Tell an advisor by the letters

The capital letters after your advisor's name denote more than alphabet soup. Here's a breakdown of what the letters mean and how your advisor can—and cannot—help you. Learn more.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
  • Print

The capital letters after your advisor's name denote more than alphabet soup. Here's a breakdown of what the letters mean and how your advisor can—and cannot—help you.

As you seek advice regarding savings and investments, you come across professionals with capitalized designations after their names. Sometimes two letters, sometimes three, sometimes a string linked by commas and trademark symbols like railcars hooked together on a train.

You must understand that those letters qualify your advisor, and building a financial plan to fit your needs means finding the right qualifications in an advisor. Your advisor should hold a qualified designation as a minimum requirement before you start your planning.

Here are some:

Certified financial planner (CFP). Holders of this gold-standard designation in the financial services industry must take college-level financial planning courses, log at least three years' experience in financial planning and pass a 10-hour examination.

That exam is no quick green light: The CFP Board of Standards, which owns and awards the designation, reports that in the past 18 months only 63% of the 8,596 advisors who sat for the CFP exam passed.

According to the CFP Board, a recent survey revealed that among clients working with a financial advisor, 87% report being satisfied or very satisfied working with a CFP compared with 72% of those working with an advisor without certification.

Chartered financial consultant (ChFC). This designation aligns with the CFP regarding knowledge needed and required. The American College of Financial Services owns and awards the ChFC, the exam for which takes 18 hours.

Professionals must undertake nine college courses (seven required and two elective) in such subjects as insurance, estate planning, retirement funding, investments and others in financial planning. Average study time for the program exceeds 400 hours and advisors, who frequently spend years earning the designation, also complete at least 30 hours' continuing professional education every two years.

Chartered financial analyst (CFA). These professionals study security analysis, stocks, bonds, investment management and corporate finance. They take three levels of examinations to earn the designation, which many mutual fund managers, pension fund managers and endowment managers hold.

CFA charterholders commit an average of four years to complete the program. A recent survey by the CFA Institute shows that almost three out of five advisors sat for the CFA exams to advance their careers or improve their overall professional knowledge.

Certified public accountant (CPA). These pass the Uniform Certified Public Accountant exam given by the American Institute of Certified Public Accountants (AICPA). CPAs qualify to prepare state, local and federal tax returns and provide auditing services for companies. CPAs also represent you in proceedings before the IRS, such as audits.

Each state maintains its own Board of Accountancy for licensing CPAs practicing in that state and each board issues rules governing how a professional becomes a CPA. According to the AICPA, 40 states now require CPA exam candidates to complete 150 hours of relevant college-level education, typically "a good balance of accounting, business and general education," according to the Institute.

Enrolled agent (EA). EAs pass three IRS exams involving personal taxation, business taxation and general tax principles and also represent you in tax proceedings before the IRS. They also complete 72 hours' continuing education courses every three years.

Picking an advisor of course means more than decoding letters: You must find an advisor you connect with and who appreciates your life goals. Examining qualifications and designations gets you off to a great start.

Topics:
  • Financial Planning
  • Starting Out
  • Financial Planning
  • Starting Out
  • Financial Planning
  • Starting Out
  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
  • Print
This article was written by Sterling Raskie from AdviceIQ and was licensed as an article reprint from November 5, 2015. Article copyright 2015 by AdviceIQ.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
The third-party provider of the reprint permission and Fidelity Investments are independent entities and not legally affiliated.
The images, graphs, tools, and videos are for illustrative purposes only.
Fidelity Brokerage Services Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
750226.1.0
close
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
close

Your e-mail has been sent.

Here's what we suggest you explore next

Keeping the harMONEY alive: When investment styles collide

When it comes to tying the knot, couples have a number of different requirements. Some insist on living together; others insist on having the families meet. But what happens when you have different ways of handling money?

Take the guesswork out of investing

If you want to invest but aren't sure how to start, see how Fidelity Go® makes it simple and affordable.

You might also like

3 reasons to invest internationally

It's a big world out there—your investment mix could benefit from some global flavor.

5 easy ways to boost your credit score 100 points

Do you have a low credit score? This article outlines 5 easy ways to boost your credit score by 100 points.

Just 1% more can make a big difference

Putting just 1% more of your salary each month into a tax-advantaged retirement account like a 401(k), 403(b), or IRA could make a noticeable difference.
Financial Checkup

Got 5 minutes? Get a financial checkup now

Answer just nine questions and we'll help you prioritize your financial to-dos, including smart moves to consider for your next dollar. Get your action plan now.