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When you walk into my office, you'll see a beautiful crystal plaque recognizing the recipient as one of “America's Top Financial Planners.” It's from a very prestigious-sounding organization that has a mailing address on Pennsylvania Avenue in Washington, DC.
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But before you assume I'm bragging, let me reveal that this plaque was bestowed upon my dog, Max Tailwag'er, and I use it to illustrate how many in the financial services industry buy their way into bogus credentials in an effort to build credibility. The more credibility we create, the more likely you are to hand your money over to us.
There are well over 100 financial designations. Some require training, experience, rigorous testing and background checks, while others can basically be purchased while putting in little or no time. SmartAsset.com lists a few of the more rigorous designations as:
- CPA (certified public accountant)
- CFP (certified financial planner)
- ChFC (chartered financial consultant)
- CFA (chartered financial analyst)
Some financial designations target seniors. Designations and awards, like the example I gave above, are for sale and require no more vetting than handing over your credit card number. My dog was also offered a spot in a physicians’ magazine as a top adviser for doctors. As previously mentioned, many designations are just used to build credibility, and some awards also target seniors specifically.
So how do you know if the adviser wanting your money truly has expertise and worked hard to build the necessary skills? Here are a few steps to figure that out.
Step 1: Start with the Financial Industry Regulatory Authority (FINRA)
FINRA is the main self-regulatory body of the financial services industry. This FINRA tool lists 213 financial designations, although some of the designation issuers are now defunct. It gives the following information:
- Name of the issuing organization
- Prerequisites, such as education
- Examination type
- Continuing education requirements
It also notes whether the organization has a process to confirm the adviser holds that designation, whether it has a complaint process and whether it lists those who have been disciplined. The tool has hyperlinks that can make it easy to check out a financial adviser.
If the organization is defunct or appears to be a slam-dunk certification, look elsewhere.
Step 2: Do 10 minutes of internet research
If the designation looks legitimate on the FINRA tool, or if you are checking out an award not listed by FINRA, then a quick internet search may help. You can type in phrases like “obtaining the XYZ designation” and see what's involved. One senior designation I looked at entailed paying some money and attending a three-day seminar in Las Vegas.
If it's an award or list of top advisers, look to see what's involved or if anyone has written about it, such as the award given to my dog. That same organization also issues top doctor, dentist, lawyer and other awards, and there are many articles online exposing these pay-for-prestige practices.
Next check out that person. In addition to any complaint or disciplinary action by the organization issuing the designation, financial regulators also list actions. FINRA's Broker Check and the Security and Exchange Commission's Investment Adviser Public Disclosure website are two good places to look. Don't assume that because the issuing organization shows no discipline that other organizations (or the government) haven't disclosed misdeeds. In 2019, The Wall Street Journal noted there were more than 6,300 CFP certificants who had clean records on the CFP website but that had disclosures on the FINRA website, including felony charges.