Decoding Financial Advisor Designations

If you’ve never worked with a financial advisor before and are in the market for one, there are plenty to choose from. You’ve probably noticed that many advisors have extra letters after their names. These are professional designations and provide a basic idea of an advisor’s education, training, and areas of expertise.

Hiring a financial planner with a professional designation can be beneficial for several reasons. Here are some key points to consider:

1. Expertise and knowledge: Designations like CERTIFIED FINANCIAL PLANNER™ (CFP®), Chartered Financial Analyst (CFA®), or Personal Financial Specialist (PFS) indicate that the planner has undergone rigorous training and has demonstrated a high level of expertise in financial planning.
2. Ethical standards: Many designations require adherence to strict ethical guidelines, ensuring that the planner acts in the best interest of their clients. For example, the Certified Financial Planner Board of Standards (CFP Board) requires CFP® professionals to uphold the principles of integrity, objectivity, competence, fairness, and confidentiality.
3. Commitment to continuing education: Designations often require ongoing education to maintain the certification. This ensures the planner stays current with the latest financial strategies, regulations, and market conditions.
4. Credibility and trust: A designation can enhance the planner’s credibility and may provide clients with greater confidence in their abilities and advice.
5. Specialized knowledge: Some designations focus on specific areas of financial planning, such as retirement planning, tax planning, or investment management. Depending on a client’s needs, a planner with a specialized designation might be more suitable.
6. Network and resources: Designation holders often have access to a network of professionals and resources, which can be beneficial in providing comprehensive financial advice and solutions.

While a professional designation is a positive indicator, it’s also important to consider other factors such as experience, client testimonials, and personal compatibility. It’s wise to conduct thorough research, and possibly interview several planners, to find the best fit for your financial needs and goals.

While we can’t cover all the designations, we’ll explore three common professional designations – CFP®, CFA, and CPA.

CERTIFIED FINANCIAL PLANNER™ (CFP®)

The CERTIFIED FINANCIAL PLANNER™ (CFP®) designation is a formal recognition of expertise in financial planning, taxes, insurance, estate planning, and retirement savings. In short, someone with the CFP® designation knows a bit of everything about financial planning.

CFP®s work with clients to form comprehensive financial plans, helping them reach financial goals. CFP® professionals are also held to a fiduciary standard, which means they are legally obligated to act in a client’s best interest when providing advice. In addition, three duties must be met by an advisor with a fiduciary duty. These are a duty of loyalty, a duty of care, and a duty to follow client instructions.¹

The CFP Board oversees the CFP® certification process. Many consider CFP® standards among the toughest in the financial services industry. To become a CFP®, applicants must meet education, examination, experience, and ethics criteria, including 6,000 hours of professional financial planning experience (or 4,000 hours of apprenticeship experience).

Certified Public Accountant (CPA)

Most people know that CPAs prepare tax returns. And while they certainly do that, taxes aren’t necessarily their only focus. CPAs can also work with companies to provide auditing services, forensic accounting, business consulting, and information technology services.

CPAs must undergo a series of education, examination, and experience requirements to receive their certification. These requirements vary from state to state, but all CPAs must pass the Uniform CPA Exam administered by the American Institute of Certified Public Accountants (AICPA). This examination takes about 16 hours to complete.

CPAs who want to expand their services can also earn a Personal Financial Specialist (PFS) certification. PFS applicants study estate planning, retirement planning, investing, insurance, and other areas of personal financial planning. Upon earning the PFS designation, CPAs can work with clients in the areas of investing, retirement planning, estate planning, and wealth management.

Chartered Financial Analyst (CFA®)

CFA stands for chartered financial analyst, a designation awarded by the CFA Institute to candidates with proven competence in investment analysis and wealth management. These professionals excel in the competitive world of financial analysis, research, portfolio management, investment consulting, risk analysis, and risk management.

Earning a CFA® designation is widely considered the apex for professional development in investment management. Most professionals who hold the CFA® designation work for institutions managing million-dollar-plus portfolios, or in areas like asset management, private wealth management, and investment banking.

The CFA® designation exams may require 900 hours or more of study in 10 topic areas. The exams assess the person’s knowledge of economics, personal and professional ethical situations, money management scenarios, and other money management and finance topics. According to the CFA Institute, the pass rate for each section of the three exams is less than 40%.

The bottom line

Understanding some basic designations can help you find the right type of financial advisor for your needs. While you can get a basic idea of an advisor’s professional qualifications through their designations, that alone can’t guarantee their quality of service. You’ll still need to do some homework and set up a meeting to see if they’re a good fit.

You may also want to double-check an advisor’s credentials with the Financial Industry Regulatory Authority (FINRA) website. FINRA is a government-authorized organization that helps protect investors, ensure market integrity, and oversee broker-dealers.

For nearly 40 years, Mercer Advisors has been helping families amplify and simplify their financial lives. How? By integrating expertise in financial planning, investment management, tax, estate, insurance, and more, all managed by a single team. Ready to explore if Mercer Advisors is a good fit for you? Let’s talk.

¹Certified Financial Planner Board of Standards. “Code of Ethics and Standards of Conduct.”

Mercer Advisors Inc. is a parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.

All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.