In professions like medicine, law and accounting, you will commonly see professional credentials — MD, JD, CPA — after a practitioner’s name. It’s no different with financial advisers, who use certifications like CFP, PFS and so on.
These certifications should signal that advisers are qualified to provide financial advice. Instead, rapid growth has caused a blizzard of designations in the marketplace, leaving investors confused when looking for a financial adviser.
Choosing a financial adviser is a major decision, like choosing a physician. Just like your doctor, an adviser helps with life’s most important moments, like starting a family, buying a home and retirement. However, all financial designations are not the same. Some require substantial education and experience, while others involve only a few hours spent over a day or two. Does that make someone an expert in that area? The credentials behind their names should mean something.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Financial Industry Regulatory Authority (FINRA), which oversees broker-dealers in the U.S., maintains a list of financial designations on its website. FINRA’s Professional Designations Database includes 170 designations that were added during or prior to 2016. As of November 2023, the number of financial designations in FINRA’s database has jumped to 245. That’s a nearly 45% increase in just seven years.
Weak requirements dilute credible ones
In theory, this should be great for the financial advice ecosystem; competition should increase the quality of credentialing programs available to financial advisers and thus the quality of financial advice for consumers. Instead, we’ve seen an influx of credentials with weak ethical and competency requirements that threaten to dilute the credible ones.
We anticipate this growth in credentials to continue, deepening the confusion. This is why CFP Board invests heavily to maintain and modernize the ethical standards and competency requirements for CFP® certification.
More than half of the designations listed on the FINRA website use terms like “certified” or “accredited” in the title, but just a small fraction of those designations requires candidates to meet the rigorous standards that those terms imply.
What you can do
The proliferation of designations makes it harder than ever to determine which are legitimate. So, what can you do when selecting a financial adviser?
You can start by ruling out designations offered by credentialing organizations that exhibit the following red flags:
- The designation lacks a rigorous exam requirement or lacks a requirement to pass any exams
- The credentialing organization requires little to no professional or educational experience to obtain the designation
- The credentialing organization does not require frequent renewal of the designation or continuing education
- The designation has a weak or nonexistent professional code of conduct
- The credentialing organization does not promote how it enforces professional conduct standards (such as certification suspensions or removal of certification for violators)
- The credentialing organization advertises how little time it takes to earn the designation
If your prospective adviser touts only designations with the aforementioned qualities, you should look for someone with stronger credentials. Common themes across reputable designations and licenses like CFP® certification, the PFS designation and the CPA license include:
- Extensive completed coursework toward both a college degree and the desired designation
- Satisfactory performance on a comprehensive and rigorous exam
- Hundreds to thousands of hours of educational and professional experience
- Continuing education and renewal requirements that ensure the adviser maintains a high level of competency as the profession grows and evolves
- Third-party accreditation from the ANSI National Accreditation Board or the National Commission for Certifying Agencies
- Commitment to upholding stringent standards of conduct in professional practice, including a commitment to act in the best interest of the client
- A transparent enforcement program that investigates and punishes misconduct and publicly sanctions those who do not meet standards
Be sure to confirm their good standing
Put simply, find advisers with strong certifications and verified qualifications to provide financial advice. Once you’ve found a suitable adviser with a credible designation, confirm their good standing with the credentialing organization. To check on any individual’s CFP Board disciplinary history and CFP® certification status, you can visit CFP.net/verify. You may find additional regulatory information through FINRA’s BrokerCheck and the SEC’s Investment Adviser Public Disclosure databases for individuals who are subject to FINRA or SEC oversight.
When selecting an adviser, make sure you understand their training and experience and that they are committed to act in your best interests. Remember, designations offered by credentialing programs that have significantly lower standards, such as lax exams, lower professional experience requirements or minimal conduct standards, should be approached with caution.
Whether you’re working with a CPA, PFS or CFP® professional, protect your financial future by taking the extra step to ensure that the letters in an adviser’s credentials deliver value.
Related Content
- Tempted to Make Rash Financial Decisions? Do This Instead
- A Virtual Financial Adviser Could Be the Right Fit for You
- Is Your Financial Adviser Doing a Good Job for You?
- Six Ways to Improve Your Financial Wellness
- Can I Hire a Financial Adviser to Manage My 401(k)?
-
2025 Virginia Tax Rebates Coming Soon? What to Know NowTax Rebates Given a historic 2025 gubernatorial race, tax policy will remain a key issue for Virginians in the months ahead.
-
What to Know Before Flying With Your PetFrom documentation and TSA screening to carrier rules and airport relief areas, here’s what to know before taking your pet on a flight.
-
Trump Tariffs and Taxes: Waiting to See What Happens Is Not a StrategyLike presidents, tariffs come and go. Policy changes also shift about every two years with the election cycle. If you're paralyzed by uncertainty, you could be missing opportunities to benefit your financial future.
-
Is a Family Office Right for You? The Multimillion-Dollar QuestionAs ultra-high-net-worth individuals increase in number, many are turning to family offices to manage their complex finances. Here's how family offices work, courtesy of a finance professional.
-
This Is How a Lot of Law School Students Are CheatingGrowing numbers of students are falsely claiming a learning disability to score more time to take tests. This has real-world consequences in which fellow students, law firms and their clients pay the price.
-
If You're Ignoring Private Markets, You're Missing Most of the ActionPrivate markets are becoming increasingly essential for all investors, not just institutions, and they are now more easily accessible thanks to innovative investment structures.
-
Three Ways Women Can Keep Caregiving From Draining Them FinanciallyMany women care for older relatives. While commendable, it could put their retirement at risk … unless they find a way to prioritize themselves.
-
I'm a Financial Professional: This Is the Roth Conversion Mistake Too Many People MakeConverting your traditional IRA to a Roth can be a fantastic tax-saving move, but you've got to be smart about two things: how much and when.
-
The Overlooked Generation: An Expert's Guide to How Gen X Can Finally Get AheadA perfect financial storm has been lashing this generation for years, but they still have time to get their retirement back on track with a few key moves.
-
Financial Advice and Retirement Confidence: What's Wealth Got to Do With It?This retirement researcher notes that retirement confidence increases the most for those with access to advice who have a lower total level of savings.
