Alphabet Soup: Understanding the Letters After Your Financial Professional's Name
April 7, 2015 | Your Finances
If you’ve ever shopped for a financial professional, you’ve probably seen a confounding list of acronyms, also known as designations, following the candidates’ names. The initials often look similar and don’t give you a hint about their significance.
Are those initials worth a second look? And what do they mean in your search for the right partner?
When you’re looking for a qualified financial professional, looking at designations can help you understand the kind of focus and expertise a financial professional will bring to the table. This understanding can help you look for someone who will bring the knowledge and background that most closely align to your needs.
In many cases, the credentialing process is like going back to school for a specialized collegiate program. Organizations such as The American College develop curricula, conduct testing and issue designations. Others, including the CFP® Board and CFA Institute, issue tests and designations after coursework at independent institutions. In most cases, practical experience and rigorous testing are required before a credential is granted, and continuing education is required to maintain the credential.
Kansas City-based Wealth Management Advisor Tracy B. VanDyke CFP®, CLU®, ChFC®, CASL®, RICP®, estimates that she has spent hundreds of hours in classroom time, studying and testing to achieve each of her designations, but it’s well worth the effort. The Certified Financial Planner (CFP®) exam, for example, was 12 hours long, “almost as long as the exam for certified public accountants,” she notes.
“At least once or twice a week, I’ll have someone ask me about the meaning of my designations,” VanDyke adds. “Often new clients will tell me they sought me out because of a particular credential.”
VanDyke points out that the more expertise a financial professional gains through professional development, the more value he or she can bring to a client’s financial situation, regardless of the question. “I often get calls from a car lot on a Saturday asking, ‘Should we finance or pay cash?’ My clients view me as their one source for a wide variety of financial answers, and that’s great. I want them calling me when those questions come up. I can bring insights on a variety of financial topics, and they can feel comfortable that I’m looking out for them in every situation.”
There are hundreds of financial designations available, but the following six credentials are the most common. No single financial professional will have all of them; in fact, one to three designations is the norm for most financial professionals.
CASL® – A Chartered Advisor for Senior Living® understands the psychological, biological and sociological factors impacting seniors. CASLs advise those preparing for or in retirement on decisions regarding investment and estate planning, including wealth accumulation, income distribution, health and long-term care financing alternatives, Social Security and annuities.
CFA – Chartered Financial Analysts provide advanced investment analysis and portfolio management. Their studies include the mastery of investment tools and analytical methods in a variety of applications for effective portfolio management and wealth planning.
CFP® – The Certified Financial Planner® certification indicates that the representative has in-depth theoretical and practical knowledge of personal financial planning, tax planning, employee benefits and retirement planning, estate planning, investment management, and insurance and risk management.
ChFC® - A Chartered Financial Consultant® is similar to a CFP; both cover the fundamentals of financial planning well. ChFC is an advanced planning designation that also covers real-world, practical planning applications for special circumstances, including in-depth coverage of planning for business owners, single-parent and blended families, LGBT families and special-needs situations. The program also addresses retirement income planning, behavioral finance issues, estate planning and the most current planning standards and practices.
CLU® – Chartered Life Underwriter® designees have expertise in a broad array of personal risk management and life insurance planning issues for individuals, business owners and professional clients. Their training includes an emphasis on ethics, professionalism and a holistic and comprehensive approach to addressing insurance planning needs.
RICP® – A Retirement Income Certified Professional® offers focused expertise in retirement income planning, including structuring effective retirement income plans, mitigating risk to the plan and creating a sustainable stream of income to last throughout your retirement years.
If you come across a professional designation that isn’t familiar, you can search its meaning and requirements through a designation look-up tool like the one offered by FINRA, the Financial Industry Regulatory Authority, or Designation Check from The American College. When working with a financial representative, don’t be afraid to ask about his or her credentials, including who awarded them, what training and continuing education are required and how to verify the rep’s standing with the organization. A trustworthy financial professional will be happy to share more about his or her credentials.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.