Alphabet soup—Making sense of advisor credentials

Steve Merrell |

Q: I am looking for a new financial advisor. In my search I have come across several different credentials. To me, all the initials after their names are just so much alphabet soup. What do the designations mean and do they really matter?

A: I’m not surprised that you are confused. According to the Financial Industry Regulatory Authority (FINRA), there are 212 different financial advisor designations currently floating around out there. FINRA does not approve or endorse any professional credential or designation, but it is a good source to go to for information about them. The FINRA website (finra.org/investors/professional-designations) allows you to search designations by name and click through to get more details.

Some designations on the list are pure marketing fluff. For example, if your advisor were John Doe and he signed his name as “John Doe BPC, C3DWP,” it would attest that he is “Bucket Plan Certified” (yes, that is a real designation) and that he is a “3-Dimensional Wealth Practitioner.” That last one, also really on the list, is apparently still being used, though the issuing organization appears to be defunct.

In contrast, there are some designations that carry tremendous value and are worth learning about. Whether a particular credential matters to you depends on what you are looking for from your advisor.

One important indicator of a credential’s worth is whether or not it is accredited by an independent accrediting agency. Regulators in some states will not allow financial professionals to use designations unless they are accredited by either the ANSI National Accreditation Board (ANAB) or the National Commission for Certifying Agencies (NCCA). Both organizations are well-known non-governmental agencies that set and monitor standards to assure the public that a credential is credible. Currently, only 8 of the 212 designations are accredited by one of these agencies. Here are four accredited credentials you may want to consider as you search for a new advisor.

Accredited Investment Fiduciary (AIF) – I firmly believe that most people are best served when their financial advisor is a fiduciary. The AIF designation signifies that your advisor understands the principles of fiduciary duty, the standards of conduct expected of a fiduciary, and has a process for carrying out fiduciary responsibility. Candidates must complete ten hours of training and pass a qualifying exam. Maintaining the designation requires 6 hours of continuing education every year.

Certified Investment Management Analyst (CIMA) – Investment management is a highly technical field. CIMA designation holders have at least 3 years of full-time investment experience with a satisfactory record of ethical conduct. They must successfully complete a comprehensive investment curriculum and then pass a rigorous 5-hour-long proctored qualifying exam. CIMA holders are required to complete 40 hours of continuing education every two years.

Certified Senior Advisor (CSA) – Elderly people face unique financial planning situations. The CSA designation signifies that the advisor has acquired broad-based knowledge of the health, social and financial issues that are important to the majority of seniors. They must also pass a criminal background check, pass an ethics exam and complete 30 hours of continuing education every three years.

Certified Financial Planner (CFP) – Probably the most important credential for a personal financial advisor is the CFP designation. This credential requires a bachelor’s degree or higher plus three years of full-time financial planning experience or 6,000 hours of part-time experience. In addition, the candidate for the credential must complete a rigorous curriculum in comprehensive financial planning and pass a final certification exam. In addition, the CFP practitioner must take 30 hours of continuing education every two years and maintain the ethical and professional standards of the CFP Board.

As you search for your new advisor, take time to review the credentials listed next to the names of the candidates you consider. Use the FINRA website mentioned above and then look into the issuing organization. It should become apparent pretty quickly if the credential is credible and applicable to your situation.

 

 

Steven C. Merrell  MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey.   He welcomes questions that you may have concerning investments, taxes, retirement, or estate planning.  Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA  93940 or email them to:smerrell@montereypw.com