Financial Designations Are not All

Created Equal
by Mark P. Cussen,CFP®, CMFC (
Whether you're new to the financial services business or an experienced veteran, earning
one of the many professional designations now available will provide you with a lot of
benefits. Increased marketing exposure, credibility and compensation are just some of the
advantages offered to those willing to fulfill the rigorous requirements for certification.

However, the proliferation of designations, particularly in the financial planning field, has
complicated the process for those trying to decide which designation will benefit them
the most. Over the last several years, a host of new designations have sprung up that
offers advisors specialized training in various niches of practice. However, many of these
newer credentials require far less academic coursework and training than what is
demanded by the older, more established designations. In this article, we'll go over some
of the more respected designations and what they entail.

New Kids on the Block

The increase in new designations has sparked debate in the financial services industry
regarding the credibility of certain designations compared to others. While there is no
black-and-white line of separation between them, a general distinction can be made
between the "old school" designations that have been around for decades and the newer
ones that continue to crop up. The designations that are most respected and recognized by
the financial industry and the media include:

1. Certified Financial Planner (CFP)

This is perhaps the most widely recognized credential in the financial planning
industry. The media has promoted this designation over most others for years,
primarily because of its unbiased approach to teaching the financial planning
process and the rigorous certification requirements that are administered by the
CFP board. The academic requirement consists of five courses covering
insurance, estate, retirement, education, tax and investment planning plus ethics
and the financial planning process. Once that is complete, students must sit for the
board exam. This is a 10-hour, 285-question test that spans two days and includes
two comprehensive case studies. Once a passing grade has been achieved,
prospective certificants must also complete at least three years of professional
experience plus a bachelor's degree in order to obtain the CFP designation. (To
learn more, read Is A Career In Financial Planning In Your Future and Studying
For The CFP Exam.)

2. Certified Public Accountant (CPA)

The CPA is by far the oldest and most established financial credential in America.
CPA requirements vary by state but generally you will require 150 semester
hours of undergraduate level courses plus a bachelor's degree or higher in order to
 sit for the 19-hour, two-day exam. There could be other requirements such as a
minimum number of credits in accounting and business, or even business
law. Check with your state's board of accountancy for the most up to date
requirements. This comprehensive exam covers accounting, auditing,
bookkeeping, taxes and ethics, among other topics. The CPA designation has long
been widely recognized by the public as the definitive credential of tax expertise.

3. Enrolled Agent (EA)

This is a lesser tax designation often obtained by those who focus on preparing
income or estate tax returns. The special agent exam administered by the Internal
Revenue Service (IRS) is broken down into four three-hour sessions spanning two
days. The test covers personal, estate and corporate taxes, as well as ethics and
Internal Revenue Service regulations, but does not include straight accounting,
auditing or bookkeeping of any kind. It could perhaps be said that the Enrolled
Agent designation allows tax preparers to roughly equate themselves to CPAs
within the specific confines of tax preparation.

4. Chartered Life Underwriter (CLU) and Chartered Financial Consultant

(ChFC)
Both of these designations were originally created by the life insurance industry.
The CLU designation requires the same five core courses as the CFP designation,
plus three additional elective courses. The ChFC designation has the same
requirements, except that it tends to embrace general financial planning issues as
opposed to the CLU, which focuses more closely on life insurance and its laws
and regulations. There is no comprehensive board exam required for either
credential.

5. Certified Employee Benefit Specialist (CEBC)

As the name implies, this designation is designed specifically for those who sell
or administrate employee benefit plans. The curriculum for this designation
consists solely of eight courses covering various business, insurance, retirement,
pension and regulatory topics. No comprehensive board exam is required. Like
the CLU or ChFC, much of the material in this coursework is also covered in the
CFP curriculum.

6. Registered Health Underwriter (RHU) and Chartered Property Casualty

Underwriter (CPCU)
These designations denote mastery of each of their respective lines of insurance.
Each designation requires the completion of several courses of intensive academic
study, but as with the CLU, ChFC and CEBC there is no board exam. Generally,
these designations are only earned by those who intend to spend the duration of
their careers focusing on health or property-casualty insurance.

7. Chartered Financial Analyst (CFA)

This designation is generally considered to be one of the most difficult and
prestigious credentials in the financial industry, at least in terms of investment
management. The academic requirements for this designation are second only to
 those for CPAs. Three years of coursework must be completed that covers a range
of topics and disciplines such as technical and fundamental analysis, financial
accounting and portfolio theory and analysis. Those who earn this designation
often become portfolio managers or analysts for various types of financial
institutions. Holders of these credentials, like CPAs, tend to be compensated
chiefly by salary with performance-based incentives (if they take corporate jobs),
or from business revenue, for those who start their own private investment
management companies. (To learn more, read What Does "CFA" Mean? and
Preparing For A Career As A Portfolio Manager.)

Separating the Wheat from the Chaff

While these designations have long since been accepted as part of the financial services
establishment, the new wave of credentials that has since arisen has served to cloud the
validity of some of these older certifications. However, closer analysis of many of these
designations quickly reveals that they only require a small fraction of the coursework that
is demanded from the traditional sources of accreditation. For example, the Accredited
Asset Management Specialist (AAMS) and Chartered Mutual Fund Counselor (CMFC)
designations can certainly aid advisors in the investment selection and management
process (and will also likely sound impressive to clients and prospects). However, the
academic curriculum required for either certification barely scratches the surface of the
material covered by either the CFA or even the CFP curriculums. But while the
coursework required to obtain most other designations does not compare to that of the
CFA, a notable exception has arisen in recent years.

The Licensed International Financial Analyst (LIFA) credential covers much of the same
material as the CFA curriculum in its coursework, but is considerably more flexible in
terms of administration. Unlike the CFA exams, which are administered at set times in
specific, approved locations, LIFA students can go to any Thomson-Prometric testing site
and sit for their exams, which can be administered at least 260 days out of the year. LIFA
exams are also less expensive, and students may also petition to bypass the first two
levels of the exam and sit directly for level III. It remains to be seen how this newer
designation will be compared to the traditional CFA certification.

Indeed, some designations that have recently been created function chiefly as
"marketing" designations (i.e.credentials that are geared toward advising senior citizens.)
These certifications often focus more on training advisors how to effectively market
certain kinds of financial products and services to senior citizens. Therefore, a substantial
portion of the training is geared primarily toward exploring the mindset of the average
senior citizen and how that can be used to induce them to follow the newly credentialed
advisor's recommendations.

Keeping Perspective
Certainly, not all financial professionals who earn designations with less stringent
requirements are dishonest or incompetent; merely that many of them have not received
the same level of training and experience as others who have earned one or more of the
older designations. But even the lesser designations can help advisors to better assist their
clients, if only in specific areas. In terms of marketing, however, the uneducated public
will have difficulty discerning between the services that a Certified Senior Advisor and a
Certified Financial Planner are able to provide for them. This, of course, has fostered
some resentment from advisors who have earned the more difficult certifications. Many
of them are seeking legislation that would either curtail the influx of new designations or
clearly label them as being lesser in scope. Time and legislation will ultimately determine
how this issue gets resolved.

For more insight, see The Alphabet Soup Of Financial Certifications.

by Mark P. Cussen,CFP®, CMFC (Contact Author | Biography)

Mark P. Cussen has more than 15 years of experience in the financial industry, which
includes working with investments, insurance, mortgages, taxes and financial planning.
He has two years of experience in writing and editing insurance and securities test
training manuals, as well as other financial topics. He has also worked in retail, discount
and bank brokerage systems and been involved in a venture capital enterprise in the oil
and gas sector. Cussen has a Bachelor of Science in English from the University of
Kansas and completed his CFP coursework at the Bloch School of Business at the
University of Missouri-Kansas City in August of 2001.