Finding the right advisor is never easy. There are many variables to consider when looking for an advisor, such as experience, location, personality, investment philosophy, and certifications. Nowadays, there are a number of different certificate titles complementing the names of financial professionals—CFP®, CPA, CFA, Series 65 and others—which can be quite overwhelming at times. The good news is that with a little research about each of these designations, the process of finding the right advisor can actually become a little easier.
Here we will focus on defining these certifications, some of the educational requirements behind them, and their benefit to you, the client.
Certified Financial Planner (CFP®)
The focus of the CFP® career and its training path is to educate financial advisors on how to create and implement financial plans for investors. According to the CFP® Board, to take the CFP® exam an applicant must have a bachelor’s degree (or higher) accredited by the US Department of Education and complete a CFP® Board-approved education program.1
The program consists of the following financial concepts:
- Financial planning
- Fundamentals of insurance planning
- Income taxation
- Planning for retirement needs
- Estate planning
Once an applicant has met all the educational requirements, they must then pass a rigorous ten-hour exam. The applicant must also have three years of professional experience in financial planning before actually receiving their certification. A passing CFP® exam score combined with relevant work experience typically results in a very well-educated individual ready to assist those seeking financial planning and investment advice. As of 6/30/14, there are 70,051 CFP® Certificants in the United States.
Certified Public Accountant (CPA)
Accountants with the CPA designation have a fundamental knowledge of the US tax codes and may also specialize in taxation for certain industries. For example, some accountants may specialize in public accounting for telecommunication companies.
Requirements for the CPA can vary state to state, but applicants generally must have at least one to two years of working experience as well as a bachelor’s degree with up to 30 hours in accounting courses before they are eligible to take the CPA exam.2 The exam covers a broad range of accounting topics including auditing, legal regulations, reporting and more. Obtaining the CPA certification can be a rigorous process for the applicant, but the result is an individual equipped with the tools to tackle a variety of complex tax issues. A CPA designation is usually not required to assist with individual returns, but given the in-depth education and experience, it can be very beneficial to consult a CPA for tax assistance.
Chartered Financial Analyst (CFA®)
The CFA® program is a comprehensive pursuit to understanding principles in accounting, economics, statistical analysis and portfolio management.3
Given the breadth of the CFA® training and exam program, CFAs can pursue a behind-the-scenes analytical role (such as a financial analyst), or something on a business’s front-end such as a Financial Advisor. This program also requires an applicant to have an accredited bachelor’s degree and three years of applicable professional experience. This certification is considered by many to be world class and is recognized globally for financial professionals.
The Financial Industry Regulatory Authority (“FINRA”) Series 65 is a license required by many states for professionals acting as investment advisors. The FINRA Series 65 exam tests on laws, regulations and ethics applicable to investment advisors as well as topics such as retirement planning, portfolio management strategies and fiduciary responsibilities.4 There is no formal educational requirement to take the FINRA Series 65 exam, nor is there any experience required to obtain the license, but relevant employment is mandatory for maintaining the license. This certification credits the applicant with having a foundational understanding of financial regulations and practices.
CFP®, CFA, CPA, Series 65
Each program emphasizes different financial principles, but what they have in common is their thorough emphasis on ethics. These designations bind their recipients to the highest standards of practice. Additionally, the CFP®, CFA, and CPA certifications are revered for high credibility, which is why each applicable board takes extreme caution with their applicants.
So do your own research on your advisor and find out if he or she holds any of these certificates or has specialized experience or knowledge they can bring to your particular situation. Remember, just because two advisors may have the same certification doesn’t mean they are necessarily equal.