If you’re looking for advice when it comes to planning your financial life, you’re not alone. According to the United States Bureau of Labor Statistics jobs for financial advisors will grow at a “much faster” than average pace of 15% between 2016-2026 . What’s more is that U.S. News and World Report ranks the “financial advisor” job as #8 for the top 25 business jobs in 2018.
Though it seems like Americans are increasingly requesting and using financial help in some form or another, recent finding by Certified Financial Planner Board (CFP Board,) indicates that many people are still very skeptical around the advice they might be getting from their financial advisor. For example, a 2015 opinion survey found that, “a majority of respondents believe that financial advisors act in their companies’ best interests rather than the consumers’ best interests (60% vs. 25%)”
Perhaps the most surprising finding in the report is that many people believed that the financial advisor they were working with had some sort of accreditation, like the CFP certification. This could mean that many people are unaware of the type of financial help they actually need along with the type of qualified professional they would engage to provide that help.
It might be useful to outline the various designations in the financial services industry and how they are best suited to help you accomplish your financial goals. This way, you can be more informed and confident about the financial help you are getting.
Certified Financial Planner® (CFP)
This is perhaps the most common designation that people are familiar with when it comes to financial advisory professionals. A certified financial planner is a type of financial advisor that has earned accreditation by way of certification provided by the CFP Board. The CPF board will only certify individuals that meet the four “Es,” outlined on their website:
Also, the CFP board requires CFPs to renew their certification every 2 years. Part of the renewal process is completing at least 30 hours of continuing education within that two years.
Most individuals would do just fine working with a CFP, as they are qualified to help people with planning that involves estates, insurance, taxation, investment and retirement needs.
Chartered Financial Analyst® (CFA)
The CFA designation is, perhaps, the next most common certification that people are familiar with. The CFA Institute provides certification to individuals desiring to be a financial analyst. To qualify for CFA certification, individuals must also pass a series of exams, undergo extensive training and fulfill continuing education requirements.
In order to obtain the CFA designation, a person must become a CFA candidate and enroll in the CFA program before registering for what is called the Level I exam and be a member of the CFA Institute and enroll in the CFA program.
The CFA program entrance requirement includes having:
- A bachelor’s degree or equivalent
- Four years of professional working experience
- A combination of professional work experience and education that equals four or more years
CFA candidates must complete a second and third level of examination to become official CFA Charterholders. Additionally, CFAs must adhere to certain codes of conduct. According the CFA Institute website they must, “complete a Professional Conduct Statement form to attest that they are in compliance with this requirement.”
While a CFA could certainly provide the average individual with financial planning, most people won’t need a CFA. CFAs are more likely to with high-net-worth individuals, businesses, and corporations for needs like asset management or portfolio analysis when it comes to dealing with large investments and sums of money.
Personal Financial Specialist (PFS™)
The American Institute of Certified Public Accountants (AICPA) issues this credential for CPAs that also specialize in personal financial planning. According to the AICPA website the PFS™ designation is a “powerful combination of extensive tax expertise and comprehensive knowledge of financial planning.”
Only CPAs can obtain the PFS certifications. CPAs who obtain this credential will specialize in providing estate, tax, retirement, risk management and investment planning advice. Aside from being a CPA, qualifications for the PFS credential include:
- Being a current member of the AICPA
- Having at least 75 hours of personal financial planning education within the five-year period before applying for the PFS credential
- 2 years of full-time business or qualifying teaching experience in personal financial planning
- Pass a PFP-related exam
Again, most people won’t require their personal planner to be a specialist in various kinds of tax treatments, but if you’ve got an extremely complicated tax situation, this professional would be who’d you count on.
Though there is no designation for this type of advisor, it’s an advisory service that is worth mentioning. With the rise of artificial intelligence and big data, robo-advisory services are becoming more popular. A robo-advisor is an automated approach to investing and planning based on predictive algorithms that require very little human involvement.
Modern computing power and machine learning have come together to produce incredibly effective and intelligent approaches to investing that, before, would take years to compile and synthesize into best practices for the financial services industry. The potential for this technology to improve financial planning is promising.
Not only can it make financial planning more effective based on historical data and trends, but it can deliver customized results for individuals who don’t have the resources like time or money to hire professionals to deliver the same results.
Though the technology is fast evolving and becoming more efficient, it’s still only as effective as the foundations it’s based on. For this reason, make sure you understand what changes the algorithms will suggest or make to your investment portfolio and why.
The fees on these services are still on the higher side, but could drop as the technology becomes more effective and commoditized.
A financial coach is someone who can help you with behaviors and strategies that can lead to better financial outcomes for your life. For example, if you struggle with overspending, lack of saving or planning when it comes to your finances, a financial coach would be ideal.
If you aren’t yet at the place where you’ve got large (or even moderate) sums of money for investing, this could be a good path to getting started as an investor. Your financial coach can help you develop goals along with action steps to reach them.
At the moment, there are a few certifications in the field of financial coaching. You might find someone accredited by The National Financial Educators Council (NFEC) or a private business like Ramsey Solutions Master Financial Coach program.
There’s not much standardization in terms of financial coaching accreditation yet, so it’s best to ask your potential coach about experience, education as well as certification. You should also ask what their certification programs requires in terms of training, examination, ethics standards and continuing education.
Other Financial Designations
Though we’ve covered the most common credentials for financial advisors, there are plenty more. For a complete list of professional designations you can check out the website for Financial Industry Regulatory Authority (FINRA).
The field of personal finance planning is so broad that people can specialize in areas like insurance or securities that have their own licensure requirements. Additionally, you might find more “proprietary” designations created by private or for profit organizations.
Though the average person would do well to deal with a CFA, CPA or PFS, here are additional licenses and certifications you might encounter on your search for financial advisory services:
- Chartered Financial Consultant (ChFC)- Advanced financial planning
- Chartered Investment Counselor (CIC)- Advanced portfolio management
- Certified Private Wealth Advisor (CPWA)- Wealth accumulation, preservation, and distribution
- Chartered Life Underwriter® – Insurance planning
- Financial Fitness Coach- Educator, counselor or planner in the field of finance
- Certified Financial Education Instructor- Educator in financial literacy
When it comes to getting financial advice accreditation is important. However, you should also know about areas of specialization and the type of financial planning your advisor is familiar with. If you are a business owner, you’d want to work with someone who’d know about issues that business owners face when it comes to finances.
You might be planning for a special needs child to be cared for in your absence. Eldercare is also becoming growing concern in terms of financial advice, so there are advisors who may specialize in that area.
Whatever your specific needs are, you should engage a financial advisor who can help you navigate through them with the best results possible for your particular financial goals. If you are in need of a financial advisor, you should also know that GuideVine can connect you to some of the best financial advisors in the field.
You can trust that advisors on GuideVine are:
- Properly registered – with the SEC or their state
- Pre-screened – through a civil, regulatory and criminal diligence to make sure they have good records
- Fiduciaries – which means they are legally obligated to only work in your best interest
- Experienced – on average they have 18 years of experience and manage $180 million each
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