Certifications to Look For
There are a range of financial certifications that advisors can acquire to display or improve their knowledge of a particular topic and the services they provide to clients. So if you’re looking for help with a specific topic or area of need, you’ll likely be able to find an advisor with a corresponding certification. Here’s a look at some common financial advisor professional designations and what you can assume for each:
Certified financial planner (CFP):
CFPs are fiduciary advisors who are well-versed in topics across the financial spectrum. They assess their clients’ full financial portfolios and provide personalized financial plans. To become a CFP, a professional must complete certain coursework, gain professional experience, then pass an exam consisting of two three-hour sessions and 170 multiple-choice questions. The test is administered by the CFP Board and historically has a pass rate of around just 65%.
Chartered financial analyst (CFA):
The CFA designation signals a mastery of financial analytics, trends and markets. Typically, CFA charterholders work in investment analysis roles at financial advisor firms, investment firms, insurance companies, banks or investment funds. The requirements to become a CFA are significant. A candidate must pass three difficult exams and have at least 4,000 hours of qualified professional experience. Historically, only about 45% of candidates end up passing the CFA exams, according to the CFA Institute.
Chartered financial consultant (ChFC):
The ChFC certification was created as an alternative to the CFP designation. Those who become a ChFC professional receive training in specialized, contemporary fields of financial planning. Some examples include planning for blended families, divorcees and other areas not included in the standard CFP course. The course is run by the American College of Financial Services and requires considerable study and testing.
Certified public accountant ( CPA):
A CPA license typically recognizes accountants, tax preparers and financial analysts. It is one of the more common financial certifications in the industry. A CPA can be helpful for those looking for financial advice regarding reducing taxes, business financial planning and organizing investments.
Chartered life underwriter (CLU):
The CLU designation is the top choice certification for insurance agents. There is no comprehensive exam, but candidates have to take five courses administered by the American College of Financial Services. Chartered life underwriters are typically experts in life insurance, estate planning and risk management.
While understanding what these certifications mean is important, no final decision should be made solely on the letters that come after your advisor’s name.
“Keep in mind, no matter how outstanding someone's credentials may appear, the key for any consumer is to find a financial advisor who listens to them and is willing to answer their questions,” said Niv Persaud, managing director at Transition Planning + Guidance, LLC in Atlanta.
Remember that some of these credentials alone do not designate someone as a financial advisor. For example, a CPA may not be qualified to advise you on investment or retirement planning. But these credentials, in addition to appropriate regulatory status and experience, may help round out an advisor’s qualifications.