Understanding Financial Credentials
Course Section
What Do all those Letters Mean?
The surprising truth is that anyone can call himself or herself a financial
advisor without meeting any educational and experience requirements. However,
to offer financial services, they should be properly licensed in their field
which might include a designation such as CPA. It isn't easy for anyone to
figure out. Accordingly, one thing to check in your search for professional
financial help might be to see what those letters mean after a candidate's
name to see if they really are licensed or have earned professional
designations.
Where to Start
To help you determine the best financial professional for you, the chart below
lists some of the most common designations and briefly explains the education
and expertise each signifies. You'll also find contact information for the
accrediting organization so you can check an advisor's status, ask
questions, or register a complaint.
| Credential | Accrediting Organization | Requirements | For More Information |
| Certified Financial Planner (CFP) | Certified Financial Planner Board of Standards | A financial planner who has completed study and passed examinations
in risk management, investments, tax planning, retirement planning, and
estate planning. Must have a minimum level of three years experience, continue
to update knowledge in the field, and adhere to prescribed code of ethics.
Continuing Education/Experience Requirements: 30 hours every 2 years |
Phone: 1-888-237-6275 Web: CFP.net Complaint Process: Online at Submit a complaint |
| Certified Public Accountant/ Personal Financial Specialist (CPA/PFS) | State boards of accountancy for CPA license
American Institute of Certified Public Accountants Personal Financial Planning Center for PFS designation |
An experienced accountant who has met education, statutory, and licensing requirements of the state in which he or she resides. Continuing Education/Experience Requirements: A CPA who has passed a financial planning exam and offers a broad range of personal financial services, which may include investment advice, may obtain the CPA/PFS. Continuing Education/Experience Requirements: Must obtain a combined total of 60 PFS points in personal financial planning business experience and qualified “life-long learning” activities every 3 years. The PFS point system is described in the PFS Credential Handbook |
Phone: 1-800-862-4272 CPA Complaint Process: Contact the Professional Ethics Committee of your own State’s Society of Certified Public Accountants and check with your state board of accountancy: NASBA.org |
| Chartered Financial Analyst (CFA) | CFA Institute |
An investment professional who has passed examinations in economics, financial accounting, portfolio management, security analysis, and standards of conduct. The CFA Program is a graduate-level, self-study curriculum and examination program for investment professionals - especially institutional or private client investment managers, investment bankers / broker dealers, mutual fund managers, and investment consultants. Continuing Education/Experience Requirements: Individuals who pass the third and final exam must also complete the minimum work-experience requirement of three years in the investment industry (four years after July 1, 2007), and sign a commitment to abide by the CFA Institute Code of Ethics and Standards of Professional Conduct, (reaffirming this commitment is required annually). Participation in the voluntary professional development program requires 20 hours of qualified activities annually. |
Phone 1-800-247-8132 Complaint Process: Online at Professional Conduct Complaint Form |
| Chartered Financial Consultant (ChFC) | American College |
An insurance professional with a focus on financial planning who has completed courses in economics, investments, insurance, taxation and related areas. Continuing Education/Experience Requirements: 30 continuing education credits every 2 years |
Phone: 1-888-263-7265 Web: The American College Complaint Process: None |
| Chartered Life Underwriters (CLU) | American College |
A life insurance agent who has passed a national examination in insurance and related subjects. Continuing Education/Experience Requirements: 30 CE credits every 2 years |
Phone: 1-888-263-7265 Complaint Process: None |
In fact, there are more than 50 financial designations and new ones are being developed on a regular basis. Many of them signify expertise in a particular area. For example, if you have an estate planning question, you may be best served by an Accredited Estate Planner (AEP) who is recognized by the National Association of Estate Planners & Councils or a Certified Estate Advisor (CEA) who has earned a designation form the National Association of Financial and Estate Planning (NAFEP.) Among other specialized designations are Certified Divorce Planner (CDP) from The Institute for Certified Divorce Planners; Certified Employee Benefit Specialist (CEBS) from the International Foundation of Employee Benefit Plans and Wharton School of the University of Pennsylvania; and Certified Financial Gerontologist (CFG) from the American Institute of Financial Gerontology.
Check Them Out
While these credentials set the advisors who earned them apart, you should
never judge a financial professional by a designation alone. Rather, you can
use the designation as just one of the ways to learn more about the
professionals you are considering. Ask them what the designations mean to them
and what they had to do to earn them. Ask them if they have ever lost or given
up a designation and if so, why. Their answers will tell you more than the NASD
chart can. You might also engage the financial professional in a discussion of
the various codes of ethics and rules of professional conduct upheld by members
in these credential-issuing organizations.
Finally, you should contact the organization issuing the credential to verify whether the professional you're considering did, in fact, earn the credential and whether he or she remains in good standing with the organization.
Take Action
- To investigate what designations your financial professional might be holding out to you, check out NASD's Investor Education Center at "Understanding Investment Professional Designations".
- You'll find a comprehensive list of these advisor designations on NASD's web site. The site also allows you to sort the designation by the issuing organization and provides links to the organizations' home pages.
