One important aspect of career-building is which designation or designations to pursue. But how do you weed through the more than 250 designations available to financial advisors?
For starters, whatever you choose should give you the tools you need to better serve investors, increase your visibility with clients and prospects, and, hopefully, bring in more business. Another part of the thought process should be the amount of work involved in earning the designation.
“If it’s really easy to obtain designation, it’s truly not worth it,” says Dr. Walt Woerheide, dean of The American College, Bryn Mawr, Pa., which provides training and development for financial services professionals.
For financial advisors looking to add some credibility as well as knowledge to their tool belts, read on to learn about a few of the most well-regarded designations and what they mean, as well as gain some insight from the advisors who hold them. (The list is not meant to be exhaustive; there are plenty of other worthy designations that an advisor might find useful for his or her particular practice.)
Certified Financial Planner (CFP)
This certification is perhaps the most well-known by investors and popular among fee-based advisors. Indeed, according to The Advisor Evolution Study, conducted by Registered Rep. and TD AMERITRADE Institutional in the second quarter of 2009, one-fourth of respondents said the CFP designation is among the top three most valuable.
The CFP is granted by the Certified Financial Planner Board of Standards Inc. Among other things, applicants must have a bachelor’s degree or higher, three years of full-time or equivalent part-time financial planning experience, complete a course of study (or an accepted equivalent) covering nearly 100 integrated financial planning topics, and also pass an examination. (The latest test stats show a 58.2 percent pass rate for first-time test takers.)
Many firms now treat the CFP as a must-have for advisors. “It’s a great baseline designation to have,” says David Blain, president and chief investment officer of D. L. Blain & Co. LLC, a fee-only registered investment advisor in New Bern, N.C.
Indeed, pursuing the CFP helped Warren Ward expand his knowledge beyond stocks and bonds to estate planning process, retirement plans and insurance. “I felt I would be better prepared to offer advice if I actually studied these things,” says Ward of Warren Ward Associates, a fee-only registered investment advisor in Columbus, Ind. “The coursework was valuable across the board.”
Chartered Financial Consultant (ChFC)
This nine-course, college-level program is offered exclusively by The American College and is very similar to the CFP. It also is a widely known and respected designation. Each course involves an average of 50 hours of study. Topics include insurance, income taxation, retirement planning, investments and estate planning. If you already have your CFP, you can earn the ChFC by taking three additional courses. In order to earn the ChFC, you must have three years of full-time business experience, commit to The American College’s Code of Ethics and complete 30 hours of continuing education every two years. A number of advisors have both their CFP and ChFC.
Chartered Financial Analyst (CFA)
The CFA is sort of the gold standard when it comes to designations. Indeed, only one in five people who begin the program ultimately earn the right to use the designation, according to the CFA Institute. Candidates are required to have four years of professional experience and pass three difficult qualifying exams, requiring hundreds of hours of extensive study. The curriculum includes fundamentals like modern economics, investment strategies and financial reporting for ethical standards. Candidates must also master advanced topics such as equity analysis, derivatives, alternative investments and portfolio management.
“I think it was a great addition to my career,” says Scott Hill, senior vice president and financial advisor at Kanaly Trust, a state-chartered trust company in Houston, Texas, who says the designation has gained him a few clients over the years. “I think it establishes your credibility at an earlier stage in building the relationship.”
Master of Science in Financial Services (MSFS)
This is actually a degree, not a designation, but many advisors say it’s useful for the exposure to higher financial planning concepts. A handful of universities offer this degree, including The American College and St. Joseph’s University in Philadelphia. The coursework differs by institution, but Bob Maloney, a founding member of the National Association of Personal Financial Advisors (NAPFA) says it prepared him to the same extent as if he had taken the CFP or ChFC. It took him three years on a part-time basis to finish his masters.
“Anytime you pursue higher learning, it gives you exposure to more knowledge and more resources,” says Steven A. Bové, president of Lebrigh Life Planners LLC, a state-registered RIA in Oldsmar, Fla. While more education doesn’t guarantee success, it gives you exposure to more areas and allows you to delve in more deeply, says Bové, who also has a CFA and CFP.
Enrolled Agent (EA)
This designation is applicable to advisors who prepare tax returns for clients and who want to be able to represent clients before the IRS in case of a dispute. It is appropriate for advisors who don’t have a CPA license, but it’s not a stand-alone designation.
EAs are the only tax professionals tested by IRS on their knowledge of tax law and regulations and, because they are federally licensed, the only tax professionals that may represent clients in any part of the country. What’s more, the IRS has proposed new registration, testing and continuing education requirements for tax return preparers not already subject to oversight. If you currently prepare tax returns for clients, you will have to meet additional requirements anyway and having the EA will give you the additional benefit of representing your clients before the IRS.
For more information on these designations and others, click on the following links:
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