Financial Service Designations: A Guide for Physicians

May 4, 2015
Steven Podnos, MD, CFP

The jungle of financial service professionals is a dense one. Here's how to navigate your way out of danger.

I sense a great deal of confusion about the different types of people in financial services. The jungle is dense and there is plenty of danger to avoid. Let's check out the various critters.

Financial Analyst: You are unlikely to encounter an analyst unless you work with a pure investment firm. These individuals usually carry the Certified Financial Analyst (CFA) certification, a rigorous multi-year course of study with exams. CFAs mostly work to put together portfolios for institutions and investment firms. They have no real training in general financial advice.

Financial Planners: Truly a mixed lot, as anyone can call themselves one (or alternatively, call themselves a financial adviser). To sort out the dangerous ones, you would like to know something about their training (if any) and the way they get paid. For training, look for Certified Financial Planner (CFP®) certification. Think of it somewhat like a medical or law degree; it strongly suggests a commitment to education and some standards. The CFP® certification requires: a college degree; a one year to two year course of study specific to financial planning; passing a rigorous exam (with only a 50 percent to 60 percent pass rate); and  at least three years of experience. If your planner has the CFP® certification, you've passed the first hurdle.

Next, I would strongly suggest you find out how the planner/adviser is paid. Anything other than "fee-only" (note that "fee-based" is a different animal and not as good) introduces some ethical challenges for the planner. It means they are getting paid by someone other than you. It means that they may not always put your interests first, and you might always worry why a particular investment is chosen.

I will draw intense criticism for the following from the investment world, but will tell you that any "adviser" you have that works for a bank or brokerage firm has potential conflicts of interest. Some may tell you they are "fee-based," but I have seen many of these accounts in which the client is paying a flat fee as well as owning funds that are paying hidden commissions to the brokerage and "adviser." Look for so called 12B-1 fees on the funds you own for proof of this.

Be careful in the investment jungle. Find a fee-only planner at through the National Association of Personal Financial Advisors and reduce the danger of your journey.