting with several financial advisors and taking the above into account, you will find the best financial planner for you. As an alternative, you can make the search easier by turning to a financial advisor matching tool like SmartAsset’s. Our tool pairs you with up to three advisors in your area based on your financial situation and preferences. Simply answer a series of questions about your financial situation and goals. Then the program will pair you with up to three advisors in your area based on your answers. You can then read the advisors’ profiles and interview them to 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.
Photo credit: ©iStock.com/zoranm, ©iStock.com/kate_sept2004, ©iStock.com/Chattrawutt