Choosing a Financial Advisor Part 2: Alphabet Soup
January 11, 2023
If you’ve ever been handed a business card by a financial advisor, you may have been baffled by the slew of letters following their name and had no idea what those letters mean. There is an array of industrycertifications including CFP, AAMS, AWMA, ChFc, CFA, CTFA amongst numerous others. In short, this alphabet soup represents the various industry designations the advisor has earned, and which indicate the courses of education they have attained. At face value this is a good thing. Each designation covers core competencies and has its own areas of focus and may help the advisor deliver value to their clients. Below, we will take a look at three commonly seen designations and briefly outline each.
Certified Financial Planner
The Certified Financial Planner (CFP) designation may be the most recognizable. The CFP is offered by the Certified Financial Planner Board of Standards, Inc. CFP’s must complete a rigorous educational curriculum (unless waived due to experience, certification, or other educational attainment), possess at least three years professional experience in financial planning, complete a final certification examination and adhere to the CFP Board’s standards of conduct. CFP education covers many areas of financial planning disciplines including investment, retirement, taxes, estate planning and insurance. Attainment of a CFP is an indication that the advisor has completed a comprehensive course of study in the financial planning profession and demonstrates the ability to put those principles into practice.
Chartered Financial Analyst
The Chartered Financial Analyst (CFA) charter is considered the “gold standard” certification for investment experts, analysts, and portfolio managers. It is offered by the CFA Institute and is comprised of a series of three exams that must be mastered to attain the charter. Rather than following a prescribed course of study, passing the exams is considered an adequate demonstration that the candidate possesses the necessary knowledge to perform as a professional in the field. The exams are extremely difficult and passing all three is quite the accomplishment. CFA charter holders add value for investment clients in the area of professional asset management due to their in-depth knowledge of the investment landscape.
Your estate plan may also be more intricate than that of a typical family. Passing an operating business and its assets
directly to your heirs may not be a viable plan. Also, business owners’ estates tend to face more complicated tax situations.
Certified Trust Fiduciary Advisor
The Certified Trust and Fiduciary Advisor (CTFA) designation is offered through the American Bankers Association Institute of Certified Bankers. The CTFA is commonly held by fiduciary advisors of banks and large asset management firms. As the name indicates, CTFA holders are fiduciaries, and are held to a fiduciary standard in the execution of their roles. Similar to the CFP, candidates must fulfill an experience requirement, a rigorous education program, and a comprehensive exam to be certified. While the CFP tends to be more general in nature, the CTFA contains an additional focus on estate planning issues, particularly those dealing with administration of trusts. This makes CTFA holders more qualified to serve high-net-worth clients dealing with multi-generational wealth transfer issues.
It would be impossible to cover all the designations available to wealth management consumers in such a short article, or any one of them in detail, but this may serve as a good starting point. While education is important, it is not the only thing to consider when choosing an advisor. Take your time, ask questions, and trust your instinct.
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