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Welcome to Get Smart about Investing. Everyone is calling themselves financial advisors these days and to make matters worse, anyone could start their own financial planning company within a few weeks just by going through the paperwork despite not having any schooling or experience in the financial field. Reassuring, isn’t it? There are so many different credentials and initials after advisors’ names that making sense of it all can be daunting. Let’s look at the credentials that really matter.
A CFP stands for Certified Financial Planner. This is the highest designation for providers of comprehensive financial planning covering many different areas of personal finance. Basically it means that the person took advanced classes ranging from retirement planning to insurance, passed a 10-hour exam on all areas of financial planning, has industry experience, and has taken an oath to give ethical advice. When you are looking for an advisor to address a lot of different areas, you definitely want to look for someone who is a CFP.
A CFA stands for Chartered Financial Analyst. This is the highest designation for advisors who specialize in analyzing companies and making investing decisions. The advisor must pass three, very comprehensive tests over a three-year period, covering economics, security analysis and portfolio management.
A CLU stands for Chartered Life Underwriter. This is the highest designation for advisors who specialize in the insurance industry. It’s given to those who completed a lengthy series of 10 courses covering insurance and financial planning.
A CPA stands for Certified Public Accountant. This is the highest designation for advisors who specialize in taxes. You may not need a CPA right now to do your taxes, but as your tax situation becomes more complex, a CPA would be the person to see.
There are literally dozens of other certifications. There isn’t anything wrong with them, but I would still recommend that you keep to the ones that we talked about. There are many good advisors out there without any designations, but all other things being equal, your chances of finding a good one increase if you find someone who meets these credentials.
I’m Greg McGraime and Now You Know!