From CPAs to CFPs, financial planners are varied based on expertise.
Displaying the complexity of the investment possibilities, there are many different kinds of financial planners available to the affluent investor.
Financial planning can be done by any number of individuals who do not have financial planning certification. Attorneys, bankers, insurance agents and mutual fund representatives are all capable of providing financial planning services, but they are not certified, registered or licensed for that specific purpose.
Acronym designations are a big part of financial planning, and here are some of the designations that indicate a certain degree of study and testing.
A Certified Financial Planner has done a lot of work to get where he or she is today. A CFP is required to take courses in estate planning, insurance, investing, retirement and taxes, as well as a 10-hour, 285-question exam. They must pass the CFP’s ethical requirements, and serve a two-year apprenticeship under an established CFP.
The advantage of a CFP is that they can answer almost any question, up to a point. They are like a general practicioner in medicine. They have as much or more general knowledge than any other kind of financial planner. The CFP title is considered the most prestigious title among financial planners.
As titles go, Certified Public Accountant is about as specific a designation as possible. CPAs are accountants first and foremost, and have taken the CPA exam that covers accounting, auditing, bookkeeping, ethics and taxes. While all CPAs are accountants, not all accountants are CPAs. It is a matter of the level of testing.
CPAs know accounting but do not provide knowledge beyond accounting. If they do, they get other certifications. However, a CPA can tell you how to make the correct decision with your investments as it relates to tax penalties and liabilities.
A CPA who wants to expand services into personal finance can become a Personal Finance Specialist, who must complete 60 hours of continuing professional education every three years in order to display the PFS designation. A PFS is a CPA who has been trained to help investors plan all aspects of their wealth. In specific terms, a PFS studies retirement planning, estate planning, life insurance and investment strategies.
A Registered Investment Advisor (RIA) is a designation from the Securities and Exchange Commission for a person or company that provides advice and recommendations on securities. An RIA has a fiduciary relationship with the investor, which means the RIA has an obligation to provide proper investment advice that always serves the client’s best interests.
A Chartered Financial Analyst is an investment expert, who undergoes three years of classwork, an extensive and exhaustive exam, and four years of work in the field before earning the CFA designation. In many cases, CFAs end up working for financial institutions, or start their own companies. For most personal investing tasks, a CFA is beyond the scope of an individual’s needs.
The most popular choice for wealthy investors based on Spectrem research is the Full Service Broker, who is indeed a stock broker but offers research and advice on retirement planning and tax information. If an investor’s needs concentrate on the stock market, a Full Service Broker is a good match. If an investor wants more of an all-encompassing financial plan, the other options above might be better suited to their needs.
There are also designations for advisors who work in specific investment industries, such as life insurance or estate planning. A Chartered Life Underwriter is an expert in life insurance products, and takes many of the same courses a CFP does, but does not take the board exam.
A Chartered Financial Consultant also handles life insurance and estate planning, but concentrates on general financial planning rather than specific investment plans. A ChFC also is not board certified.
There are also specialists in employee benefit plans, called Certified Employee Benefit Specialists, who are required to pass courses in insurance, retirement, pension, and regulatory issues related to benefit plans. A CEBS is a good resource for questions about your employee benefits plan, but is not likely to be able to handle your entire investment portfolio needs.
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.