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The Alphabet Soup of Financial Advice: Part III

In our ongoing “Alphabet Soup of Financial Advice” series, we’ve been exploring best practices for finding a financial advisor. Today let’s discuss financial credentials – or those puzzling professional designations at the end of advisors’ names.

According to a Kiplinger’s Personal Finance piece, “Five Key Credentials to Seek in a Financial Advisor,” “There are more than 100 different financial advisor certifications and designations. But only three truly matter.” Kiplinger’s short list includes the CERTIFIED FINANCIAL PLANNER™ (CFP®), Chartered Financial Analyst® (CFA®) and the Certified Public Accountant (CPA) certifications.

As my own list of credentials will attest, there may be more than three worth obtaining. But some of them are considerably more impressive than others. Some take an experienced advisor a weekend to scratch off the list. Others demand years of study, testing, and hands-on experience. Kiplinger’s “big three” require the following:

  • CFP® – Two years of study, a 10-hour exam and three years of financial planning apprenticeship.
  • CFA® – Three six-hour exams (about six months of study for each), and four years of experience.
  • CPA – 150 college credit hours, a 2-½ day exam and two years of experience. (CPAs also can pursue a “PFS®” or Personal Financial Specialist credential to add to their name.)

As a public accountant and financial advisor, I wish the financial advisor world would do what accountancy did over 100 years ago and settle on one designation. This would alleviate confusion and build credibility, as I believe it did for accountants. For my vote, the CFP® mark would work. There already are 170,000 CFP® certificants worldwide, and the CFP Board has been diligent about enforcing its standards and code of ethics, and disciplining errant credential holders.

In my final article in this series, I will discuss how financial professionals get paid, and why it is important for you to understand how their sources of income can impact your best financial interests.

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