What Is the Financial Advisor's Designation?
Your advisor's designation can tell you a lot about their background and expertise. Some of the more common financial planning designations include Chartered Financial Consultant (ChFC), Certified Public Accountant (CPA), Chartered Life Underwriter (CLU), Certified Financial Planner (CFP), or attorney (JD), among others. These indicate backgrounds in finance, accounting, business, law, and insurance.
Background is, however, only one aspect of a financial advisor.
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 ChFC exam is clearly a broader and more rigorous exam (and therefore accredited like other colleges and universities) than the CFP designation, though CFP is marketed better and is more popular.
Areas of specialty won't always mean everything either. CPAs take college courses in accounting, focused primarily on the historical view of financials. They are often primarily focused on the then and now. They pull historical information, and then plug it into a financial statement or tax return. Every business owner needs a good CPA to keep the money management and financial in order.
The problem is that they are seldom able to take a future driven approach. That is the difference between a CPA and a financial planner. Even colleges recognize that the accounting program is different than the finance program. The financial planner takes a proactive, analytical, and long-term strategic approach. They are not reactive to the data, but influence the direction the data will take.
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.
A designation can be helpful in determining your financial planner's background, but don't get lost in the false assumption that a designation represents expertise.
Background is, however, only one aspect of a financial advisor.
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 ChFC exam is clearly a broader and more rigorous exam (and therefore accredited like other colleges and universities) than the CFP designation, though CFP is marketed better and is more popular.
Areas of specialty won't always mean everything either. CPAs take college courses in accounting, focused primarily on the historical view of financials. They are often primarily focused on the then and now. They pull historical information, and then plug it into a financial statement or tax return. Every business owner needs a good CPA to keep the money management and financial in order.
The problem is that they are seldom able to take a future driven approach. That is the difference between a CPA and a financial planner. Even colleges recognize that the accounting program is different than the finance program. The financial planner takes a proactive, analytical, and long-term strategic approach. They are not reactive to the data, but influence the direction the data will take.
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.
A designation can be helpful in determining your financial planner's background, but don't get lost in the false assumption that a designation represents 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 planner, visit us online.
posted by Credit Counseling at
5:57 AM
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