For investors who decide to enlist the aid of a financial adviser, the next step is often the hardest: wading through the alphabet soup of acronyms and professional designations financial pros use.
To help clear things up, here is a guide to some of the most commonly seen strings of initials, and what they signify.
RIA (Registered Investment Adviser) - This is an advisory firm that has registered with the Securities and Exchange Commission or state securities regulators. The investment adviser representatives who work at these firms may or may not have one of the specialized credentials listed below. Unlike brokers, who generally are paid a commission on the securities they sell, registered investment advisers typically charge a flat rate or asset-based fee and are bound by a fiduciary duty, meaning they must put clients' interests first when giving advice. Brokers are required only to ensure that their investment recommendations are suitable for the client, based on factors such as age and risk tolerance.
While some brokers are CFAs, the designation is more likely to be held by advisers who provide wealth-management services to high net-worth clients, as they typically have complicated portfolios in need of this kind of expertise.
Tom Robinson, managing director of education at the CFA Institute, says the issuing body recommends, but doesn't require, that advisers spend 20 hours a year on continuing education. CFAs must annually attest that they have adhered to a code of ethics that includes putting clients' interests first.
Investment advisers, brokers and insurance agents may hold this designation, but it requires them to adhere to a fiduciary standard when providing financial-planning services.
In addition to the required courses, exam and work experience, CFPs must submit to a background check and renew their certification every two years, which requires 30 hours of continuing education. The requirements are "designed to give the public assurance of a competent and ethical financial planner," says Kevin Keller, chief executive of the Certified Financial Planner Board of Standards Inc.
ChFC (Chartered Financial Consultant) - Similar to a CFP, a ChFC has training in overall financial planning.
If an investor is looking for "someone who understands the basics of how to construct a financial plan, either of those marks would represent someone with that basic knowledge," says Keith Hickerson, senior strategy consultant at the American College, which confers the ChFC designation and provides education for the CFP.
Financial pros seeking a ChFC complete the same course work as required for the CFP, plus two electives in topics like executive compensation or macroeconomics. They also must pass 18 hours of exams. Brokers and advisers can hold this credential.
CLU (Chartered Life Underwriter) - This is an insurance specialist educated in topics such as risk management and estate planning. The eight college-level courses required to earn this designation encompass subjects such as life-insurance law.
A CLU may be a financial adviser or an insurance salesperson. This credential, which also is conferred by the American College, requires the passage of 16 hours of exams and has the same work experience and continuing-education requirements as the ChFC. The ethical standards also are the same—and they don't require the holder to maintain a fiduciary relationship with clients.
CPA/PFS (Certified Public Accountant/ Personal Financial Specialist) - This is an accountant trained in the nontax parts of financial planning, such as investing.
He or she must first earn the CPA license, which generally requires 150 hours of education and passage of a 14-hour exam, before earning a PFS credential. "When you are working with a PFS, you know they are a CPA first," says Andrea Millar, senior technical manager for the American Institute of CPAs personal financial-planning division.
Before hiring any financial adviser, investors should do their homework. The groups that grant these credentials have websites where investors can verify whether an adviser using its marks is in good standing.
Source: Caitlin Nish, Wall Street Journal
The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.
The Jacksonville Business Journal has ranked D2 Capital Management in
the top 25 of Certified Financial Planners in Jacksonville
D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association
D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association
No comments:
Post a Comment