Are all certifications created equal?
You are not alone if you struggle to tell the difference between a CFA, CFP, CIF, ChFU, and any of the other financial certifications. How do you filter through this alphabet soup to find the best planner for you? Here is our list of the eight most popular designations and a brief explanation of what each does:
Certified Financial Planner (CFP) – Those with the CFP designation are trained to have a broad knowledge in every major area of the financial world. Planners take exams on a wide range of topics, including stocks/bonds, tax implications, insurance, retirement planning, and estate planning. A major benefit is that the CFP Board publishes information about current licensees for you to research. The last thing you need is to choose a CFP whose certification has been revoked.
Chartered Financial Analyst (CFA) – This designation, given by the Association for Investment Management and Research (AIMR), measures the competence and integrity of financial analysts. Candidates must pass several exams on accounting, economics, money management, and security analysis. CFAs tend to be in the business of institutional financial management and inventory analysis, not financial planning.
Certified Fund Specialist (CFS) – As the name suggests, these programs focus on mutual funds and the mutual fund industry. The Institute of Business & Finance, formerly known as the Institute of Certified Fund Specialists, offers education on a variety of mutual fund topics, including portfolio theory, average cost, and investment-related topics. annuities.
Chartered Financial Consultant (ChFC) – ChFCs must have at least three years of experience in a position in the financial sector and must pass an examination in the areas of financial planning, including income tax, insurance, investments and estate planning.
Certified Investment Counselor (CIC) – This is a designation given by the Investment Counsel Association to those who hold CFAs and are currently working as investment counselors. The major scope of this program is portfolio management. CICs are generally the big ones, managing large accounts and mutual funds.
Certified Investment Management Analyst (CIMA) – An investment consultant must have three years of work experience before being eligible to earn this certification. The Investment Management Consultants Association teaches CIMA courses.
Chartered Public Accountant and Personal Finance Specialist (CPA and PFS) – CPAs have already passed accounting and tax preparation exams, but their title does not indicate training in other areas of finance . If a CPA is interested in financial planning, they will also need to obtain certification as a Personal Finance Specialist (PFS). The PFS designation is awarded by the American Institute of Certified Public Accountants to those who have completed additional training or already have a CFP designation.
Chartered Life Underwriter (CLU) – This designation is issued by the American College and is held primarily by insurance agents. The CLU designation is awarded to individuals who complete a study program of ten courses and 20 hours of examinations. The course itself covers the fundamentals of life and health insurance, retirement planning, insurance law, income tax, investments, financial planning and inheritance and group benefits.
While certifications aren’t everything, you should give extra credit to investment advisors who have one of these designations. For example, to become a CFA, you must pass approximately 250 hours of reading per exam, and you must pass three exams. The exams are so thorough that more than 35% of those who write fail! Founding members are further bound by codes of professional conduct and ethics, and they are required to complete a minimum of 25 hours of continuing education per year.
