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My Take On The Financial Alphabet Soup
If you've ever worked with or looked for a financial advisor, you may have noticed a variety of letters following different advisors' names. The financial services industry is littered with a litany of certifications and designations that professionals can earn. Some of these require little more than showing up for a couple hours on a weekend and sitting through a class to begin using the designation. Others require months or even years of study, significant testing, a commitment to a high standard of care, and continuing education.
I want to give you my brief take on the importance of these various letters by answering two questions about designations. First, are any sets of letters meaningful to an individual looking for financial advice? Second, how do you pick between the different designations. My answer to both questions will be very simple.
Do Designations Matter?
I believe they do. While there are many designations and training programs that do not equip a professional to provide financial advice, there are several that do achieve this. I don't believe any program is perfect or even particularly close yet, but some are well on their way.
Does this mean a designation is necessary to be a good financial advisor? No, there are people who have learned the requisite knowledge on their own without a program. But if you're looking for a financial advisor right now, selecting someone with the correct designations gives you the confidence that they have at some point learned the material and hopefully maintained that knowledge.
Designations matter. They help you increase the likelihood you will select a good financial advisor.
What Designations Matter?
Now that you know the right designations can be meaningful, which should you look for? Again, I have a very simple answer, one that a great deal of people will disagree with. Every search for a financial advisor should begin by looking for a CERTIFIED FINANCIAL PLANNERTM certificant (often indicated by the use of the CFP® marks following an advisor’s name.)
Forget about all the other designations and education. I know I wrote above that there are several meaningful designations, but there is plenty of choice within the CERTIFIED FINANCIAL PLANNERTM ranks that you can simply ignore the others. Again, it's about increasing the probability you work with someone with the training necessary to help you and working with a CFP® does this.
Selecting a CFP® does not guarantee you good advice; you still need to interview several potential advisors, determine if they offer the services you are looking for, investigate their histories, and make sure they are a good personality fit with you. But by limiting your search to only CFP® certificants, you increase the chance of working with a good financial advisor. You can feel confident they have the correct training, meet certain continuing education requirements, and are asked to work in your best interest. Whether they live up to these standards is a matter you have to determine for yourself.
Again, there are great financial advisors who do not hold the CFP® designation. If you work with one now, you may want to continue doing so. But if you are looking for an advisor today, I suggest you limit your search to CFP® certificants. Remember one designations. Don't confuse the issue. Many designations are designed to obfuscate the good from the bad. By focusing on only one, it becomes much easier to prevent this from happening.
Where Can I Find One?
The easiest way to locate a CFP® near you is to visit the Certified Financial Planner Board of Standards, Inc. website and use their CFP® Search tool based on your zip code. Select several and begin interviewing. Ask for references, find out what their focus is. Are they providing predominant investment advice, financial planning, life planning, or do they specialize otherwise? Are you similar to their ideal client? Make sure they offer what you are looking for. Check out their backgrounds on www.finra.org or www.sec.gov.
Finding a financial advisor can be a very overwhelming and confusing process. By cutting through the alphabet soup and only focusing on one designation, you can reduce this confusion considerably. Ultimately, you will still need to use your best judgement to determine whom you can trust and who will provide the services you want or need.
Finding a financial advisor can be a very overwhelming and confusing process. By cutting through the alphabet soup and only focusing on one designation, you can reduce this confusion considerably. Ultimately, you will still need to use your best judgement to determine whom you can trust and who will provide the services you want or need.
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