Which Type of Financial Advisor is Right for You?

Say you're nearing retirement age, and you want to improve your portfolio to make sure it lasts a lifetime and helps meet your personal goal of putting the grandkids through college someday. You also need to help your grown daughter as she goes through a divorce, and you have a desperate need for estate planning -- as well as ongoing tax counsel -- plus a needs evaluation on long-term care insurance, and you've heard about annuity products that could help you lock in an income stream for you and your spouse for the rest of your lives.

Theoretically, that means you are looking for a financial advisor who is a CFP, CCPS, CDP, EA, CIC, CEP, or CAS.
Or perhaps you'd settle for a CPA/PFS who also holds the AEP, BCA, CDFA, CAA, CASL credentials, although there's definitely a chance you won't get enough advice on the grandchildren's college savings that way.


You should be. There are more than 100 professional designations and credentials for financial advisors, and that doesn't count some of the flimsy, half-hearted, or just plain silly things that some advisors latch on to as a way to impress you. Every few months, there seems to be another new designation, as if consumers or the financial-services industry need them.

Advisors use financial licenses and designations to market themselves to you. Oh, they'll say that they got the credential in order to be more qualified to handle a specific financial task or job -- and there may be some truth to that -- but they know that the more credentials they have, the more they can impress potential customers, and the more services they can offer their clients.

If credentials are truly important to you, and you have the needs laid out in the hypothetical above, you'd hire a Certified Financial Planner (CFP) who is also a Certified College Planning Specialist (CCPS), a Certified Divorce Planner (CDP), an Enrolled Agent (EA, for your tax needs), a Chartered Investment Counselor (CIC), a Certified Estate Planner (CEP), and a Certified Annuity Specialist (CAS).

Or, if you went the other way, you'd have a Certified Public Accountant/Personal Financial Specialist (CPA/PFS), with a whole raft of other credentials to cover the rest of your needs.

Yet the truth is that an ordinary financial planner with a customer base that is mostly people of your age and assets and concerns could probably do the job, without having a single advanced credential. You may feel more comfortable with someone who has additional training to meet your needs, but you can also overvalue that additional training and pick an advisor more on his or her credentials than his or her true worth as a counselor.

Don't sell experience short and give too much credit to letters after the advisor's name. Some titles and designations have valuable significance; but others are misleading, or worse. As a consumer, you should know that titles and credentials can misrepresent an advisor's ability to give you appropriate, knowledgeable advice.

Smart Investor Tip

Don't sell experience short and give too much credit to letters after the advisor's name.

Credential confusion can leave consumers vulnerable to unsuitable recommendations and costly investments; state and federal regulators have reported a huge increase in deceptive practice cases, particularly involving senior citizens, who swallow the alphabet soup as if it's truly meaningful. They believe that advisors with a credential that makes them some type of expert on the finances of senior citizens makes for the perfect helper; however, it may also open the door to rogues and scoundrels. As a result, some states have implemented new regulations that limit the use or mention of credentials by certain types of advisors.
By Chuck Jaffe
Chuck Jaffe is a senior columnist and host of two weekly podcasts at MarkWatch. He has also been a guest speaker on several television and radio shows.

Copyrighted 2020. Content published with author's permission.

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