Common Credentials: What Investors Should Know About Those Few Key Letters That Follow a Financial Professional’s Name
First of all, congratulations! If you’ve made the decision to find a professional to help with your financial planning, you have ALREADY begun to make progress along your journey to financial freedom. As you do research on who to work with, you’re likely to find that financial professionals have a wide variety of titles… The two most common are ‘wealth manager’ and ‘financial advisor,’ and today we’ll take a look at their similarities, differences, and everything in between.
Wealth Management & Financial Advisory. What’s The Difference?
On a broad level, Wealth Managers, also known as Wealth Management Advisors, are financial advisors who can help you manage your wealth on a fully-integrated basis. At InVestra, we refer to this method as “holistic wealth management”. A wealth manager brings additional tools and specialization necessary to address clients’ needs on a comprehensive basis, as the individuals they serve tend to require specialized planning due to the level of their income and assets. This could include advanced tax-efficiency planning, estate planning, sophisticated investing strategies, and more in-depth analyses of financial plans. They analyze each of your goals, from sending a child to college, to retiring comfortably, to leaving behind a legacy. Then, they show you financial strategies and subsequent short-term goals and planning needed to help you meet those goals over time.
It is possible, however, that professionals who refer to themselves solely as financial advisors can still do what Wealth Managers do, and vice cersa. To ensure that you’re working with a professional who has the right training and expertise for your situation, it often makes more sense to look at one’s industry credentials, or designations.
Common Credentials
Below are some of the most common credentials you’re sure to see throughought your search for a Wealth Manager or financial advisor. Each of these credentials carries with it its own requirements for certification, which can include educational, training, and experience requirements, as well as specific ethical standards.
Certified Financial Planner (CFP®)
This designation is regarded as one of the top-most certifications in the industry and is granted to financial professionals who demonstrate comprehensive financial planning knowledge. Those with this designation are knowledgeable on a range of planning topics including insurance, investing, tax planning, retirement, business owner needs, estate planning and more.
Chartered Financial Consultant (ChFC®)
Like the CFP, the ChFC designation is also representative of someone who has comprehensive and extensive financial planning knowledge. It is granted to financial professionals who have completed requirements set by the American College of Financial Services, including extensive coursework on insurance, investments, tax planning, retirement planning, planning for business owners, estate planning and more. The CFP and ChFC certifications have many of the same educational requirements, but instead of a final board exam, ChFC® candidates must complete a comprehensive case study analysis.
Certified Life Underwriter (CLU®)
The CLU designation is granted to financial professionals who have completed a certain financial planning program that enables them to specialize in life insurance and estate planning as it relates to financial planning, and must also complete coursework in insurance planning, life insurance law, estate planning and planning for business owners, among other topics.
Retirement Income Certified Professional (RICP®)
Professionals with the RICP designation specialize in retirement income planning in addition to general financial planning. They typically work with those in, near, or preparing to enter retirement and specialize in building holistic retirement plans. Those with RICP designations have demonstrated extensive knowledge of how to build retirement income portfolios and income streams in retirement, along with knowledge on how to claim Social Security, among other retirement-related planning topics. This designation is often held in addition to a CFP certification or a ChFC or CLU designation and is also granted by the American College of Financial Services.
Certified Plan Fiduciary Advisor (CPFA®)
Erin D. Eiras, Founder and President of InVestra Financial Services, maintains the Certified Plan Fiduciary Advisor (CPFA) designation in order to best serve clients .
The CPFA certification is overseen by the National Association of Plan Advisors, which is part of the non-profit American Retirement Association. It is a certificate for Wealth Management Professionals who specialize in working with retirement plans. A critical advantage in seeking guidance from Wealth Management Professionals who maintain this type of designation is the confidence and comfort gained knowing that in addition to passing the exam, these advisors must adhere to the ARA’s code of ethics. When giving investment advice to retirement plans, CPFAs are legally required to follow the fiduciary standard and act only in their clients’ best interests. (The things is, most financial advisors are not fiduciaries, so don’t be afraid to have meaningful conversations and ask questions.) It’s important to understand the differences between all these types of ‘advisors’ because a fiduciary has a higher standard to meet, an ongoing standard.
“At InVestra we place great emphasis on being individually accountable and collectively responsible for upholding the highest standards of integrity and honesty in all our dealings. Therefore, our team takes a fiduciary approach to our partnership, so clients can be certain their best interests are always front of mind.”
– Erin D. Eiras, CPFA
Choosing The Right Wealth Management Professional
Ultimately, choosing an advisor doesn’t need to be complicated or stressful. Start by having conversations with each individual to make sure they could be the right fit. Ensure that they understand your financial goals — what you hope to accomplish by working with a financial professional — and use that to help guide your selection. In addition to looking at credentials, ask the advisors questions about their financial planning and investment philosophies, and don’t be afraid to ask for client references. Consider also their reputation: go through online reviews and see what others are saying about them.
Not all financial professionals are created equally; there are many different types of financial firms or companies. It’s important to ensure that you’re working with a trusted advisor with whom you’ll have a long-lasting relationship.
Sources:
https://www.napfa.org/mission-and-fiduciary-oath
https://www.finra.org/investors/professional-designations
https://napacpfa.org/cpfa-credential-holders/
https://www.usaretirement.org/code-conduct
Important Disclosures:
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or discussed are suitable for all investors or will yield positive outcomes. To determine which type of guidance to seek, if any, from financial professionals regarding what designations they maintain may be appropriate for you, consult a legal advisor, as the information provided is not intended to be a substitute for specific individualized advice or legal advice.
Subsequently, the information is believed to be from reliable sources (see below); however, LPL Financial and InVestra Financial make no representation as to its completeness or accuracy.
Unless otherwise stated LPL Financial and the third-party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.
All investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Securities are offered through LPL Financial, Member FINRA/SIPC. Investment Advice is offered through InVestra Financial Services, a registered investment advisor and separate entity from LPL Financial.
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