The financial industry is famous for alphabet soup! Due to the numerous designations and certifications advisors can obtain, there’s no shortage of confusion surrounding the various letters behind planners’ names. We advise our clients to research the qualification and requirements in order to make a more informed opinion. In this week’s blog, we will discuss a few of the main designations and the websites available to verify an advisor’s information.
- CFP® (Certified Financial Planner): According to The Certified Financial Planner Board of Standards (CFP Board), candidates are required to meet what it calls “the 4 Es”:
- Education– The education component must be satisfied through one of the CFP Board’s several approved methods. The candidates must demonstrate the ability to create, deliver and monitor a comprehensive financial plan that covers investments, insurance, estate planning, retirement, and tax planning. CFP® professionals are also required to complete 30 hours of continuing education every 2 years.
- Examination – Examines a planner’s ability to apply financial planning knowledge.
- Experience – At least 3 years of full-time, relevant personal financial planning experience is required.
- Ethics – CFP® professionals must adhere to the high standard of ethics, code of conduct and practice standards set forth by the CFP Board.
- CFA (Chartered Financial Analyst): The CFA charter is a qualification for finance and investment professionals in the fields of investment management and financial analysis of stocks, bonds and their derivative assets. The certification is awarded only to those who pass 3 levels of exams. The CFA institute estimates that successful candidates take 3 ½ years on average to complete the exams and obtain the certifications.
- CPA (Certified Public Accountant): Most people think that a CPA only completes tax returns, but the job description can be much more extensive and includes tax preparation, financial statement preparation, and auditing. All accountants who use the CPA designation must pass the Uniform Certified Public Accountants Exam. The exam has 4 parts including financial accounting and reporting, auditing, regulations, and business environment and concepts. Each state board of accountancy determines the prerequisites needed to take the exam as well as those in place for continuing education requirements. For additional information regarding the CPA designation, please visit The American Institute of CPAs®.
- ChFC® (Chartered Financial Consultant): The ChFC® designation focuses on comprehensive financial planning and currently requires more courses than any other financial designation (9 courses). The curriculum covers education and training in all aspects of financial planning, income taxation, investments, estate planning, and retirement planning. Candidates must pass 9 course exams, have 3 years of relevant business experience, and adhere to The American College’s Code of Ethics. Once the designation is earned, 30 hours of continuing education are required every 2 years.
- EA (Enrolled Agent): EAs are federally authorized tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. They are required to demonstrate their competence in all areas of taxation, representation and ethics to the IRS. To become an Enrolled Agent, candidates must pass a comprehensive exam that covers all areas of the tax code and complete a rigorous background check by the IRS. In order to maintain their status, EAs must complete 72 hours of continuing education every 3 years and they must abide not only by the Department of Treasury’s provisions but also the code of ethics and rules of professional conduct set forth by the National Association of Enrolled Agents. Due to the complexity and ever-changing nature of the tax code, an EA’s expertise in the field of taxation is a valuable resource to taxpayers needing representation in their communications with the IRS.
When meeting with professionals in the financial industry, you can verify their licensing and credentials through the following resources: