What Is the Financial Advisor's Designation?
The advisor's designation tells you about his educational background. Designations include Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), Certified Public Accountant (CPA), Chartered Life Underwriter (CLU), or attorney (JD), among others. These signify backgrounds in finance, business, accounting, insurance, and law.
Remember, though, that background is only one aspect of a planner.
Many very naturally assume that CPAs have a much stronger background in tax law and tax planning than other similar professionals. Their proficiency most often is related to their experience, not their CPA designation. You probably didn't know that the CLU exam has more questions regarding income taxation than does the CPA exam.
As another example, the ChFC exam is clearly a broader and more rigorous exam (and therefore accredited like other colleges and universities) than the CFP designation, though CFP is marketed better and is more popular.
A particular area of specialty doesn't necessarily mean anything either. CPAs major in accounting, with most of the college courses in accounting focusing on the historical point of view. They look at historical data, place it on a form, and then prepare a tax return or financial statement. A good CPA to assist with financials and money management is necessary for every business.
But that's not the same as a financial planner. Even colleges recognize finance and accounting as different majors. Financial planning is applied economics. It takes a futuristic approach. It is analytical and has a long-term strategic perspective. It's proactive, not reactive.
Typically the very worst financial advice comes from journalists. They are infamous for taking extreme positions, glorifying unreasonable returns, and sensationalizing stories in order to sell magazines. Remember, if it sounds too good to be true, it probably is.
A designation may help in determining the financial planners areas of expertise, but don't get pigeonholed into common assumptions of such designations. - 16931
Remember, though, that background is only one aspect of a planner.
Many very naturally assume that CPAs have a much stronger background in tax law and tax planning than other similar professionals. Their proficiency most often is related to their experience, not their CPA designation. You probably didn't know that the CLU exam has more questions regarding income taxation than does the CPA exam.
As another example, the ChFC exam is clearly a broader and more rigorous exam (and therefore accredited like other colleges and universities) than the CFP designation, though CFP is marketed better and is more popular.
A particular area of specialty doesn't necessarily mean anything either. CPAs major in accounting, with most of the college courses in accounting focusing on the historical point of view. They look at historical data, place it on a form, and then prepare a tax return or financial statement. A good CPA to assist with financials and money management is necessary for every business.
But that's not the same as a financial planner. Even colleges recognize finance and accounting as different majors. Financial planning is applied economics. It takes a futuristic approach. It is analytical and has a long-term strategic perspective. It's proactive, not reactive.
Typically the very worst financial advice comes from journalists. They are infamous for taking extreme positions, glorifying unreasonable returns, and sensationalizing stories in order to sell magazines. Remember, if it sounds too good to be true, it probably is.
A designation may help in determining the financial planners areas of expertise, but don't get pigeonholed into common assumptions of such designations. - 16931
About the Author:
Hank Brock is president of Brock and Associates, LLC, a firm specializing in retirement, estate, tax, and business planning. For more detailed information on selecting a financial planner, visit us online.
posted by Edgar at
01:51
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