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DOES YOUR ADVISOR SERVE YOU ALPHABET SOUP?




On December 22, 2017, The Tax Cuts and Jobs Act was signed into law. The information in this article predates the tax reform legislation and may not apply to tax returns starting in the 2018 tax year. You may wish to speak to your tax advisor about the latest tax law. This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.


Does Your Advisor Serve You Alphabet Soup?

Are the titles, designations, certifications, and labels behind your financial advisor’s name confusing to you? Just what is a CFP®, CFA®, CFS®, AiF®, ChFC®, CIC®, CIMA®, and CMT® anyway? Do you have trouble interpreting what they mean? Do you really care? Well, you are not alone! But you need to sift through the alphabet soup to determine if the financial advisor you choose (or are currently working with) has the expertise and knowledge in the various areas of finance that you need. Most of these certifications require the advisor candidates to put in many hours of study and meet high ethical and professional standards. Let’s take a look at the eight most popular designations with a brief explanation of the education and expertise each designation signifies, and the type of work done by the advisors holding them.


Certified Financial Planner® (CFP®)


One of the most popular designations, those who hold the CFP® have demonstrated competency in all areas of financial planning. Financial advisors complete studies on more than 100 topics, including stocks, bonds, taxes, insurance, retirement planning and estate planning. The program is regulated by the Certified Financial Planner Board of Standards, Inc. In addition to passing the CFP certification exam, advisors must also have qualifying work experience and agree to adhere to the CFP Board's code of ethics, professional responsibility, and financial planning standards. A CFP advisor/planner works with individuals to help them make financial decisions suited to their financial situation and goals. The CFP Board posts information about current licensees, allowing clients of CFPs to verify if their financial planners' designations are in good standing. The last thing anyone needs is to choose a CFP whose certification has been revoked. Chartered Financial Analyst (CFA®)


This designation is offered by the CFA Institute (formerly the Association for Investment Management and Research (AIMR). To obtain the CFA, advisors must successfully complete three challenging exams and obtain at least three years of qualifying work experience, among other requirements. By passing these exams, candidates demonstrate their competence, integrity, extensive knowledge in accounting, ethical and professional standards, economics, portfolio management, and security analysis.


CFA charterholders tend to be analysts who work in the field of institutional money management and stock analysis, not necessarily financial planning. These also provide research and ratings on various forms of investments.


Certified Fund Specialist (CFS®)


As the name indicates, an advisor with this certification has demonstrated expertise in mutual funds. They often advise clients on which funds to invest in and, with a license, they can buy and sell funds for clients. The Institute of Business and Finance (IBF), formerly known as the Institute of Certified Fund Specialists, provides training for the CFS, and the course focuses on a variety of mutual fund topics, including portfolio theory, dollar-cost averaging and annuities. The knowledge these CFS designees have is kept current by their continuing education requirements.


Chartered Financial Consultant (ChFC®)


Financial advisors with the ChFC designation have demonstrated their vast and thorough knowledge of financial planning. The ChFC program is administered by the American College. In addition to successful completion of an exam on areas of financial planning, including income tax, insurance, investment and estate planning, candidates are required to have a minimum of three years experience in a financial industry position. Like those with the CFP designation, professionals who hold the ChFC charter help individuals analyze their financial situations and goals. And what is the difference, you say? The ChFC’s own educational curriculum essentially is the CFP certification education, plus several additional classes. That means the American College has already institutionalized its ChFC program as a post-CFP certification: advisors take the ChFC classes after finishing the core CFP curriculum.


Chartered Investment Counselor (CIC)


A lesser-known designation, it is administered by the Investment Adviser Association and one that CFA charterholders who are currently registered investment advisers can study for. The focus of the CIC program is portfolio management. In addition to proving their high-level expertise in portfolio management, these advisers must also adhere to a strict code of ethics and provide character references. These advisers tend to be some of the major players in the financial world, such as those who manage large accounts and mutual funds.


Certified Investment Management Analyst (CIMA®)


The CIMA focuses on asset allocation, ethics, due diligence, risk measurement, investment policy and performance measurement. Only advisors who are investment consultants with at least three years of professional experience are eligible to try to obtain this certification, which signifies a high level of consulting expertise. The Investment Management Consultants Association offers the CIMA courses.


Advisors who hold this designation must prove their expertise through continual recertification, requiring them to complete at least 40 hours of continuing education every two years. CIMA designation holders tend to have careers with financial consulting firms, which involve extensive interaction with clients and the management of large amounts of money.


Chartered Market Technician (CMT®)


To achieve this designation, an advisor must pass three exams offered by the Market Technicians Association (MTA) and agree to adhere to the MTA code of ethics. Advisors with the CMT designation have demonstrated expertise in the field of technical analysis. Often CMTs will work for hedge funds and money management firms.


Accredited Investment Fiduciary (AiF®)


Advisors who have earned the AiF designation are able to immediately show they are working toward the best interests of their clients. They are known as fiduciaries in a legal and an ethical sense. They have gone through training, met the qualifications, and passed the exam allowing use of the AiF designation. The mark coupled with the knowledge and processes taught in the course make it easy for an advisor to quickly show the added value they bring to prospective and current clients.


How Meaningful Are These Letters?


While certifications are not everything, you should give extra credit to the financial advisors for spending hundreds of hours studying for more knowledge. If you meet an advisor who has none, you might ask the reason. Maybe they already have the necessary experience and background and designations are not needed


Remember, these designations should only be one part of your criteria when choosing a financial advisor. Of course, it’s important to know the extent of his or her expertise in different areas of finance. If the marks help you meet your financial goals, that’s all you need to know.


CPA in Boise Idaho

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