Sorting Through the Alphabet Soup of Investment Advisor Credentials

There is some confusion among the public when they see “Dr.” before someone’s name. Dr. Jones could be a physician, a dentist, or an educator with a PhD. There is even more confusion when trying to figure out the alphabet soup of investment advisor professional designations and credentials. When a physician is evaluating a potential financial advisor, what credentials or professional designations are important?

Here is a list of some of the important investment advisor credentials you should look for:

Chartered Financial Analyst (CFA®) - This credential is specific to investment analysis and counsel. The CFA® designation is considered the pinnacle credential for those in the investment field. It is a difficult post-graduate credential to attain as it requires passing a rigorous battery of tests, administered annually throughout the world. The CFA® credential is awarded by the Association for Investment Management and Research.

Certified Financial Planner (CFP®) - This credential is specific to financial planning. The credential means that the designee has been trained to help clients achieve a sound fiscal foundation. The CFP® credential is awarded exclusively by the Certified Financial Planners Board of Standards.

Chartered Life Underwriter (CLU®) - This credential is specific to insurance and estate planning. The credential means that the individual has been trained to help clients achieve their estate and insurance planning needs and goals. The CLU® credential is awarded exclusively by the American College.

Chartered Advisor for Senior Living (CASL™) - The CASL™ designation signifies that an individual has particular knowledge about dealing with older clients and people who are making plans for their retirement years. The CASL designation is also awarded exclusively by the American College.

Certified Investment Management Analyst (CIMA®) - This program is specific to investment consulting. The credential is offered exclusively by the Investment Management Consultants Association (IMCA). The CIMA® course and exam were developed by the IMCA Certification Committee, IMCA staff and faculty of The Wharton Business School.

Chartered Financial Consultant (ChFC®) - This designation is a credential specific to financial planning. The credential means that the designee has been trained to help clients achieve a sound fiscal foundation. The ChFC® designation is also awarded exclusively by the American College.

Accredited Investment Fiduciary (AIF®) - The AIF® course prepares the investment advisor to work with fiduciary accounts - private trusts, foundations, endowments, and retirement plans. The training is based on well-defined fiduciary practices, and is the only known training program that has a defined fiduciary standard of care. This new AIF® credential is awarded by the Center for Fiduciary studies at the University of Pittsburgh.

Chartered Alternative Investment Analyst (CAIA®) - This is a new credential for the field of alternative investments. The CAIA® professional designation is granted after completing a year-long study curriculum designed to provide investment professionals with a broad base of knowledge in traditional and modern alternative investment vehicles, including real estate, private equity and commodities, as well as hedge funds and managed futures. The CAIA® credential is awarded by the Chartered Alternative Investment Analyst Association.

Enrolled Agent (EA) - The EA is a designation from the federal government. Enrolled Agents are licensed to practice by the federal government, and are authorized to appear in place of the taxpayer at the Internal Revenue Service.

Accredited Estate Planner (AEP) - This designation is issued by the National Association of Estate Planners and Councils and recognizes estate planning professionals who meet the NAEPC stringent requirements.

When looking at an advisor’s credential, give particular importance to those with multiple credentials, especially in the areas of investment analysis and counsel or fiduciary management. For example, less than 3% of financial advisors in the nation hold both the Chartered Financial Analyst (CFA®) and the Certified Financial Planner (CFP®) professional designations. An advisor with both the CFA and CFP credentials should be high on your list. There are also organizations to help you in your search. The National Association of Personal Financial Advisors (www.NAPFA.org.) will provide you a list of fee-only financial advisors in your area. Likewise, the US Securities and Exchange Commission (www.SEC.gov) can help you check out the background of an advisor.

See our next article in this 6-part series: Who can you trust to give you unbiased investment advice, free of compensation conflicts of interest?

Tom Orecchio, CFA®, CFP®, CLU®, ChFC®, AIF®, is the president of Modera Wealth Management, which offers fee-only wealth management services.