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How Doctors Can Ensure Financial Advisers Have the Right Credentials


It is shameful that there is no regulation on who can be called a financial adviser. Luckily, there are some credentials to look for that suggest a strong background.

In the medical world, we insist on a basic level of education and training before allowing someone to be called a physician. 

Guess what! Any of you could be hired by a brokerage house tomorrow and put "financial adviser" on your business card the same day. Or, you could call yourself a "financial planner" or a "wealth manager." Knock yourself out.

It is shameful that there is no regulation on who can be called an adviser in the financial world. Luckily, there are some credentials that suggest at least a basic amount of initial training. Let's review them now.

The certification in financial planning requires a bachelor's degree, a year or two of dedicated study, successfully passing a difficult examination, and a full three years of planning experience. Adherence to a code of ethics and continuing education is required and monitored by the CFP board. Interestingly, a few years ago the CFP board began pushing for a fiduciary standard for all CFPs. At that point, brokerage houses began telling their stockbrokers to stop promoting the certification (if they had it). The CFP(TM) certification is rapidly becoming the standard of the profession. In this day and age, I'd think twice about using a planner that does not have this certification.

The chartered financial consultant (ChFC) has similar educational requirements to the CFP(TM) certification, but is not very prevalent anymore. The ChFC also has a close relationship to the insurance industry. Take that as a warning.

The certified public accountant is a certification with high standards and ability to perform accounting and tax procedures and provide advice. The American Institute of Certified Public Accountants has added a course of training to result in the "Personal Financial Specialist" certification to add financial planning training and skills. The designation carries the assurance of rigorous education and testing. An individual with CPA/PFS credentials is well qualified to be a financial planner. However, be aware that some have crossed over to the dark side of commissions and are not fiduciaries. Make sure to ask.

This represents a program designed to add some expertise in investment management. It is not a holistic education on financial planning. You will often see the CIMA degree associated with one of the other degrees above if the person is a planner and not just an investment consultant.

The chartered financial analyst has training to make investments. It is a vigorous and difficult education with hard testing. There is little to no training in any of the other general aspects of financial planning or advice. You may see a CFA operating in a firm as a portfolio manager, but you will almost never see individuals with the CFA certification holding themselves out to be financial planners.

The chartered life underwriter is pure insurance training. These individuals do not spend any significant time on financial planning. A person with only CLU training is likely to see life insurance as a solution to most financial issues.

An individual with this graduate degree has training for business issues with no particular emphasis on the various aspects of investment planning or general financial planning. Having an MBA may add some skills, but is not enough of an educational background to be a good financial adviser.

This designation appears on business cards and on other signs for investment and planning firms. It is a registration and not a form or training, competence, ethics, or certification. It means "Registered Investment Adviser" and certifies that the firm and its planners are registered with either the state or the Securities and Exchange Commission. All fee-only advisers either own or work for an R.I.A., but these organizations can also accept commissions. Technically, an R.I.A. is supposed to be a fiduciary, but many brokerage houses have muddied the waters by allowing employees to follow less than fiduciary standards. What you want for fiduciary financial advice is a fee-only financial planner (who is usually the owner of an R.I.A. or works for an R.I.A.). If you have a stockbroker or insurance agent as an "adviser," you may pay dearly.

Again, a well-trained financial planner will have a CFP or a CPA/PFS certification. Accept no less.

If someone other than you is compensating the "planner," the planner will have many conflicts of interest to overcome. Sure, there are ethical planners that take commissions, but you are stacking the deck against you searching for them.

Before selecting a planner, read the firm's ADV, as this document discloses a great deal of information to the regulators. What you find in the ADV might help you determine if that firm and planner are the right fit for you. 

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