Financial planners may deal in numbers, but when you’re trying to verify that one is qualified to handle your financial needs, it turns into a letters game.
CFP® ChFC®, CDFA®,…we counted over 20 different certifications, degrees, and designations held – and that’s by just a small sample of ten GuideVine financial advisors. That may seem a bit overboard, but it’s actually comforting to know that the people who will be helping you plan your retirement, stay on budget, and grow your investment assets (which can be, ahem, complicated) are generally an overeducated bunch.
Still, if you’re looking through your options, it might be helpful to know what all these letters mean! We’ll break it down for you – what these designations signify, how important they are, how difficult they are to get and keep, and which ones you’ll want to look for in an advisor who can help you with your unique financial needs.
CFP® – CERTIFIED FINANCIAL PLANNER™:
The most common and one of the most stringent of certifications for financial planners, this certification is conferred and owned by the Certified Financial Planner Board of Standards, Inc. Many regard it as the “gold standard” of financial advisor designations. It requires a bachelor’s degree; extensive professional experience; passing a difficult exam in financial planning, taxes, insurance, estate planning and retirement; plus completing continuing education programs each year.
CFA® – Chartered Financial Analyst®:
A credential given to degree-holding financial professionals who have completed four years of professional financial experience, and have passed three grueling exams covering investment management, financial analysis, ethics, stocks, bonds, derivatives, and other areas of finance. It is considered by many to be the gold standard of financial analysis. A financial advisor with this designation is well qualified to manage your investments – perhaps even too qualified. CFA®s are usually employed by large firms for financial analysis, typically not by individuals for personal financial planning.
NAPFA – National Association of Personal Financial Advisors:
An association whose members are advisors who are paid strictly through fees instead of commission, and who adhere to a strict code of ethics. As we’ve written before, this type of payment structure is often cited as the least likely to cause conflicts of interest. NAPFA is the also the only financial planning organization that requires a peer review of a candidate member’s work before granting membership. If you find a financial advisor with this acronym, you can be sure they’ve sworn to put your interests first when managing – or advising you on – your money.
CRC® – Certified Retirement Counselor®:
Issued by the International Foundation for Retirement Education (InFRE®), this designation is the oldest and most established program specializing in retirement financial guidance. It requires that a candidate have a bachelor’s degree plus two years relevant professional experience (within the past five years), or high school diploma plus five years relevant professional experience (within the past seven years). They must pass a background check and – after self-study – an exam. It requires continuing education after that. (Watch out for unaccredited retirement designations, by the way. Many have popped up to confuse and take advantage of seniors seeking financial advice.)
CRPC® – Chartered Retirement Planning Counselor℠:
Awarded by the College for Financial Planning to professionals who complete a study program and pass a multiple-choice exam with a focus on problem solving for clients, including personal savings, retirement plans, income taxes, retirement cash flow, asset management, estate planning, and more. CRPC® professionals must complete 16 hours of continuing education every two years. If you are approaching retirement, this is a beneficial designation for your advisor to have. (Again, as we warned above, watch out for unaccredited retirement designations!)
CDFA® – Certified Divorce Financial Analyst®:
A financial professional with this designation helps clients who are going through a divorce, by helping them understand and estimate the long-term ramifications of a potential divorce agreement. They handle tax issues, dividing property, determining alimony and child support, and the impact on retirement of a divorce. A CDFA® is not a substitute for a divorce lawyer, but an additional professional who can help you protect your finances and come to an equitable and fair agreement, financially speaking. Often a CFDA® is hired through the divorce attorney, to preserve attorney-client privilege. Two organizations – The Institute for Divorce Financial Analysts™ (IDFA™) and The Academy of Financial Divorce Practitioners – give out the designation. Both require self-guided study in a six-month course, plus prior professional experience in finance or law.
CIC – Chartered Investment Counselor:
This professional is certified by the Investment Advisor Association (IAA) as someone who has high expertise in portfolio management. They have at least five years of experience managing portfolios (often for large accounts and mutual funds), have a CFA® designation, work at a IAA member firm spending more than half of their time doing portfolio work, have submitted professional and character references, and have passed a series of exams. A CIC is held to a higher set of ethical standards, and must get re-certified yearly.
CPWA® – Certified Private Wealth Advisor®:
Widely recognized as an important title for financial professionals who work with clients with assets worth more than $5 million, this designation is issued by the non-profit Investment Management Consultants Association and covers tax, estate and retirement planning. It requires six months of online courses, a week of in-person classes, a half-day exam, and continuing education. Plus, candidates must have a Bachelor’s degree or one of these designations: CIMA®, CIMC®, CFA®, CFP®, ChFC® or a CPA license, plus five years of professional experience helping clients.
ChFC® – Chartered Financial Consultant®:
A professional designation granted by the American College to professionals who have three years professional experience in the financial industry, plus have completed several financial education courses and examinations. Most applicants also have a degree in business or finance, though that is not a requirement.
CIMA® – Certified Investment Management Analyst®:
This designation denotes a high level of consulting expertise, focusing on asset allocation, ethics, due diligence, risk measurement, investment policy and performance measurement. CIMA professionals tend to work for financial consulting firms managing large client accounts. Candidates for this designation must have three years of financial experience, a satisfactory record of ethical conduct completion of a classroom program, and completion of two exams. Extensive continuing education is required.
CAIA – Chartered Alternative Investment Analyst℠:
This designation focuses on asset classes that don’t fall under the usual umbrella of stocks or bonds. It’s given to advisors by an organization of the same acronym, the Chartered Alternative Investment Association®, which was founded relatively recently, in 2002. A CAIA has a Bachelor’s degree, has passed two exams, has more than a year of relevant work experience or four years of professional experience, and pays annual dues. An advisor with this designation will be familiar with private equity, hedge funds, commodities, and real estate, among other things.
CLU® – Chartered Life Underwriter®:
This professional designation is for advisors specializing in life insurance and estate planning. It requires the completion of several courses, plus several exams. It’s usually achieved on top of getting a CFP certification.
CFS® – Certified Fund Specialist®:
Financial professionals with the CFS® designation specialize in advising clients on mutual funds. This does not license a professional to buy or sell funds, but if they have the correct license, they often will buy and sell funds for their clients. The Institute of Business & Finance (IBF) provides a 60-hour self-study program, and requires that candidates have a bachelor’s degree or 2,000 hours of related industry experience.
CRPS® – Chartered Retirement Plans Specialist℠:
Awarded by the College for Financial Planning to professionals who specialize in creating, implementing and maintaining retirement plans for businesses. It requires candidates to pass an exam, continuing education, and a small fee. WHY? > This would only be useful for your advisor to have if you are an entrepreneur. (Again, watch out for unaccredited retirement designations!)
B.A. – Bachelor of Arts:
An undergraduate academic degree commonly award to liberal arts students. In this case, it just means your advisor has a college degree. It’s not enough to be a financial advisor, but a start.
B.S. – Bachelor of Science:
An undergraduate academic degree. These degrees tend to be more science and math heavy – a financial advisor with a B.S. most likely got a degree in business or finance. This is a great underpinning for their financial education, but again, it may not be not enough, so look for additional certifications and designations.
MBA – Master of Business Administration:
A postgraduate degree with a focus on business. It’s an excellent underpinning for a financial career, but you should still look for an additional certification in financial planning.
Series 7 or RR – Registered Representative:
Given by the Financial Industry Regulatory Authority (FINRA) to those who have passed its Series 7 licensing exam and are regulated by the same entity. An advisor with this designation is licensed to sell securities and is often known as a stockbroker, or a broker for short. A professional with this designation will be especially equipped to give investment related advice and manage investments. Most Series 7 advisors will charge you on a commissions basis.
Series 65 or IAR – Investment Advisor Representative:
This designation is fairly easy to acquire, by passing the series 65 exam(conducted by FINRA) and paying a fee to the SEC. There are no ongoing education requirements. If an advisor has a CFP, ChFC, CIC, PFS, or CFA designation they can waive the examination and receive the license automatically. So most people who take the exam are former stockbrokers, insurance agents, or commercial bankers. All IARs are subject to the regulations of the SEC, and have to be registered with the state and/or federal regulators. A professional with this designation will be especially equipped to give investment related advice. You might see them working at firms called a Registered Investment Advisors, or RIAs.
CPA – Certified Public Accountant:
This is the official license for a practicing accountant. An advisor with this designation has passed the Uniform Certified Public Accountant Examination after completing a certain amount of hours of professional experience. In most U.S. states, only CPAs who are licensed are able prepare and advise you on your taxes, excepting Arizona, Kansas, and North Carolina, where the designation of CPA and the practice of auditing are not restricted. Anyone who handles your taxes should have this designation but it isn’t necessary, or even widely found amongst financial advisors.
PFS – Personal Financial Specialist:
This credential goes above and beyond the CPA credential. It’s awarded by the American Institute of Certified Public Accountants (AICPA) to CPAs who can help you plan all aspects of your wealth – estate planning, retirement planning, investing, insurance – not just tax planning. To become a PFS, advisors must be active members of the AICPA, have at least three years of financial planning experience, submit recommendations, and pass a written exam. They also must complete 60 hours of continuing professional education every three years, and pay several hundred dollars a year in fees.
CMA® – Certified Management Accountant:
This designation is given by the Institute for Management Accountants to professionals who are interested in managing the finances of a company. It requires work experience, a two-part exam, and continuing education. This certification is not necessary if you are looking for a professional to help you with your personal finances. You might also see this as “Certified Financial Management” in a professional’s list of certifications.
CEPF® – Certified Educator in Personal Finance®:
This is a designation given to financial educators or counselors who have completed six months in relevant experience, have a high school diploma or GED, and have passed an online exam. It is issued by the Center for Financial Certifications, or Fincert.org. This designation is helpful for professionals who are educating you on personal finance or advising you on basic financial topics such as budgeting or paying off debt, but you wouldn’t want the person managing your money to have this (unless they have several other designations or credentials as well). It’s a certification you’ll often find in the nonprofit sector.
Of course, you might find some more acronyms littered throughout financial advisors’ profiles, but those tend to be just window dressing.
Don’t worry, though, about wading through profiles to find an advisor with the right acronyms! GuideVine lets you search by type of advice, including retirement planning, tax planning, insurance management, real estate, and many other specialized areas. Plus, GuideVine pre-screens all financial advisors before they join the site, so you can be confident that whoever you find, they are well equipped (and well educated) to handle your money.