When choosing the right financial advisor for your unique situation, many characteristics may be considered. Experience, background, and education are bound to be near the top of the list. We’d suggest that credentials and designations should also be included in your evaluation process. You’ve likely seen a myriad of designations if you’ve started to do the research or work with an advisor already, but what do those letters behind advisors’ names mean, anyway? Let’s review some of the most common credentials in the wealth management industry, what it takes to earn them, and how Foster & Motley promotes a culture that encourages employees to acquire them.
The CFP® certification (Certified Financial Planner™) is a credential professionals would pursue who are interested in focusing on financial planning. The courses and exam focus on subjects such as retirement planning, estate planning, taxes, and risk management. To earn the certification, a candidate must complete a robust education requirement, pass a 6-hour examination, and show proof of 6,000 hours of financial planning-related professional experience. With Foster & Motley being a registered RIA, all of our advisors are held to a fiduciary standard. Additionally, all CFP® professionals agree to operate within a fiduciary framework as part of their commitment to providing clients with the best advice possible.1 Ongoing ethics training is also a mandatory part of the continuing education requirement that CFP® professionals are subject to, furthering the organization’s commitment to high ethical standards. As of the writing of this article, there are fewer than 100,000 CFP® professionals in the United States who have achieved the designation, solidifying its prestige in the industry.2
A CFA® (Chartered Financial Analyst®) charterholder is someone who has completed the requirements of the CFA Program and is interested in deepening their knowledge of investment management and analysis. An individual pursuing this designation is likely a portfolio manager or analyst, or even a Chief Investment Officer. The CFA Program consists of 3 tests, each requiring an estimated 300 hours of studying. The three exams test the same subjects (for the most part) but explore the topics in greater detail as candidates proceed through each level. Some topic areas include equity, fixed income, economics, derivatives, portfolio management, and financial reporting and analysis. What sets the CFA exam apart from many other designations is the level of difficulty of the tests. The most recent data posits that the Level One pass rate was only 38%, the Level Two pass rate was still paltry at 44%, and the Level Three pass rate was only slightly higher at 48%.3 There is also an experience requirement to become a charterholder.
Aside from the CFP® certification and the CFA® Program, one can earn other designations that target a specific area of expertise. For instance, a Chartered Mutual Fund CounselorSM (CMFC) specializes in identifying, analyzing, and recommending mutual funds for clients4, while a Certified Divorce Financial Analyst® (CDFA) is equipped to assist in the financial planning of clients going through a divorce.5 Further still, a Chartered Retirement Planning Counselor (CRPC) has worked to hone their skills specific to helping clients plan for retirement.
Although many of these designations pursue different aspects of the financial planning and investment management professions, some commonalities exist in what they offer and how individuals can become credentialed. As one might expect, the main similarity of these credentials is the dedication required to attain them. Candidates prepare for the exams and attend courses outside of regular work hours; the time commitment is arduous both in terms of size and scope. The rigorous workload implies a baseline level of dedication that those who test and receive the certifications may have. Furthermore, the professionals who not only pursue but achieves a credential is committed to upholding the highest standards in their respective sector.
At Foster & Motley, our team members are encouraged to further their education and pursue relevant credentials for the benefit of our clients. The client-first culture embedded in our organization has provided a welcoming atmosphere for individuals to want to pursue these designations rather than making them a requirement; however, some credentials are required for specific roles. Visit the Our Team page on our website to learn more about the individuals who have worked hard to earn the above credentials!
1 https://www.cfp.net/get-certified/certification-process
2 https://www.cfp.net/knowledge/reports-and-statistics/professional-demographics
3 https://www.cfainstitute.org/en/programs/cfa/exam/results-info
4 https://www.kaplanfinancial.com/docs/default-source/wealth-management-library/publicity/cmfc_publicitybrochure.pdf?sfvrsn=94efe18c_2
5 https://institutedfa.com/what-cdfa-1/