Financial professionals may possess a variety of certifications and designations. These credentials instill a sense of competency. In recent years, however, the number of financial credentials has expanded significantly. If you choose to work with a financial professional, you should understand what these credentials mean.
The prestige of certifications and designations and their usefulness to clients varies considerably. The Financial Industry Regulatory Authority, or FINRA, has a designation lookup feature on its website, https://www.finra.org/investors/professional-designations. The tool is beneficial, especially because you can compare different designations. FINRA does not endorse or recommend any of these designations.
The list of designations on the FINRA website is extensive. Currently, there are more than 200 listed. How do you determine which are the most meaningful? Look up what is required to achieve and maintain the various designations. If you need help with retirement planning, what are the prerequisites for becoming a Certified Retirement Financial Advisor (CRFA), a Chartered Retirement Planning Counselor (CRPC), or a Personal Retirement Planning Specialist (PRPS)? The terminology can be quite confusing unless you compare the designations side by side.
The most relevant designations involve an extensive study program, challenging exams, work experience requirements, a code of ethics, and continuing education. Here are some examples:
- A Certified Public Accountant, or CPA, is an essential credential for an accountant. Some CPAs manage money after obtaining the Personal Financial Specialist designation.
- The Certified Financial PlannerTM, or CFP®, certification indicates expertise in financial planning. The certification is designated for fee-based professionals who provide a holistic evaluation of a financial profile and develop a financial plan. Some are also registered investment advisers, or RIAs, and manage clients’ money for a fee.
- Professionals who complete the CFA program, which requires extensive study of various investment management topics, earn the Chartered Financial Analyst® credential. Many portfolio managers hold this designation.
Credentials are a factor to consider. Referrals, however, are more valuable. If you decide to work with a broker or adviser, ask for referrals from family and friends. Ensure your family and friends have worked with the broker or adviser professionally. Some friends or family may know a broker or adviser socially, but it is essential that referrals come from professional experience.
