What's in a Name? -- distinguishing amongst professional financial designations

Since I have started this blog, I have been surfing the investment sites on the internet. It makes me wonder whether the world really needs another blogging investment expert. We will find out won’t we? If anyone out there in cyberspace is finding my comments useful, I would appreciate hearing from you. I won’t promise to stop if I don’t hear from you, it just would be nice to know someone is listening ;-).

So who is worthy of your time? Call me biased but I do think that is important for financial writers/advisors to have some type of professional designation. Why else would I have worked so hard to get my CPA and CFA? I am sure that there are investment experts out there with no professional designations who are very good. The legendary investor, Warren Buffett comes to mind. Mr. Buffett has no letters after his name – just a whole lot of zeros! He does however have a Masters from Columbia University and was the protégé of the Benjamin Graham, the father of value investing. My point is that acquiring a professional investment designation shows a certain level of competency and dedication to the subject. If your advisor doesn’t have a designation, you need to do further research to make sure that he/she exhibits Buffett-like qualities.

OK. We’ve established the importance of professional designations now comes the hard part. Which one? The International Association of Registered Financial Consultants (IARFC) reports that as of January 2005 there are 89 designations, certifications and degrees and 87 financial services associations and professional institutions. If you want to torture yourself, you can read a little of each on IARFC’s web site. http://www.iarfc.org/content_sub.asp?n=64

In my, albeit bias opinion, there are three that merit special attention – CFA, CFP and CPA for generalist investment knowledge. I have shown the description from the IARFC’s web site for these designations below.

• CFA Chartered Financial Analyst. Has completed three comprehensive exams on ethics and professional conduct, securities and portfolio management and investment valuation offered by the CFA Institute (formerly Association for Investment Management and Research - AIMR). Candidates must also meet reference, ethics and work experience requirements. There are over 30,000 CFA charter holders worldwide.


• CFP Certified Financial Planner™. In the U.S. a Certified Financial Planner professional who successfully completes the CFP Board of Standards comprehensive examinations and meets ongoing certification requirements. CFP is an internationally recognized designation held by over 55,000 people in 13 countries, although there are some differences in the accreditation process outside of the U.S..


• CPA Certified Public Accountant. Has met educational qualifications, such as a bachelors or masters degree in accounting, passed four state-certifying examinations and met experience qualifications in the area of public accounting. CPAs are licensed individually by state and can hold licenses for more than one state at a time. An approximate number of CPAs is 600,000 with 55% of them being AICPA members.


• CPA/PFS Certified Public Accountant - Personal Financial Specialist. A designation awarded by the AICPA to accountants who have completed additional study and examination requirements in personal financial planning.

A financial advisor that possesses one of these designations should have some level of knowledge in financial matters -- but -- a designation (or two) is not a guarantee of expertise. Just as I shudder to think about some of my college classmates that are now surgeons, there are many CPA, CFAs and the like that are not worth a lick. You still need to determine each individual’s competency based on their character and performance. In my next post, I will discuss the types of questions that you should be asking your advisor to assess these traits.