Understanding designations and credentials is essential for your financial well-being
Francis Xavier (FX) Bergmeister
If referrals are important to lifeguards, arborists, and airline pilots, shouldn’t the same be true for those offering financial advice?
It is good to know that the lifeguard of a pool is certified by the American Red Cross or that the person who fells a tree near the house is certified by the International Society of Arboriculture. You probably want the person flying that multi-engine airplane to have their airline pilot certificate.
Providing safety at a community pool, chopping down a large tree near our home, and flying an airplane of any size are risks we probably have no qualms about outsourcing to a professional. But how to ensure the competence of the person? Swimmers, owners and airline passengers are also interested in someone’s experience. Designations and certificates are important.
According to Institute of Accreditation Excellence, “accreditation” is an umbrella term for professional certification and certificate programs. Accreditation validates skills, knowledge and abilities. There are usually elements of experience and education.
A “designation” is a recognition of professional knowledge and expertise in the field. Designations require membership in a professional organization and generally require work experience.
So what if you are looking for a financial planner? Anyone can call themselves a financial planner. There is no crime in not having the proper training or relevant experience to back up that claim. Even if someone has several impressive titles in financial planning, they may ring hollow. Not all financial planning designations or credentials are the same. Some financial certifications or designations are earned simply by attending a morning or afternoon seminar.
To further research significant credentialed financial planners with experience and education, you may want to pause your search and introduce the search terms fiduciary and continuing education.
Investopedia defines fiduciary duty as “a relationship between two parties that requires one to act solely in the interests of the other. The party appointed as fiduciary has a legal duty to a principal, and strict care must be taken to ensure that no conflict of interest arises between the fiduciary and the principal.
Continuing education is an important consideration. It recognizes the reality that a field of professional expertise is dynamic. Ongoing changes in areas such as ethics, taxation and legislation are addressed through continuing education.
If you expect a fiduciary to have significant financial planning experience, education, and a commitment to ongoing education, consider the following three titles or designations. They are a Certified Financial Planner® (CFP®), a Certified Public Account (CPA) and a Chartered Financial Consultant (ChFC®). The women and men who hold these titles have demonstrated not only serious training, but many years of practice.
CFP®s have a curriculum taught at select colleges and other locations encompassing financial planning, taxes, estate planning, and retirement. To earn this title, they must pass a comprehensive test and have at least 6,000 hours of work experience. The Board of Certified Financial Planners also requires members to complete at least 30 hours of continuing education every two years.
CPAs must have a bachelor’s degree in business administration, finance or accounting and complete an additional 150 hours of training in finance or accounting standards and practices. They must pass a rigorous test and have at least two years of experience in public accounting for this designation. Each state has its own continuing education requirements for CPAs. Additionally, members of the American Institute for CPA must complete 120 hours or its equivalent every three years.
The educational requirements of the ChFC® are similar to the curriculum of the CFP®, but involve additional coursework. They do not pass a comprehensive exam like the CFP®. The designation requires at least three years of experience in the financial services industry. All ChFC® must complete at least 30 hours of continuing education every two years.
The financial planner you and your family deserve is someone whose education and experience demonstrate a serious commitment to the profession. But sometimes a financial planner may need an additional expert for your situation. The difference between a good and a great professional is one who understands that certain conditions require calling in a specialist.
Bringing in another professional as a resource for caring for family members with special needs or planning for cognitive decline should be welcomed as an acknowledgment that the plan is personalized for specific needs. When your doctor seeks advice from specialists, it is recognition that he is a lawyer seeking the best medical care.
Financial planning is a detailed and comprehensive process. This is due to the duration of the risk that we entrust to a financial professional. The time during which we are exposed to certain risks may not exceed a few hours, as is the case for the rescuer, the arborist or the airline pilot. But what about the risks of preparing for decades of retirement, including subsequent estate planning? A fiduciary with the proper credentials can make a difference in producing the best outcome to serve multiple generations.
Francis Xavier (FX) Bergmeister, CLU®, ChFC®, CASL®, ChSNC® has been a Certified Financial Planner® for 30 years. He graduated from The Wharton School and earned a Doctor of Arts degree from George Mason University. He offers retirement seminars through Federal Career Experts http://www.federalcareerexperts.com.
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