Lorraine Ell clears the confusion.

Investors are confused by the myriad acronyms replete in the financial services industry as they appear after the names of any number of Vice Presidents and Directors. Many designations are merely certificates issued without rigorous tests or any assurances of a defined body of knowledge that should include financial accounting, investment analysis, and the law. Not surprisingly, in this complex and turbulent industry only two designations require a regimen of exams and a college degree, the Chartered Financial Analyst (CFA®) and the Certified Financial Planner (CFP®).

The most coveted is the Chartered Financial Analyst designation. This credential is a requirement for a career in investment research and stock analysis. To become a Financial Analyst Charterholder, applicants must pass three six-hour exams within a five-year period. In addition, Charterholders must have 48 months of work experience in an investment decision-making position to qualify. Only one in five aspirants completes all three levels. The exams are given in 89 countries and approximately 90,000 recognized individuals hold the designation, worldwide. The program addresses quantitative methods, economics, ethical and professional standards, corporate finance, investments and derivatives.

Whereas the CFA® concentrates on the analysis of investments and financials, the CFP® approaches finances from a client-centered perspective. The Certified Financial Planner designation provides financial professionals with a broad-based knowledge of taxes, insurance, estate planning, retirement planning, and the fiduciary level of ethics for recommending singularly appropriate investments that meet a client’s specific financial and life goals. Applicants must pass five courses on these subjects and take a ten hour comprehensive examination. To be granted use of the CFP® designation, candidates must also have three years of experience in personal financial planning.

Both the CFA® and CFP® have governing boards to uphold the professional standards and ethics of the designations. Investors can check with the governing boards to be sure their financial advisor is a member in good standing.

Holding both the Certified Financial Planner and Chartered Financial Analyst designations is an uncommon distinction. In the United States, there are approximately 1,100 financial professionals with both a CFA® charter and CFP® certification.

Tags: certified financial planner, CFA, CFP, charted financial analyst, credentials, financial advisor, financial plan, financial professional, governing boards, investment research, stock analysis