The media refers to all of the initials after an advisor’s name as “alphabet soup”. Sometimes the initials are referred to as designations. Other times they are called certifications. I am going to use certification when I refer to them. Financial advisors acquire certifications when they accumulate specialized knowledge that increases their competence. Most advisors use the initials to prove they are experts in their fields. For example, a CPA knows more than an accountant who is not a CPA.
However, what if an advisor purchased several certifications so he appears more knowledgeable than he really is? This is a major problem because the advisor is using a deceptive sales practice to get you to select him. Let’s call the tactic what it is – misrepresentation that violates industry regulations. Do you want this type of person controlling or influencing the investment of your assets? Absolutely not!
If this is your response then you better learn how to tell real certifications from fake ones. To begin with there are four top notch certifications out of more than 200:
- CFA® (Chartered Financial Analyst)
- CFP® (Certified Financial Planner)
- CPA/PFS® (Certified Public Accountant/Personal Financial Specialist)
- CIMA® (Certified Investment Management Analyst)
It starts with prerequisites. High quality certifications have them, for example, years of experience, college degrees, and other minimum requirements. Low quality credentials do not have them. In the latter case, what’s important is the advisor’s ability to pay versus qualify.
Next is curriculum. The best certifications have extensive curriculums that can take months or years to complete. For example, the CFA® program takes three years to complete. Method of learning may be classroom (preferred) or online. Low quality certifications may not have curriculums. They are awarded based on life experiences or there are a few pages of content. You should also determine how long it takes to complete the programs.
Next are examinations. The best programs have proctored examinations in classrooms. Some programs have timed examinations online so it is difficult to cheat. Low quality programs may not have examinations and if they do they are open book.
Last is Continuing Education (CE) requirements. High quality certifications may require a substantial number of hours every one or two years. An increasing number also have examination requirements to verify their designees are acquiring the knowledge. Low quality programs may also have CE requirements because it is a way to obtain additional payments from advisors who have purchased their certifications. You will have to dig a little deeper by looking at their prerequisites, curriculums, and examination requirements.
How do you learn more about specific certifications? There is an easy way and a more time consuming way. The easy way is go to Investor Watchdog (www.InvestorWatchdog.com) / Get the Facts / Certifications and look them up. You will see Watchdog has already done the work for you. Or, you can go to the website of the organization or company that sponsors the certification. It may take up to an hour, but you should be able to get some sense of the validity of the credential. When in doubt, call the organizations and ask them specific questions about their programs, testing, and CE requirements. If you go this route ask the company what the advisor paid for the certification and how long it took to obtain it. You may or may not get accurate information. Remember, this may be a scam that is designed to mislead you.