You would likely expect a CPA for complicated tax work, a J.D. for your legal needs, or an MD for healthcare. Why not expect a CFP (R) for your financial planning & investment needs? The fact is most consumers of financial planning services don’t know much about the credentials scarcely found throughout the financial services industry. Unfortunately, what you don’t know… CAN HURT YOU!
While there are literally dozens of credentials created by educational institutions and other organizations focused on various niches of financial services, there are really three primary designations relevant to comprehensive financial planning at the highest level of skill. Comprehensive financial planning is what you as a consumer of financial services should be most concerned with. Nearly anyone can sell insurance or annuities, stocks, bonds and mutual funds – but a truly comprehensive financial planner can add far more value to your financial security in many ways!
Comprehensive financial planning includes aspects of your financial life such as:
- Insurance and Risk Management
- General Financial and Retirement Planning
- Estate Planning and Management
- Investment Planning
- Accounting & Tax Planning
- Employee Benefits & Retirement Plans
An Accredited Asset Management Specialist (AAMS) may have specialized knowledge in investment planning and portfolio management, but may be inept at holistic financial planning. Without a holistic approach to comprehensive financial planning, they may be lacking the knowledge to properly diagnose and manage other aspects of your financial situation. This lack of proficiency may in turn negatively impact your investment planning.
For example, most financial advisor’s sell and/or manage investment products. They can allocate and manage your investment portfolio (with varying levels of competency!), however if they don’t have tax and retirement plan knowledge they may not stop to ask about your contribution level to your 401k plan at work. This simple oversight may lead to a negative financial impact, as you likely would have been much better off with the tax benefits and possible employer contribution by maxing out your retirement plan at work! The unskilled financial planner may overlook many areas of your financial situation which must be addressed to achieve the best financial results for you.
It’s similar to a mechanic knowing how to change the oil in your car. They may be efficient at getting you in and out of the shop with fresh oil and a new oil filter, but not realize the color or texture of the old oil meant there is a larger problem with your engine, a problem that could leave you stranded on the side of the road!
Here are the three most commonly found, recognizable and reputable designations in the financial services field:
CERTIFIED FINANCIAL PLANNER (TM) – The CFP (R) designation are financial planning credentials awarded by the Certified Financial Planner Board of Standards Inc. (the CFP Board). This is perhaps the most difficult designation to attain for a financial advisor as it requires:
- Education – Including approximately two years of coursework in investments, insurance, employee benefits and retirement plans, financial planning, and income tax. A bachelor’s degree is also required to hold the CFP (R) designation.
- Examination – The CFP (R) designation requires successfully passing an extensive two day examination in the educations topics listed above.
- Experience – The CFP (R) designation requires three years of relevant experience in the financial planning process.
- Ethics – After all three requirements above are met, CFP (R) certificants must sign the CFP (R) Certification Application, requiring business background disclosure and adherence to the CFP Board’s Code of Ethics.
- Continuing Education – The CFP Board requires certificants to complete 30 hours of continuing education every two years including 2 hours of ethics education.
Chartered Financial Consultant – The ChFC (R) credential is a financial planning designation awarded by the American College. It also is a widely known and respected designation in the financial services industry. The ChFC (R) requirements are:
- Experience – Three years of full-time business experience (vs. the CFP (R) requirement of three years of relevant financial planning experience).
Code of Ethics – Adherence to a Professional Pledge which is a code of ethics for those holding the designation.
Continuing Education – Requires certificants to complete 30 hours of continuing education every two years.
Education – The ChFC (R) designation requires completion of 6 college level courses and 2 elective courses, however there is no comprehensive test.
Personal Financial Specialist – The PFS credential is awarded by the American Institute of Certified Public Accountants (AICPA). This designation requires a Certified Public Accountant (CPA) credential in addition to:
- Education – 80 hours of educational coursework.
- Experience – 2 years of full-time experience.
- Examination – Completion of the CERTIFIED FINANCIAL PLANNER (TM) comprehensive examination.
Each designation mentioned above illustrates dedication and determination to excellence in financial planning as well as motivation to provide the best financial advice and guidance to clients. If you recognize the need for qualified financial advice and guidance, you need a professional who’s taken the time to achieve one of the three most important and recognized designations in the financial services industry.
You’ll find CERTIFIED FINANCIAL PLANNER (TM) Practitioner’s, Chartered Financial Consultant’s, and Personal Financial Specialists in every major city across the country – and around the world for that matter. You expect the highest standards for your medical care (MD), qualified and professional tax preparation and advice (CPA), and knowledgeable legal guidance (J.D.) – isn’t it time you expected more from your financial advisor?