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Alphabet Soup – What do our professional designations mean?

Gerald D. FaheyFebruary 16, 2017

HFA News

I.M Bright, CFP®, CPA/PFS™, CFA, CIMA®, ChFC, CLU, AIF®, EA, RIA

Clients sometimes ask about the various professional designations and certifications held by team members at our firm and throughout the investment and financial planning industry, so we thought it might be fun (or at least, interesting) to review some of these designations and what is required to use them. 

CFP®

The Certified Financial Planner designation is likely the most desired designation in the financial planning industry and one must have the “four E’s” to hold it – education, experience, examination and ethics (including Code of Ethics and Conduct Standards and continuing education requirement).  The CFP® holder has received an education on a wide range of topics such as personal financial planning, investment management, retirement planning, insurance planning, taxation and estate planning.

In addition to the educational background for this designation, the candidate must have a minimum of 3 years of financial planning industry experience, pass the CFP® Board exam (not easy!) and complete 30 hours of continuing education credits every 2 years.  So this designation takes at least 3 years until completion.1

CFP® designees are also held to a fiduciary standard, requiring one to act solely in the client’s best interest when offering personalized financial advice.2 

CPA/PFS

Certified Public Accountants are accounting and tax professionals who have received their education in accounting rules and regulations, corporate and individual taxation and many other specializations in this field.  For CPAs with a focus in financial planning, the Personal Financial Specialist or PFS™ designation may be obtained to demonstrate this specialization.3

In order to become a CPA, one must pass the difficult CPA exam and maintain state-specific continuing education requirements (80 hours every two years in PA).  CPAs have to meet education and experience requirements, in addition to the exam.  If the CPA is interested in the PFS™ designation, there is a separate exam to pass and the individual must have at least 2 years of experience in financial planning.

CFA

The CFA Institute identifies the Chartered Financial Analyst designation as the “most respected and recognized investment management designation in the world”.  The education for this designation includes investments, statistical analysis, financial modeling, economics and corporate finance. The portfolio management teams for the mutual funds we use for clients will typically include one or two CFA analysts.

To earn the CFA, one must complete a self-study program, pass three exams of increasing complexity (6 hours each!) and have 4 years of work experience, so it generally takes at least four years.4

CIMA®

The Certified Investment Management Analyst designation, offered through IMCA (Investment Management Consultants Association®) is one of the most valued certifications in the investment consulting and wealth management industry.5   CIMA® certificate holders are educated in topics including investments, portfolio management, behavioral finance and economics. 

For this designation, one must complete the executive education curriculum of one of three registered programs, pass two exams, have 3 years of financial industry experience, complete 40 hours of continuing education credits every two years and adhere to IMCA’s ethics standards.

ChFC

The Chartered Financial Consultant designation has a similar curriculum to the CFP®, but without any Board exam.  Those who earn the designation are understood to be knowledgeable in financial matters and to have the ability to provide sound advice.

Candidates for this certification must complete an education program through the American College, complete 3 years of industry experience and 30 CE credit hours every 2 years.6

CLU®

The American College describes the Chartered Life Underwriter as the premier designation for insurance professionals desiring to provide their clients with the security of life insurance and risk management.

To receive the CLU® designation, one must successfully complete eight courses and exams, meet experience requirements and ethics standards, and agree to comply with The American College Code of Ethics and Procedures.7

AIF®

The Accredited Investment Fiduciary designee has completed a comprehensive education program on fiduciary standards of care, including the legal and regulatory requirements for managing investment decisions on behalf of others.

There are four requirements for this designation, including specific AIF® training, passing the AIF® exam, financial industry experience (varies) and satisfying the Code of Ethics and Conduct standards, as part of the AIF application.8

EA

Enrolled Agents are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. 

To earn this designation, candidates must either pass a comprehensive three-part exam covering all aspects of the tax code or have worked at the IRS for at least 5 years, in a position applying and interpreting the tax code and its regulations.  Enrolled agents are also subject to a rigorous background check and 72 hours of continuing education every 3 years.

RIA

RIA stands for Registered Investment Advisory, and RIA firms are registered with the Securities and Exchange Commission (SEC) or state securities regulators and are held to the fiduciary standard by the Investment Advisers Act of 1940, as well as similar state laws.9 

Hoover Financial Advisors is an independent RIA firm and as such, held to this higher fiduciary standard.  In contrast, broker/dealer firms are held to a lower “suitability standard in the advice provided to their clients. 

We hope this discussion of “Alphabet Soup” used in the financial services industry has been informative and yet not overwhelming!  Consistent with the CFP® and CIMA® designations, as well as some of the other professional designations held by colleagues here at Hoover Financial Advisors, we feel that as fiduciaries – our commitment to our clients’ best interests makes a difference every day!10

Sources

  1. What are those letters after my financial advisor’s name?
  2. Fiduciary Standard of Care
  3. CPA Examination
  4. CFA Institute
  5. Benefits of CIMA Certification
  6. Charted Financial Consultant – ChFC
  7. Chartered Life Underwriter
  8. What is an Enrolled Agent
  9. Charles Schwab – Exploring Independence
  10. Charles Schwab – Experience the Schwab Difference