A Who's Who Guide to Financial Advisers

NEW YORK (MainStreet) -- Consumers in need of a little professional financial advice have more choices than they may realize. Choice, though, can be a source of confusion.

"There are over 2,000 financial designations," says Joel Redmond, a certified financial planner based in Syracuse, N.Y.
There are more than 2,000 financial designations, but fortunately, only three primary financial adviser fields consumers needs to know.

Furthermore, these days, wealth management companies have integrated so many services into their business model that many in the industry have obtained the right to list more than one acronym after their name.

"Designations have become arrows in the quiver of a wealth management adviser," says Ben Stacy, senior vice president of Investment with HDS Wealth Solutions of Raymond James. Stacy adds that because of this integration, financial professionals may operate under a business model that's a bit different than their designations indicate, which can make it difficult for people to find the right adviser for their needs.

To help you wade through the alphabet soup, we looked into what Redmond calls "the three most coveted designations" in their given worlds -- the Certified Financial Planner, Certified Public Accountant and Chartered Financial Analyst -- so consumers know what to expect when they see those three little letters after a pro's name.

Certified Financial Planner
CFPs specialize in assessing whether a person can meet life goals through careful planning. They're generally sought out by consumers interested in making sure that they have enough money for retirement, are adequately insured and/or have their assets protected.

"They're generalists, but with a very high level of expertise," says Toby Johnston, a CFP and a CPA with accounting firm Mohler, Nixon & Williams. He adds that those in the midst of a serious search for a financial adviser look for the CFP acronym since it's a good indicator that person is top tier.

Redmond notes, though, that while financial planners do know a thing or two about investments, they're more apt to let you know whether you can afford to take risk rather than outline which specific investment risks you should take.

"If you already have a financial plan and you know you have money you can afford to lose, you can just go to an investment adviser or a stock broker to get advice on investments," Redmond says.

People become financial planners by completing five course sessions that specialize in one of the many areas of study -- including insurance planning, employee benefits planning, investment and securities planning, state and federal income tax planning, asset protection, estate planning and retirement planning -- before taking the CFP Certification Examination, a 10-hour multiple choice exam.

Because of the broad spectrum of issues they are trained to deal with, finding a financial planner can be tricky. Check out this article for some tips on how to do so.

Certified Public Accountant
The average consumer generally seeks out a CPA when they are looking for someone to prepare their taxes or simply need general tax advice. These experts also specialize in tax audits or work as corporate accountants for big companies looking to maximize their tax returns and make sure that everything is filed accurately and on time.

Their in-depth knowledge of tax law has led CPAs to branch out into other specialized markets and become a mainstay at wealth management companies.

For instance, CPAs are also becoming a regular go-to for small businesses, who want to "know the tax ramifications of the decisions they're making," says Sean Duncan with the Texas Society of CPAs.

To become a CPA, an individual must pass a national test and be in compliance with state laws before being licensed to practice there. While the requirements vary, Johnston says most states require 150 hours of education, which means most CPAs must have the equivalent of a master's degree.

They also have to spend two to three years working under the supervision of an experienced CPA before they can add the acronym to their email signature, Duncan says.

Once you are a practicing CPA, you have to take 40 hours a year in continuing education to keep up on tax law and maintain your license.

Chartered Financial Analyst
CFAs specialize in investment strategies that are more advanced, more analytical and more market-centric than those CFPs or CPAs work with, but the average consumer isn't likely to run across one in the quest for financial knowledge.

"There are not too many of these people working with the public," says Johnston at Mohler, Nixon & Williams.

Some of this has to do with how long and difficult it is to earn this particular designation.

"A CFA has worked very diligently for a number of years to study and pass a series of three exams that have quite a low number of people who pass them," says Scott Whytock, a CFP with August Wealth Management.

Unlike the exams required to become a CFP or a CPA, the CFA tests are administered by only one institution, aptly named The CFA Institute. They are offered only twice a year and, as such, can take up to three years to complete.

Upon completion, most CFAs become employed by banks or investment managers who operate mutual funds, pension funds and hedge funds to crunch numbers, analyze data and coalesce the vast amount of financial information into a more usable form relevant to a particular investing decision that needs to be made.

"They're stock pickers," Johnston says. For instance, a CFA working in Merril Lynch's oil and gas sector might comb through financial statements from Chevron to determine whether it's a good financial investment, Johnston adds.

It is also a designation sought out by many chief financial officers (or prospective CFOs) and high-level financial managers in a larger company "as their enhanced ability to study the fine details of securities and a company's financial statements can be invaluable," Whytock adds.

This isn't to say the expertise of CFAs is totally inaccessible to consumers, since there's almost always one on staff at a local wealth management company.

"I, as a CFP, could envision hiring a CFA to assist me in defining and maintaining an investment plan that would fit the needs of my clients, as their area of specific training could be a great addition to my more generalized practice," Whytock says.

Clients looking for a financial adviser who has similar expertise to a CFA and who specializes in working with individuals can look for someone who has a Certified Investment Management Analyst certification.

"This is a high-quality designation that indicates the person knows how to select investments for individuals," Stacy says of CIMA certification.

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