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Advisor Credentials (Financial Planning)

The Consumer Financial Protection Bureau recently issued a report entitled “Senior Designations for Financial Advisers: Reducing Consumer Confusion and Risks”. While the title gives a good indication of the subject matter, let’s delve further.

There are more than 50 different designations used in the financial service industry. This can be very confusing to the average investor, including seniors who are constantly targeted by financial advisors. With so many designations it’s difficult for the average investor to understand the value or meaning behind many of these so-called credentials.

If you are interviewing an advisor, here are a few questions that should come up regarding his/her credentials.

  • Purchased - Did the advisor simply have to write a check, sit back and then wait for the certificate or did he/she earn it?
  • Education - Did the advisor have to go through any schooling, and if so, how many classes and was his/her knowledge tested?
  • Continuing Education - Does the advisor have to continue his/her education in order to maintain such credential(s)?
  • Membership - Did the advisor have to submit a sample financial plan or work product to gain membership in certain organizations?

For me, the standard of excellence has always been the CFP certification, which requires knowledge in all aspects of financial planning (investments, retirement, insurance, tax planning, cash flow, etc.) as tested on the rigorous 2 day, 10 hour CFP examination. Further, CFP designees are required to take ongoing educational classes to maintain such a designation.

As far as memberships go, the National Association of Personal Financial Advisors(NAFPA) sets a very high threshold for admission. All members are non-commission based advisors and considered fiduciaries, which means they are obligated to always act in the best interest of their clients. To gain admission, applicants must submit a financial plan for a peer review and then upon becoming a member, the advisor must satisfy a continuing education requirement.

If you are being targeted as a potential client by the financial service industry, then take the time to understand the letters after the advisor’s name.


Philip J. Capell, CFP, JD, MS in Tax

(Member of NAPFA since 2002)