Understanding Your Financial Advisor’s Credentials

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When searching for a financial advisor, you’ll come across enough acronyms to fill a phone book. Financial advice can be a very broad topic, but most advisors narrow down their specialties to fill specific voids. 

Think of it like medicine – cardiologists, neurologists, and pediatricians are all doctors, but you wouldn’t visit a cardiologist if your kid begins running a fever. Financial advisors function similarly; some specialize in taxes, others in wealth management, and so on.

Finding an advisor who fits your needs could be a tedious task if you don’t understand the different specialties attached to each designation. The credentials of your advisor will tell you a lot about what you can expect from their service. It’s no guarantee you’ll find the perfect advisor on the first phone call, but understanding advisors’ credentials will help narrow down your search and save valuable time.

Certified Financial Planner™ (CFP®)

CFPs are well-rounded advisors who often help individual and family clients meet their financial goals. CERTIFIED FINANCIAL PLANNERS™ hold one of the most stringent qualifications for financial planning knowledge and meet the highest standards in the industry.

CFPs® assist with retirement planning, asset allocation, wealth management, and tax and estate planning. If finance was medicine, a CFP® would be the family practitioner who you see for physicals, flu shots, and non-emergency illnesses. (Last medical analogy, promise.)

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CFPs are fiduciaries (as are all advisors on this list), meaning they’re held to an ethical standard that non-fiduciaries don’t have to meet. In addition to formal education requirements, CFPs must log thousands of professional experience hours and pass a multi-part exam that takes several hours to complete. CFP designations are only granted by the CFP Board, which requires a continuing commitment to ethics. CFPs can only make recommendations in the best interest of their clients.

 What Is a Fiduciary Financial Advisor?

Chartered Financial Analyst (CFA)

CFAs have strict education and experience requirements like CFPs®. CFA charters are distributed by the CFA Institute, a non-profit with offices all over the globe. CFAs must renew their credentials each year (and pay an annual fee for the privilege).

Investment management is the specialty of the CFA. Most CFAs don’t necessarily work with individuals or families, but with business clients managing large corporate portfolios. Unlike a CFP®, the CFA does not follow a holistic approach. Investing and allocating large sums of capital are what CFAs do best and they frequently work up the ladder at big corporations.

CPA vs CFA vs ChFC

Due to their skill set in managing huge portfolios, the CFA is a coveted credential. High-net-worth clients with large nest eggs may also utilize the services of a CFA, but individual clients looking for help with 401(k)s and insurance usually seek a CFP®.

Personal Financial Specialist (PFS)

Here’s a less common credential that’s an offshoot of the Certified Public Accountant (CPA) designation. CPAs go through a similar education – experience – exam process as CFPs® and CFAs and the credential is issued by the American Institute of Certified Public Accountants (AICPA). To achieve the PFS designation, candidates must complete the requirements to become a CPA and maintain standing with the AICPA.

PFS is similar to the areas covered by Certified Financial Planners™ (CFPs®), but The CFP® exam qualifies as one of the prerequisite exams needed for the completion of the program. The PFS certification allows CPAs to branch out into the personal finance industry while still maintaining their accountant status.

Retirement Management Advisor (RMA)

Another lesser-known certification, the RMA focuses on individual retirement planning through specialization in several different areas. 

RMAs specialize in retirement outcomes, as opposed to expectations. The focus here is more on income-producing plans instead of wealth accumulation plans. RMAs can help retirees smoothly withdraw funds from their nest egg while managing taxes and budgetary logistics. Lifecycle finance is a core component of RMA certification so advisors with this designation work well with clients approaching retirement.

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Retirement Income Certified Professional (RICP)

Like the RMA, this designation is intended to be an extended credential for an already licensed CFP® or CFA. But the RICP program is administered by The American College and has a mandatory three-part exam that any prospective candidate must complete. 

In addition, three years of experience are required to earn an RICP (although a related degree from an accredited university can count as a year of experience).

RICPs focus exclusively on developing plans to help retirees efficiently spend their nest eggs. Managing income for retirees is a lot of multi-tasking; RICPs are well-versed in different types of investments, tax planning, and how to best utilize government programs like Social Security and Medicare. RICPs also have expertise in areas like insurance and healthcare.

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Certified Retirement Counselor (CRC)

The CRC designation is the retirement specialty offered by the International Foundation for Retirement Education (InFRE). Unlike the previous credentials we’ve discussed, candidates for the CRC don’t need any specific education requirements other than a bachelor’s degree. Two years of professional experience are required and candidates must pass a 200-question exam. Plus, CRC designation holders must perform 15 hours of continuing education each year, including two hours devoted specifically to ethics.

The word ‘counselor’ is key in this particular designation because many behavioral finance concepts are featured in the exam. CRCs are expected to have a more holistic approach to retirement planning. The focus here isn’t just on income distribution or asset management, but also on the feelings and mindset of the retiree. CRCs are expert communicators capable of understanding clients from different generations and backgrounds.

Certified Financial Planners™ at Advanced Retirement Strategies

Working with a Certified Financial Planner™ is an excellent investment of your time and money. With the high standards for CFP® certification, you’ll know you’re getting the expertise and knowledge of a highly-trained and educated professional who will always act in your best interests and with the loftiest ethical standards. 

The team of retirement planners and investment advisors at Advanced Retirement Strategies in Bountiful, Utah includes two Certified Financial Planners™ who specialize in helping diligent savers with $250,000 or more of investment and retirement assets (not counting your primary residence) prepare for and then transition into retirement. 

If you’re looking for a CFP® to help you live the retirement you have dreamed of, contact us today.

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