I recently met someone who said he was a financial advisor and asked if I would refer clients to him. He handed me a business card that listed all sorts of certifications. At first glance, it looked impressive–unless you knew enough to distinguish between bona fide and bogus.
Certifications are, admittedly, confusing. Some certifications require a state-issued license to practice, while others are merely awarded by an industry association. The meaningful certifications require exams, experience, and high professional standards. The so-so certifications just require a three-hour course or an application. The worthless certifications just require payment of a fee. But how to distinguish between them?
Distinguishing Professional Designations
There are some authoritative sources that have databases of professional designations:
- FINRA, the Financial Industry Regulatory Authority
- ANAB, the ANSI National Accreditation Board
- NCCA, the National Commission for Certifying Agencies
The FINRA database is especially user-friendly. It contains a description of 253 designations, and references credentials by the letters that follow the financial professional’s name, the required training, the issuing organization, required continuing education, and how to confirm if an individual actually holds that credential.
FINRA also carries a disclaimer that it does not approve or endorse any professional credential or designation.
Types of Certifications
A few certifications are well-known and carry immense clout. They require at least a college degree, successful completion of one or more difficult professional exams, adherence to a strict code of ethics, and ongoing education:
- CFA (Chartered Financial Analyst)
- CFP (Certified Financial Planner)
- CPA (Certified Public Accountant)
Some financial advisors advertise that they are registered under FINRA. What does that mean? FINRA is responsible for regulating brokers and dealers in the securities industry, but the conditions for registration are a bit surprising. A college degree is not required. Registrants do need to pass the required FINRA exams, such as the Securities Industry Essentials exam. The Series 7 and Series 65 are more advanced exams. Individuals must also be associated with a FINRA member firm to take the exams.
Common Credentials
Here are some other common credentials and their meanings:
AEP – Accredited Estate Planner
Must be an attorney, accountant, insurance professional and financial planner, or trust officer with 15 or more years’ experience as an estate planner or successful completion of two graduate-level courses, take a proctored final exam, and participate in continuing education.
CTFA – Certified Trust and Fiduciary Advisory
Must have experience in wealth management and complete a multiple-choice proctored exam.
CAPP – Certified Asset Protection Planner
Registrants complete a 16-part course and take an open-book, online exam.
RAA – Registered Annuity Advisor
This has no meaning. FINRA cannot verify that this still exists.
APFI – Accredited Personal Finance Instructor
This credential is issued by the National Financial Educators Council and requires completion of an online training course and an online closed-book exam.
AIF – Accredited Investment Fiduciary
Complete training from the issuing organization and pass that organization’s test.
ATA – Accredited Tax Advisor
Must have 3 years’ experience in tax planning, consulting, and preparation, and take a closed-book proctored exam.
CDFA – Certified Divorce Financial Analyst
This was formerly known as a CDP, or Certified Divorce Planner. Must have a bachelor’s degree with three years’ experience, but if no degree, can still be certified if they have five years’ experience. Requires online courses and a proctored final exam.
Always Check the Credentials and Certifications
Don’t be fooled by the credentials behind a name. Look up the meaning and then verify that the individual indeed holds that credential.
I did. Guess who did not make it onto my referral list?
Virginia Hammerle is an accredited estate planner and represents clients in estate planning, probate, guardianship, and contested litigation. She may be reached at legaltalktexas@hammerle.com. This blog contains general information only and does not constitute legal advice.
