Don’t be Fooled by a Few Letters- Learn Which 5 Financial Designations Really Matter

It’s important to know what the letters after a financial professional’s name mean. But it’s more important to know which ones really matter.

Credentials serve an important purpose: to let everyone know there’s a certain degree of education, mastery, and professionalism behind a name. But when there are dozens of credentials, as there are in the financial industry, it’s more than a simple matter to find out who really knows their stuff.

It’s pretty important to know one set of letters from the next, since many financial services jobs don’t require a degree, a fiduciary oath, or very much continuing ed. On the other hand, some positions require years of study and continuous re-education to stay certified, plus a crushingly difficult exam.

To help you find the right financial professional, here’s a quick guide to the financial designations that really matter. Scan the list, but know that there’s a full list over at the FINRA website, in case you encounter some obscure credentials on your quest to find the perfect financial advisor for you.

Financial Designations: The Big Five

1.Certified Financial Planner (CFP). CFPs are among the cream of the crop of financial designations. These guys know a lot about a broad range of topics. They need to, since that’s what is required to help you see the big picture and formulate all-inclusive plans for achieving goals.

Unlike many other financial designations, this one covers more than one financial specialty. When you hire a CFP, you’re getting a lot of bang for the buck. They know about:

  • Taxes
  • Retirement Planning
  • Estate Planning
  • Stocks & Bonds
  • Insurance

In addition to their rocket-scientist level of knowledge about the financial world, CFPs also adhere to a strict set of ethical guidelines. We like that!

2. Certified Public Accountant (CPA). CPAs are tax wizards and accounting geniuses, but if you’re looking for a financial advisor their knowledge may be a tad too specialized for your purposes. CPAs may actually know enough to create a financial plan for you, but their CPA designation does not indicate training in areas outside of taxes and bookkeeping.

3. Chartered Financial Analyst (CFA). There’s a three-part exam for this, and fewer than 20% of test-takers pass all three on the first attempt. The overall passing rate is a mere 37%. That should tell you a lot.

Preparing for this monster of an exam takes an average of six months, studying approximately 20 hours per week. And that’s after completing an average of four years of program study… more time put in than a Bachelor’s degree!

4. Chartered Life Underwriter (CLU). The CLU designation does indeed signify sound financial knowledge… about insurance. CLUs mostly work as insurance agents and although they can help you navigate the mystifying world of insurance, they might not be your first choice for creating a financial plan for your life.

CLUs only need to take a 10-hour course and then sit through 20 hours of exams. While that much test-taking is impressive (provided you pass), it’s hardly at the level of what CFPs put themselves through to earn their credentials. But if it’s insurance you need, these are the guys to go to.

5. Chartered Financial Consultant (ChFC). The name makes it sound like exactly what you’d be looking for if you wanted to hire someone to guide you with your finances. While that may indeed be true, the requirements aren’t as stiff as they are for the CFP or the CFA.

To become a ChFC, one must show three years’ business experience, take nine classes, and take a final exam. This is roughly equivalent to one year of college (compare that to the four years of study for the CFA). They must also complete an additional 30 credits every two years, so ongoing education is important for this group.



PJ Wallin

PJ Wallin is the founder of Atlas Financial, a fee-only financial planning, investment management, and tax services firm located in Richmond, Virginia. Atlas uses an all-inclusive approach provides a clear overview of your financial potential and gives you the comprehensive support necessary for peak success.

PJ and I became friends through NAPFA and I asked him to write some thoughts on Financial Designations as a guest topic for this site.