Financial Planning

Why Those Impressive Financial Credentials Aren't Always So Impressive

Financial advisers often come with a string of letters after their names, but while some should give you confidence in their training, others could just mean they attended a one-day seminar.

If you’ve been on the hunt for a financial professional who can give you good advice, you may have been impressed — or perhaps just confused — by all those letters you see attached to different people’s names. Do those impressive-sounding credentials really carry any weight, or are they as worthless as the paper they are written on?

Just a few of the designations you might encounter include CFP®, RICP®, BCM, CAC, CHFC, CLU, WMS, CFS and, well, the list goes on and on.

When you see all those certifications, you can’t help but think, “Those are some pretty impressive credentials. These people must know what they’re talking about.”

Maybe so.

And maybe not.

A license vs. a designation vs. a certification

To begin with, let’s distinguish licenses from designations. Financial professionals obtain a license after they pass the test deemed necessary by the regulating authority, such as the state, FINRA or the SEC. A designation or certification is an additional credential that can be gained by those who already hold a license.

Some certifications require substantial effort and a comprehensive education. But plenty of others can be obtained by attending a daylong seminar.

We need to raise the bar on standards

Frankly, in my opinion, one of the significant faults in the financial advising industry is that the barriers of entry are low. Someone with limited education or experience can pick up a license of some sort after passing a test, hang out a sign and — voila! — he or she is advising people on their life’s savings.

So am I saying that, in a time when many people are calling for less regulation, I would like to see more of it in my profession?

Yes, that’s exactly what I’m saying.

And I think the profession may be moving in that direction. As far as I’m concerned, that’s a good thing.

Think of it this way: If you go to a doctor’s office, you want to consult about your health with someone who has Dr. in front of their name or M.D. after it. You’d be uncomfortable if you learned you had entrusted your physical health to a person whose training amounted to a couple of weekends spent in seminars.

Yet people do that often with their financial health, which I would argue is equally as important as your physical health. I’ve seen it time and time again: When someone loses their financial health, their physical health is often quick to follow suit.

Most other professions require some sort of formal education even beyond the professional licenses the practitioners must hold. Doctors, lawyers and CPAs all must have specific degrees relating to their business practices in addition to taking difficult board exams, for example.

But in the world of financial professionals, you could drop out of high school, pass the required test, and get a securities license, which enables you to call yourself a “financial adviser” and go to work.

In my opinion, it simply shouldn’t be that easy — too much is at stake.

Certified Financial Planners have extensive training

What kind of education, training, knowledge and experience do you expect your financial adviser to have? I personally hold the CFP® designation.

Among the requirements to become a CFP®: a bachelor’s degree from an accredited college; a 10-hour board exam to demonstrate your financial-planning knowledge; 6,000 hours of financial planning experience; and a thorough background investigation that would review criminal history, civil complaints, job terminations, bankruptcies, customer complaints and other activities that might be of concern.

In my opinion the CFP® certification process shows that the right types of requirements and training for the profession already exist — it’s just a matter of requiring all who want to call themselves financial professionals to obtain those credentials.

I think we’re headed there, and it’s long overdue. More and more individuals are walking into my office seeking exactly that. Do yourself a favor and take the time to understand the letters after your financial professional’s name. You may be pleasantly surprised, or you may just find you don’t have what you had hoped for.

What do your provider’s credentials stand for?

If you want to look designations up for yourself, the Financial Industry Regulatory Authority (FINRA) has a website for you to do just that: http://www.finra.org/investors/professional-designations.

Ronnie Blair contributed to this article.

About the Author

Casey B. Weade, CFP®

President, Howard Bailey Financial Inc.

Casey B. Weade is president of Howard Bailey Financial Inc. in Indiana and author of the book "The Purpose-Based Retirement." Weade, a financial professional, hosts The Purpose-Based Retirement radio and TV shows in the Fort Wayne area. He earned the prestigious Certified Financial Planner™ (CFP®) certification in addition to being a Retirement Income Certified Professional® (RICP®). He is also an Investment Adviser Representative (IAR), as well as life, accident and health insurance licensed and Long-Term Care Certified.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
9 Great Growth ETFs for 2022 and Beyond
ETFs

9 Great Growth ETFs for 2022 and Beyond

These growth ETFs offer exposure to higher-risk, higher-reward stocks while lessening the risk of a single stock torpedoing your returns.
January 18, 2022
The 10 Best Closed-End Funds (CEFs) for 2022
CEFs

The 10 Best Closed-End Funds (CEFs) for 2022

These high-yielding CEFs won't just significantly boost your portfolio income. They'll also allow you to buy their underlying stocks and bonds at a di…
January 12, 2022

Recommended

The Right Dividend Stock Fund for You
Becoming an Investor

The Right Dividend Stock Fund for You

Dividend stock strategies come in many different flavors. Here's what to look for.
January 26, 2022
5 Stocks to Own for Decades
Becoming an Investor

5 Stocks to Own for Decades

Companies that can achieve spectacular business success are innovators with big ideas and mammoth potential markets.
January 26, 2022
What to Do When a Family Member Needs a Guardian
estate planning

What to Do When a Family Member Needs a Guardian

Seeking a guardianship for a loved one is a decision that shouldn't be taken lightly. Here's how the process works.
January 25, 2022
The “Gray Resignation” with Liz Windisch
Making Your Money Last

The “Gray Resignation” with Liz Windisch

Pandemic pressures (and high stock and real estate values) are leading many to try to move up retirement. Plus, tax-filing season gets under way.
January 25, 2022