When looking for a financial planner you are likely to run into what we sometimes refer to as our credentials ‘Alphabet Soup.’ The Financial Industry Regulatory Authority’s website lists over 235 credentials a financial advisor can earn over the course oftheir career. In the past, the financial advisor profession struggled with its fair share of bad actors like Bernie Madoff and Allen Stanford. It’s no wonder many seek credentials for demonstrating competency and establishing credibility.
But out of those 235 credentials, how can you know which ones to trust? In my opinion, which is shared by many, there are three credentials that you should look for when seeking help from a financial planner.
CERTIFIED FINANCIAL PLANNER™ (CFP®)
The CERTIFIED FINANCIAL PLANNER™ mark is widely considered the gold standard for a financial planner. Those holding the CFP® marks are bound by rigorous requirements set by the CFP Board including four parts to earning the CFP® marks: education, examination, experience, and ethics. CFP® professionals have at least a bachelor’s degree and have put in up to 1,000 hours to complete the required coursework and pass the exam. The ethics component requires the applicant to meet the Fitness Standards for Candidates and promise to follow the Code of Ethics and Standards of Conduct, which puts the client’s interests first. They must also have at least three years of professional financial planning experience or a two-year apprenticeship before holding the marks and often have broad expertise in insurance, investments, taxes, retirement, and estate planning. CFP® professionals can be limited in their tax advice and estate planning advice, if they are not also a CPA or an estate attorney, so CFP® professionals typically act as a client’s quarterback coordinating services between the CPA and estate attorney.
Certified Public Accountant (CPA) and Personal Financial Specialist (PFS)
Probably one of the oldest, best known, and respected financial credentials is the CPA. The bar to become a CPA is quite high. 150 hours of college classwork (which often results in a master’s degree), four exams, at least two years of public accounting experience, and typically 40 hours of continuing education each year. CPAs work in a variety of specializations that can include taxation and financial planning. CPAs that are members of the American Institute of CPAs and intend to specialize in financial planning can pursue the Personal Financial Specialist (PFS) credential. In addition to being a CPA in good standing, the PFS typically requires two years of experience in financial planning, 75 hours of personal financial planning education, an examination, and 60 hours of continuing education every three years.
Chartered Financial Analyst (CFA)
The CFA credential is considered the gold standard for investment research and portfolio management. Issued by the CFA Institute, it is regarded as the hardest finance credential to obtain. To become a CFA charterholder you are required to have a bachelor’s degree, pass three grueling exams (called “levels” over multiple years), have 4 years of experience in investments, and adhere to certain ethical guidelines. The CFA credential is highly concentrated in investing: equity investments, fixed income, derivatives, alternative investments, financial statement analysis, and economics. Professionals that are CFA charterholders commonly work at banks, mutual funds, hedge funds and wealth management. The CFA Institute offers a few other programs including the rigorous Certificate in Investment Performance Measurement (CIPM) that leverages portions of the CFA Program typically for non-stock picking professionals focused on investment performance measurement and investment manager selection. The CIPM content is also rigorous, time consuming and requires two exams to complete. Those holding the CIPM are members of the CFA Institute and are also held to ethical and continuing education requirements.
Putting Your Best Interests First
When searching for a financial planner you should ask if they will commit to you, in writing, that they will have a fiduciary duty to you. One of the benefits to working either directly with a CFP® professional or through a Registered Investment Advisor (RIA) firm is that they are required to always act as a fiduciary when providing financial advice to a client. This is not always the case when working with a financial planner.
When seeking a financial planner, it is also important to interview them and ask if they have ever been publicly disciplined by any organization overseeing their conduct. If they are associated with a broker/dealer, you should be able to search for additional background information through FINRA’s BrokerCheck or the SEC’s Investment Advisor Public Disclosure Database for employees of RIA firms. Be sure to check these websites for prior issues with the advisor including licensing information, arbitrations, and complaints.
Walnut Hill Wealth Management (“WHWM”) is an independent, fee-only RIA firm putting your best interests first. Stephen Bodwell, WHWM’s Founder and President is a CFP® certificant, CPA/PFS and holds the CIPM certificate from the CFA Institute. His complete bio can be found HERE To learn more about how WHWM can help you, schedule your complimentary, no-obligation 30-minute consultation with WHWM today.
Walnut Hill Wealth Management, LLC (“WHWM”) is a registered investment advisor offering advisory services in the State of Texas and in other jurisdictions where exempt. The information provided is as of the date indicated and subject to change.
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