Alphabet Soup: Sorting Through Financial Professionals’ Designations

One of the biggest lessons coming out of the recent bear market is that you need to find financial professionals upon whom you can rely. A number of factors can go into the process, such as the professional background and history of the individuals you are considering, referrals from others who have used them and your own comfort level from having a one-on-one discussion.

For many, a good starting point is to understand the credentials of the professionals you are considering. As you look at their business cards, letterhead or office nameplates, you are likely to see professional designations being used.

Financial advisors

There are several different certifications you may commonly see attached to financial advisors. These typically provide an indication that the professional you are considering has invested time and energy to increase his or her knowledge to a specific area. Here are some basic explanations of financial designations:

CFP® (Certified Financial Planner ™ professional); ChFC® (Chartered Financial Consultant)

To qualify for these designations, professionals must have at least three years of experience in financial planning and pass rigorous exams that typically require one-to-two years of study and ongoing education. The coursework provides these individuals with more in-depth knowledge about key financial planning topics that should better prepare them to develop beneficial solutions for their clients.

CLU® (Chartered Life Underwriter); CPCU® (Chartered Property Casualty Underwriter)

Both are professional designations for those who provide insurance products to individuals and companies. Again, they require a course of study and continuing education, often dealing with more complex topics related to the application of insurance coverage to meet individual financial planning needs.

RIA (Registered Investment Advisor)

These individuals must be registered with their states or the Securities and Exchange Commission (SEC) in order to provide investment advice and manage investments for others. They typically are held to a high standard of fiduciary responsibility by regulators.

Registered Representative

These are professionals licensed by the Financial Industry Regulatory Authority, a self-regulating body of the securities industry. They have to complete a course and pass an exam to be licensed and abide by industry regulations.

Tax Preparers

You have many options when considering a professional to help you manage and prepare your tax returns, from a one-person shop on the street corner to large, international tax preparation companies. In most states, there is little regulation of tax preparers and no licensing requirements. Those who have more complex needs may want to consider a CPA.

CPA (Certified Public Accountant)

Individuals with this designation have passed an in-depth exam and, in some states, must have completed a work experience requirement. If you are choosing a CPA to help you with taxes, it may be beneficial to find one that specializes in working with individuals or businesses, depending on your needs. An experienced CPA can provide advice to help you sort through key financial and investment decisions that may have tax consequences.
Finding professionals who have achieved designations is one qualification to consider as you go through your own selection process. Keep in mind that the designation alone does not necessarily assure the level of quality you will find in the professional.

AJ Jugan and Brian Stumpf are financial advisors and Certified Financial Planner™ professionals. Andrew (AJ) can be reached by calling 412-635-5813 or emailing andrew.m.jugan@ampf.com. Brian can be reached by calling (724) 799-2782 or emailing brian.d.stumpf@ampf.com.