As you begin a search for a financial professional, you will come across many different types of certifications. Each certification tells a story about the level of expertise and dedication an individual advisor has in different fields of finance. While it can be confusing, it is crucial to have an understanding what an advisor specializes in before seeking their services. The best advisor for you will be one that can help you across the different areas where you need financial assistance.
What are Financial Certifications?
When a financial advisor wants to specialize in an area of the financial industry and become an expert, they usually need to earn a certification. Getting these designations often requires hours of coursework, exams, and continuing education. Failure to meet any of these requirements results in their certification being taken away. A financial certification is an advisor’s way of letting you know that they have experience and are held to professional standards. Not all financial advisors are the same though, and understanding the main certifications will let you know which advisor is best for your unique situation.
The Best Finance Certifications to Look for in a Financial Advisor
With over 200 different designations, it can be a bit overwhelming to know exactly what to look for. While there are so many to choose from, there are a few key ones that are not only the most popular but are considered the best in terms of rigorous standards, oversight and expertise.
1. Certified Financial Planner (CFP)
CFP is the most common designation you find when searching for an advisor. This certification is an expertise for professionals in financial planning, taxes, insurance, estate planning, and retirement. The certification is overseen by the Certified Financial Planner Board of Standards. Designation is determined by successfully compleInvestment Adviser Association.Investment Adviser Association.ting the board’s exam and continued ongoing education of at least 30 hours every two years.
To sit for the exam, individuals must have a Bachelor’s degree and complete a course approved by the board. The course if often waived if the person holds another designation, such as a CPA, CFA or a PhD in business or economics. Candidates also must have at least three years (or 6,000 hours) of full-time professional experience.
Why Use a CFP?
CFP’s are best for those looking for holistic financial planning. If you are looking for than just investment management, but need help with retirement, taxes, etc. a CFP is your best bet.
2. Certified Public Accountant (CPA)
The Certified Public Accountant designation is to ensure professional standards for accountants. The certificate is given by the American Institute of Certified Public Accountants to those who pass the Uniform CPA Examination. Individuals who hold a CPA usually are in public or corporate accounting, or other executive positions like chief financial officer.
Becoming certified as a CPA is very difficult, with only a 50% pass rate. To become a certified accountant, individuals must have a bachelor’s degree in business administration, finance or accounting and complete an additional 150 hours of education regarding accounting standards and practices. They must also have two or more years of public accounting experience and pass the exam. Like the CFP, those with a CPA must also continue to take courses to keep their certification.
Why Use a CPA?
CPAs are best used for tax issues. If your main financial situation revolves around tax help, and nothing much else, like retirement, then a CPA may be your best bet.
3. Chartered Financial Analyst (CFA)
The Chartered Financial Analyst designation is considered one of the hardest certificates for those in the financial sector and is also the gold standard for those who work in investing or manage portfolios. It’s globally recognized and is run by the CFA Institute. There are three levels of exams that cover everything from accounting, ethics, economics, security analysis, and money management. In 2019 the pass rate for levels 1 and 2 were at 40%, while level 3 had a pass rate of 56%.
Before sitting for the exam, the candidate must have four years of professional work experience, bachelor’s degree, or a combination of the two totaling four years. If the person can pass all three levels in sequential order, they must become a member of the CFA Institute and abide by the institutes code of ethics. While the exams can be taken as many times as possible, candidates usually need to study at least 300 hours for each test, which means many do not continue after failing to pass one level.
Why Use a CFA?
Generally you won’t find someone just registered as a CFA working with individual clients. CFAs work for big corporations. If they do work with individuals, they will usually also have a CFP certification. A CFA underscores their strong investment analytical skills.
4. Chartered Financial Consultant (ChFC)
Advisors with the Chartered Financial Consultant designation work with individuals on retirement savings and budget planning. It’s a designation that is granted by the American College and consists of individuals taking seven required courses and two electives. The topics covered include retirement and estate planning, insurance, investments and income tax.
While not compulsory, the college recommends that those who apply already have a degree related to business or finance. The candidate must also have a minimum of three years working in the industry and must maintain continuing education credits. While similar to the CPA, it differs in that it is a course and does not require candidates to pass one exam, but instead take a test after each course.
Why Use a ChFC?
The difference between a CFP and ChFC is small, and doesn’t affect how qualified they are to work with clients. If you see an advisor with either a CFP or ChFC, as long as they are a fiduciary and don’t have a history of disclosures, you should be in good hands.
5. Chartered Life Underwriter (CLU)
A CLU is geared toward insurance agents. A chartered life underwriter’s domains of expertise are primarily life insurance as they relate to estate planning and risk management. There is no exam one has to pass, but candidates have to take eight courses administered by the American College of Financial Planning in order to become one.
Why Use a CLU?
CLUs are great if you are looking for life insurance and do not know how to navigate the complexity involved with buying a life insurance plan.
6. Chartered Investment Counselor (CIC)
A Chartered Investment Counselor recognizes experts with significant experience as investment and portfolio managers. It is a designation that must be applied to and is approved by the Investment Adviser Association. Candidates must work for an Investment Adviser Association member firm, adhere to a code of conduct and submit references. They are held to the standards set under the Investment Act of 1940, meaning they have a legal obligation to work for the best interest of the clients. They also must run large accounts and mutual funds and already have a CFA.
Why Use a CIC?
A CIC will be best for those looking for pure investment advice. A CIC won’t be able to help you with things like financial plans, estate planning or taxes.
7. Certified Private Wealth Advisor (CPWA)
A certified private wealth advisor is for professionals whose clients include high-net worth clients. They often deal with individuals who have a net worth of more than $5 million. This certification means advisors can help high earners with things like tax, growing their assets and wealth succession.
The designation is offered by the Investments and Wealth Institute and is obtained by taking a six-month course either through the institute, via the University of Chicago Booth School of Business or the Yale School of Management or an investment firm. To qualify, a candidate must have a bachelor’s degree or another certificate like the CFA, CFP or CPA and five years of experience in the field.
Why Use a CPWA?
A CPWA is going to best serve wealth individuals with a net worth over $5 million. It doesn’t mean high net worth individuals should only work with CPWAs, but they are a good option.
8. Certified Estate Planner (CEP)
This certification is designated by the National Institute of Certified Estate Planners and gives financial planners the knowledge to help people develop and plan their estate. It is a proctored exam. While there is a self-study manual of 770 pages, candidates can also opt for in-person study, which usually adds an additional 16-hours of class time.
To qualify, a professional must have a valid license in the financial, legal or tax profession or have special permission to enroll. Once the exam is passed, they must complete eight hours of continuing education every two years and follow NICEP’s code of ethics to remain certified.
Why Use a CEP?
A CEP is great if your main area of concern is estate planning. This can be useful for people with a high net worth and are unsure of how to pass down their estate.
9. Certified Personal Finance Counselor (CPFC)
This designation is for professionals who work with clients on a one-on-one basis. The certification is run by Fincert and ensures that the candidate is trained in counseling skills and personal finance management. It was designed to fulfill the requirement of the Uniform Debt Management Services Act. The certificate is issued after passing a test after the completion of a self-study course through Fincert which covers things like communication, money management and consumer protection. To qualify a candidate must have at least 6-months of relevant experience.
Why Use a CPFC?
A CPFC is best for people who are looking for ways to better manage their money, rather than planning complicated financial matters.
10. Financial Risk Manager (FRM)
A financial risk manager is someone who assess potential liabilities to the assets, capacity or success of a company. They work in financial services, banking, marketing or other services and often specialize in credit and market risk. Someone with an FRM designation is required to also be accredited with the Global Association of Risk Professionals. To get an FRM certificate, candidates need to pass a two-part exam and have two years of experience. There is also an optional 40 hours of coursework every two years. The exam itself is not easy, with only an average 50% pass rate.
Why Use a FRM?
Like a CFA, most advisors certified with FRM will most likely not just work with individual clients. FRMs will usually work for companies and corporations. If an advisor does work with individuals, they will likely have other credentials.
11. Retirement Manager Advisor (RMA)
Another certification offered by the Investments and Wealth Institute, a retirement manager advisor helps clients with retirement planning. To get the certificate, a candidate must complete an online course, an in-person capstone and pass an exam. In addition, they must have at least three years of experience or another designation like a CFA, CPA or CIMA. It’s one of the shortest designations to get, as it only takes nine weeks of two-three hours per week and two days of in person instruction to complete.
Why Use a RMA?
Retirement Manager Advisors specialize in retirement planning, so if that is your primary concern then an RMA will be great for you. RMAs will usually also have a CFP. Choosing a CFP with an RMA may be more advantageous than choosing a CFP without one if you are worried about your retirement.
12. Certified Retirement Counselor (CRC)
There are several certificates for retirement planners. The CRC is overseen by the International Foundation for Retirement Education, a non-profit organization that advocates for high standards and ethics. Getting the designation consists of a certification exam, adhering to InFRE’s code of ethics, and re-registering every year. Holders of the certificate must also complete at least 15 hours of ongoing education per year. To sit for the exam, a candidate must pass a background check and hold a bachelor’s degree and have two years of relevant experience, or a high school diploma with five years of experience.
Why Use a CRC?
A CRC is similar to an RMA and will be useful for those whose primary concern is retirement planning. RMAs usually also need to have a CFP or CPA, which may make them a little bit more qualified than those who just hold a CRC.
Why Should Financial Advisors Have Finance Certifications?
Although financial advisors are not required to have a certification, it signals that they adhere to specific ethical standards. If an advisor doesn’t have a certification, it can mean that they don’t have the necessary experience or education requirements. If they are not certified or registered with the SEC or FINRA, it could mean that they are not legally obligated to put your best interests first and are limited in some of the things they can do for you.
Who Regulates Finance Certifications?
Financial certifications are overseen by independent bodies who administer the tests and determine the certificate standards. There is no one body that oversees these certifications, although FINRA does keep track of the designations available. Most designations are overseen by private or non-profit institutions, so it’s important to make sure you know the qualifications of the certificates your financial planner holds.