By Amber Miller, CFP®
So you’re looking for a financial advisor.
You’ve heard all the titles: Financial Advisor. Investment Advisor. Registered Investment Advisor. Certified Financial Planner. Certified Financial Analyst. Stock Broker. Broker…and the list goes on. Who do you go with…or have I lost you already?!?
In this day and age when 42% of Americans have no type of detailed financial plan1, and talking about money is essentially a social taboo, it’s hard to know who to trust. So when you do finally make the commitment to taking charge of your financial life and set out to find your perfect person, a trustworthy advisor to give you unbiased advice that’s best for your life (and not just her paycheck), what acronyms and credentials can you trust? And how do you know?
In an earlier blog post I mentioned that I’m a career changer. I joined the financial profession a little over two years ago…it wasn’t too long ago that I sat where you’re sitting, wondering all of these same things.
As I transitioned into financial planning, I had heard of the CFP® (Certified Financial Planner) designation because my parent’s planner was one, and all of the partners at my new firm (The Planning Center!) held the designation. But initially I didn’t know how the CFP® compared to the slew of other financial acronyms.
So as you’re doing your research to find your person, your planner, let me start with a synopsis of all those intimidating job titles and acronyms out there. Then I’ll tell you why the CFP® designation is the industry cream of the crop, and why I decided to pursue it for myself.
IA = Investment Advisor. This “designation” means absolutely nothing! You could call yourself an Investment Advisor and start a little company giving investment advice. No education, certification or knowledge of investing or financial planning necessary.
FIA = Financial Investment Advisor. See IA above.
RIA = Registered Investment Advisor. Technically this is a type of firm and not a person. An RIA is in the business of giving investment advice.
IAR = Investment Advisor Representative. This is a person who works at an RIA. An IAR (who technically cannot use these initials, but instead must spell out the entire title) has passed a test called the Series 65, which tests on investment, market, and tax basics, and gives the person the approval to give investment advice. This person also must register with the Securities and Exchange Commission (SEC) and pass a background check.
CTFA = Certified Trust and Financial Advisor. This certification requires work experience, passing a comprehensive exam, and an agreement to abide by a code of ethics. It is offered by The American Bankers Association and available to trust and wealth management professions who offer fee-based services.
CFA = Chartered Financial Analyst. Typically this is a research analyst who work at an investment bank, mutual fund company or securities firm. This is considered the most exclusive and difficult titles to achieve. It requires multiple monitored exams, four or more years of work experience, and adherence to both an ethical and professional conduct standard codes.
What about comprehensive planning?
So far, all of these designations have been for investors. The previous titles cover professionals who work with individual stocks and bonds, mutual funds and/or retirement funds, etc. However, none of them address the complete picture of your financial life which you know includes so much more than your investments (albeit that’s an important part).
What about monthly cash flow, insurance, tax strategies, education planning, estate planning, legacy planning or charitable giving?! None of the designations listed above test for or require experience in any of these areas.
(To be fair, the insurance industry does have its own list of acronyms, and the tax world has rigorous education and testing requirements too. But none of them cover comprehensive financial planning either.)
So what acronyms do cover comprehensive financial planning?
Well, the CFP® = Certified Financial Planner. This is the most comprehensive planning designation. It indicates competency in all areas of financial planning including stocks, bonds, taxes, cash flow, insurance, retirement planning, estate planning, tax planning, charitable giving and legacy planning. Candidates must complete an education requirement, a three-year (or more) work requirement, and a rigorous and comprehensive, seven-hour exam. (The average pass rate is only 55 – 60%.) A CFP® must adhere to a code of ethics, meet professional responsibility standards and make a commitment to continuing education. Less than 20% of those who call themselves financial advisors are CFP®s. It is truly a distinguishing mark.
To set this designation apart even further — and the biggest reason why I am personally pursuing the CFP certification – its advisors are committed to the fiduciary standard. This code of ethics requires all CFP®s to commit to being fiduciaries, which means always putting the clients’ needs ahead of their own. It is a CFP®s duty to do so, and to empower clients with the tools and education to make the best decisions.
Stop worrying and start planning the parts of your life that excite you
As in all of life, it’s about trust, relationships and finding the right person. Different types of advisors could suit your needs, but a CFP® will always have more training and retraining and will always put clients first.
Money is often the biggest source of stress in many people’s lives. Worrying about it can cause many lost hours of sleep and challenge even the strongest of relationships. A Certified Financial Planner should help alleviate this stress.
So get out there, find your right planner, your right person, and let’s get planning…because there’s an awful lot of life out there to spend it worrying about acronyms.
Amber Miller, is a Sr. Planning Analyst in the Twin Cities office of The Planning Center, a fee-only financial planning and wealth management firm. In her non-work hours she worries about hiking, rowing, reading and how to share more time with the great outdoors…
Please email her at: firstname.lastname@example.org.