Important Credentials For Brokers
Those will not necessarily be much help when it comes to lifetime financial advice, since the typical licensing review course takes only two or three days. Moreover, the exams are more concerned with a broker's technical proficiency -- understanding of investment issues, legal and regulatory requirements -- than with developing a real-world understanding of risk, diversification, and more.
The National Endowment for Financial Education has done several studies that have consistently shown that rookie brokers are trained without a significant emphasis on "understanding a client's overall financial picture and assimilating the role of individual investments within that picture." (That's not a problem, so long as you only want them to facilitate your trades; the minute you want something bordering on planning, it's a problem.)
Until a decade ago, brokers did not have to even undergo continuing education to retain their license, although it is now required at certain anniversaries of licensing.
Smart Investor TipDon't be fooled by an advisor telling you he is a "registered representative," a "registered investment advisor," or both.
As such, advanced credentials are a good thing; while there is no substitute for the School of Hard Knocks, you don't want to go through that course while riding on your account.
- Certified Financial Planner, Certified Fund Specialist, Chartered Mutual Fund Consultant, or other designations that are described in Swimming through Alphabet Soup, among many others, typically are more common to financial planners, but have found a home with some brokers looking to raise their education and prove their expertise.
- The Chartered Financial Analyst (CFA) designation, one of the most prestigious of all credentials, awarded by the CFA Institute, requires several years of experience, a study course, and exams in securities analysis, portfolio management, financial accounting, economics, and ethics. The designation is common among institutional money managers and Wall Street analysts; it is held in high regard in those circles, so if you find a local stock-picker with a CFA, he or she may merit strong consideration in your selection process. At the very least, he or she will have some chops for doing his or her own stock-picking, rather than relying mostly on company research.
By Chuck Jaffe