What Is the Financial Advisor's Designation?
Your financial advisors designation has the ability to tell you a lot about his educational background. The designation can denote backgrounds in various areas of finance, business, insurance, accounting, and law. Common designations in the financial planning field are ChFC (Chartered Financial Consultant), CFP (Certified Financial Planner), CLU (Chartered Life Underwriter), JD (attorney), or CPA (Certified Public Accountant).
Remember, background is only one of the necessary criteria for selecting a financial planner.
By way of example, many assume that a CPA has far greater knowledge in the area of income taxation than other financial professionals. What most do not know is that the CLU exam has more questions in reference to taxation than does the exam the CPA is required to take.
As another example, the Certified Financial Planner (CFP) designation is more popular and marketed better than the ChFC exam. However candidates for the Charted Financial Consultant (ChFC) are required to take more courses and broader and more meticulous exams than the CFP.
A particular area of specialty doesn't necessarily mean anything either. CPAs major in accounting, with most of the college courses in accounting focusing on the historical point of view. They look at historical data, place it on a form, and then prepare a tax return or financial statement. A good CPA to assist with financials and money management is necessary for every business.
But a CPA is not the same as having a financial planner. Most colleges will have two separate programs for accounting and finance. Financial planning is more accurately applied economics. Its approach is future driven. Rather than a historical or current perspective, it takes a long-term strategy and analysis. It's proactive, not reactive.
The worst financial advice comes from journalists. They are notorious for describing an extreme market position, emphasizing the sensational in order to sell magazines. In my view, journalists are more concerned with making a story than reporting one. Seldom do I read the complete facts as given to the reporter, but rather a hazy half-truth intended to make a warped yet sensational point. Seldom do I find good judgment.
Designations are an important criterion in assessing a financial advisor. Fully explore the planner's background and experience. Often the common assumptions of background are not totally accurate as to expertise.
Remember, background is only one of the necessary criteria for selecting a financial planner.
By way of example, many assume that a CPA has far greater knowledge in the area of income taxation than other financial professionals. What most do not know is that the CLU exam has more questions in reference to taxation than does the exam the CPA is required to take.
As another example, the Certified Financial Planner (CFP) designation is more popular and marketed better than the ChFC exam. However candidates for the Charted Financial Consultant (ChFC) are required to take more courses and broader and more meticulous exams than the CFP.
A particular area of specialty doesn't necessarily mean anything either. CPAs major in accounting, with most of the college courses in accounting focusing on the historical point of view. They look at historical data, place it on a form, and then prepare a tax return or financial statement. A good CPA to assist with financials and money management is necessary for every business.
But a CPA is not the same as having a financial planner. Most colleges will have two separate programs for accounting and finance. Financial planning is more accurately applied economics. Its approach is future driven. Rather than a historical or current perspective, it takes a long-term strategy and analysis. It's proactive, not reactive.
The worst financial advice comes from journalists. They are notorious for describing an extreme market position, emphasizing the sensational in order to sell magazines. In my view, journalists are more concerned with making a story than reporting one. Seldom do I read the complete facts as given to the reporter, but rather a hazy half-truth intended to make a warped yet sensational point. Seldom do I find good judgment.
Designations are an important criterion in assessing a financial advisor. Fully explore the planner's background and experience. Often the common assumptions of background are not totally accurate as to expertise.
About the Author:
Hank Brock is president of Brock and Associates, LLC, a firm specializing in retirement, estate, tax, and business planning. For more detailed information on selecting a financial advisor, visit us online.
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