The Alphabet Soup Of Financial Planner Certifications

When a client looks for a veterinarian, the educational qualifications are reasonably straightforward. For primary care, a client looks for a DVM (or VMD) and for specialty care there are a limited number of certifications all with rigorous training programs behind them. But what financial planners? There are MBA, CPA, CFP, CFA, CFP®, CIC, ChFC, RFM, and over 200 other certifications.  Many of these certifications represent little more than a short course and a simple examination. Some, like the “retirement specialist” are completely made up while others, like the popular C.S.A. certification involve completing nothing more than a class on how to sell financial products to retirees. How is a DVM to know what those  initials after a financial advisor’s name means?  A few of these represent a legitimate educational and testing process and those are the ones we will focus on.

The Masters of Business Administration

Let’s start with the Masters of Business Administration – the MBA. I have one. But what  really is an MBA and why would a financial planner have one? Someone with an MBA has spent two years studying graduate level accounting, statistics, economics, communications, management and entrepreneurship. It’s a non-thesis masters degree and it can be invaluable to someone in corporate business and for entrepreneurs (e.g. practice owners). Is it essential for a financial planner to have an MBA, maybe not; however, it be quite helpful. Someone with an MBA may have a unique prospective into the world of business and has important tools that are invaluable in helping others with complex financial decisions.

Certified Public Accountant

What about a CPA? Although rules vary by state, a Certified Public Accountant is someone who has completed an undergraduate degree and additional studies in accounting (often a master’s degree), has demonstrated accounting related experience, maintained a record of continuing education and passed the rigorous multi-day CPA examination. A CPA is someone with an advanced understanding changing tax laws and can help a veterinarian avoid taxes, which is perfectly legal while not erroring on the side of evading taxes – which can send you to jail! CPAs are also well versed in financial analysis. Who should be using a CPA? Practice owners should no doubt be working with a CPA as should anyone with a tax return that would be more complex than say Turbo Tax can handle. Probably the biggest reason people turn to CPAs is an IRS audit.  CPAs can represent you before the IRS which is something that a tax preparer cannot. Of course, the time to start working with a CPA is before the audit.

Financial planning certifications 

CFP – Certified Financial Planner

Probably the most prestigious and most difficult to attain is the CFP – Certified Financial Planner. These individuals have an undergraduate degree and completed studies on a wide range of topics including:  stocks, bonds, taxes, insurance, retirement planning and estate planning. The program is administered by the Certified Financial Planner Board of Standards which oversees the fairly rigorous CFP examination. The pass rate on this test is lower than the NAVLE. In addition to education and examination, CFPs demonstrate competency by having 3 years of supervised  experience in financial planning and agree to adhere to the CFP Board’s code of ethics and standards.

Chartered Financial Analyst (CFA)

Chartered Financial Analyst (CFA) is an individual who has 48 months of work experience in an investment related field, has studied advanced accounting, economics, ethics, finance and mathematics, passed 3 six-hour exams, and is committed to the CFA Institute’s Code of Ethics and Standards of Professional Conduct. The average study time for the examinations is estimated to be over 1,000 hours and the pass rate is 39%. Fewer than 20% of the candidates pass all three tests on the first attempt. CFAs have put in a significant amount of time and effort to better their skills and knowledge. Generally this is reflected in the advice they can give.

Personal Financial Specialist (PFS)

Personal Financial Specialist (PFS) are Certified Public Accountants who have additional expertise in financial and wealth management. A PFS has studied estate planning, retirement planning, investing, insurance and personal financial planning. They are certified by the American Institute of Certified Public Accountants and must have three years of work experience, attend a significant amount of CE, and pass a fairly rigorous examination. Since they are already CPAs these folks are highly trained professionals who can help you with many aspects of tax planning as well as your personal finance.

There may be other certifications that are of value; however, these are the ones that are the most rigorously vetted. To tell if initials after an advisor’s name are of any real value, google them. Look for the rigorousness of the training and the extent of the examination. You probably will be disappointed to learn that most are fairly worthless. More important than the initials after the name, you want to know for certain if the advisor is fee based or fee only. Never work with someone is fee based. Before you work with anyone be certain that you have clear expectations and that you verbalize these to the advisor.  And one last thing. In veterinary school or your professional life, you no doubt have run into someone that you would never trust with your pet despite this individual having the prestigious D.V.M. or V.M.D.  after their name. The same is true of financial advisors. Take to time to learn about someone before you trust them with your hard earned money.