In the pursuit of senior clients, some less-than-scrupulous investment advisers have resorted to using bogus credentials. At last count, there were more than 200 professional credentials available for financial advisers, but if any adviser had acquired any credential that connoted specialized knowledge or expertise that he did not possess, the adviser is guilty of using a deceptive sales practice to enhance his or her appeal. Such practices are in violation of accepted industry standards and have actually been the subject of congressional review.
This week the Securities and Exchange Commission announced that it is actively reviewing the materials that advisers submit to them for suspect information, “Some of the areas they’re looking at are education, business background, disciplinary disclosures and credentials,” said Marilyn Miles, vice president at National Regulatory Services. “They’re not taking (those items) at face value anymore.”
According to Investorwatchdog.com, there are four “top-notch” adviser credentials:
• CFA (certified financial analyst)
• CPF (certified financial planner)
• CPA/PFS (certified public accountant/personal financial specialist)
• CIMA (certified investment management specialist)
According to this website, these credentials meet their standards for high quality professional designations, and the site actually lists all 200 credentials with their requirements. Go to www.InvestorWatchdog.com, click on “Get the Facts” then click “Financial Certifications” to see their lists.
This site states that there are four essential components to any professional designation: prerequisites, curriculum, examination and continuing education. High-quality credentials call for years of experience and college degrees, among others, before a candidate can even begin the process to earn a designation.
The best certifications have curriculums that cover a plethora of topics and require months or years to complete. In my case, the CFP designation had an extensive curriculum that covered topics with which I was totally unfamiliar. The CFA program takes three years to complete; I began that program at one time, and it was tough! High quality credentials may call for classroom learning, augmented by online study. Conversely, low-quality certifications may not even have curriculums. Such designations are often awarded based on life experiences, or there are a few pages of content.
The CFP program had a 10-hour, closely proctored exam over 2 days. Prior to the exam, I studied for more than 6 months! Some lesser credentials may not even have exams, or if they do, they may be open-book tests.
Finally, high-quality designations have meaningful continuing education requirements. In the case of the CFP designation, 30 hours of CE must be completed every two years. Included in that is a requirement that at least two of the hours must cover “Standards of Professional Conduct.”
This listing of only four designations does not do justice to several other designations, such as ChFC (chartered financial consultant) that is provided by the American College. I am proud to say that I earned that credential in 1983, and the study required, along with the exam itself, was rigorous. Another important designation offered by the American College is the CLU (chartered life underwriter) designation, which designates a life insurance professional. I must say that many CLUs have greater life insurance acumen that do the average CFP certificant.
Designations are certainly not the only determinant in choosing an investment adviser. One good way to determine if an adviser is competent is to interview his or her current clients. It is also vitally important to check out an adviser’s status on finra.com. If he or she has had complaints or been reprimanded, such actions can be found in their records.
Greg Roberts is a certified financial planner with 35 years of financial and estate planning experience.