Financial Advisor ABCs

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Question: I am looking for a financial advisor and have noticed they have a variety of designations after their names, such as CFP, ChFC, CPA, EA, MBA, and CIMA.  What do they all mean?

Answer: When selecting a financial advisor, you should be looking for competence and integrity.  Designations and degrees are helpful in that they show the advisor has made a commitment to achieve at least a minimum level of competence.  Some designations and degrees are more meaningful than others, and they can give you a place to start your search.

Like in any profession, you will find a variety of players in the financial advisor lineup.  For example, in the medical profession you have MD, DPM, DC, DO, etc.  They may all be doctors, but their talents differ.  And within each designation, there are areas of specialization.  For example, a medical doctor may specialize in radiology.  A podiatrist may specialize in foot surgery.  A chiropractor may only do back alignments.

Unfortunately, the financial advisor field is relatively new and designations are not as clearly defined as they are in the medical profession.  It’s no wonder that consumers are understandably confused. 

Financial advisors, like other professionals, should meet some basic prerequisites.  You should expect your advisor to have: (1) an appropriate education, (2) a certification from a professional agency, board, foundation, or institute; (3) standards for continuing education requirements; (4) the appropriate licenses, and (5) a code of ethics. 

I will list some of the common designations for financial advisors.  You can find a more complete list on the FINRA investor website here.

CFA

Chartered Financial Analyst.  Issued by the CFA Institute.  Experience in the financial field and a special course of financial education are pre-requisites.

CFP® Certified Financial Planner®

Certified by the Certified Financial Planner Board of Standards, Inc. in Denver, Colorado.  Requirements include education, background in financial services, testing, continuing education and adherence to a strict code of ethics.

ChFC Chartered Financial Consultant

Designation awarded by the American College in Bryn Mawr, Pennsylvania.  Requires completion of an extensive educational program followed by continuing education and adherence to a strict code of ethics.

CIMA  Certified Investment Management Analyst

Professional credential awarded by the Investment Management Consultants Association (IMCA).  This credential requires completion of an extensive educational program followed by continuing education and adherence to a strict code of ethics.

MBA

Master of Business Administration.  This masters degree is awarded after extensive study in the areas of business, finance, and economics.  Generally MBA students will specialize in one of these fields.

PFS

Personal Financial Specialist.  This designation is available to Certified Public Accountants who complete financial planning specific education. 

RR

Registered Representative.  This is not a designation, but an acronym.  A registered representative is licensed to sell securities and works for a broker-dealer firm.

RIA

Registered Investment Advisor.  RIA is another acronym, not a designation.  The Securities and Exchange Commission (SEC), which administers and enforces the Registered Investment Advisors Act of 1940, does not permit the use of the letters RIA after a registrants name because the SEC staff believes it may be misleading.  They feel it might suggest the advisor has achieved a degree, has been licensed in a professional position that requires qualification, or has been approved or endorsed by the Commission.

Kenneth B. Petersen CFP®, EA, MBA, AIFA® is an investment advisor and Principal of Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey.   He welcomes questions that you may have concerning investing, taxes, retirement, or estate planning.  Send your questions to: Ken Petersen, 2340 Garden Road Suite 202, Monterey, CA  93940 or email them to ken@montereypw.com.