Does Your Adviser Have a “PhD in Financial Planning?”

 

In the university setting obtaining a PhD or M.D. is a milestone. It means years of study, research, sacrifice, and hard work. Your peers immediately understand what you have been through to obtain that level of education. For many, it also comes with the new title of doctor or professor. These titles leave no confusion regarding the individual’s experience, education, or capability. 

Unfortunately the same cannot be said in the financial planning industry. “Financial adviser” is a general title that may be used equally by someone with many years of experience and education or by someone with little to no education or experience in the field. 

Furthermore, it’s not uncommon for some financial advisers to leverage “financial planning” under the guise of selling their products. Be wary of a product being presented as the solution to your financial planning questions or concerns.

How can a consumer know who to turn to for financial guidance in this environment? This report will explain the meaning behind many professional designations in the financial planning industry, and outline the benefits of seeking an experienced planner, so you can be an informed consumer when it comes to sources for financial advice.

 

Professional Designations

One way to gain insight into the qualifications of a financial adviser is to investigate any professional designations they hold. You may have noticed the alphabet soup of letters behind a financial adviser’s name. Professional designations are common in the financial industry, but what exactly do these acronyms mean? How does a CERTIFIED FINANCIAL PLANNER™ (CFP®), which requires rigorous coursework followed by an examination, a bachelor’s degree, and relevant workplace experience, compare to a Master Financial Planner (MFP), which only requires an undergraduate degree and a job in finance? These titles may sound equal, but they aren’t.

There are more than 200 different designations in use in the financial services industry. One designation may take an afternoon seminar to obtain and use, and another may take several courses of study and a multiple day examination. Some require many hours of continuing education per year, while others don’t require anything to maintain.

FINRA, one of the industry watchdogs, maintains a database of these professional designations. From “3 Dimensional Wealth Practitioner” to “Wealth Management Specialist,” FINRA lists and provides information on all 209 different designations. All of these designations fit into a broad spectrum of how they are both initially obtained and how they are maintained going forward. 

If your adviser has a professional designation, take a moment to look up what the designation means and what it took for them to earn it. A grandiose title may not carry as much weight as is seems.  

Examples of Respected Financial Titles

With hundreds of designations available to advisers a handful rise to the top within the industry. 

• CERTIFIED FINANCIAL PLANNER ™ or CFP®
  is a well-respected designation that provides training in all areas of financial planning (Insurance, Tax, Investment, Retirement, Estate Planning). CFP® holders must act as a fiduciary when providing financial advice, putting the interest of their client ahead of all else. Requirements include a bachelor’s degree and relevant course work in the areas of financial planning equivalent to 18 semester credit hours of education. Upon completion of the initial coursework, candidates are eligible to take the comprehensive examination offered by the CFP® Board. Upon passing the exam, candidates need to have 4,000-6,000 hours of relevant financial planning experience before they are even able to use the designation. Thirty hours of continuing education are also required every two years to maintain this designation. 
   
• Chartered Financial Analyst® or CFA®
  is a designation specific to investment planning. It is considered a graduate-level curriculum and is comprised of three separate exams offered once per year. Holders of this designation will be especially well versed in portfolio management, financial analysis, and general market topics.  
   
• Certified Public Accountant or CPA
  will have a high level of knowledge regarding taxes and other accounting needs. CPA candidates must complete an extensive level of education pertaining to accounting. Four levels of examinations are also required as well as 6-24 months of experienced before the designation can be used. 
   
• Chartered Life Underwriter or CLU®
  has a higher level of training in insurance and other risk management. A series of courses and exams are required to obtain this designation.  Many CFP® holders will also pursue this designation to demonstrate their expertise in the area of insurance planning. The CLU® is also one of the oldest designations in the financial planning industry, dating back to the late 1920s.  

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A Comprehensive Approach

Similar to academia, a well-rounded education is important in the financial planning profession. All areas of financial planning are interconnected. A change in your investments can have a ripple effect on your retirement and estate planning. A new tax law may necessitate a change to your estate plan and your investment strategy. If your adviser lacks education or experience in an area of financial planning, it can cause significant problems for your overall financial picture.

For example, if your adviser’s education and experience is solely focused on investment management, they may not think through the tax ramifications of selling and reinvesting your current portfolio, leading to a surprise tax bill the following April. If your adviser is not accustomed to working with clients in a university setting, they may miss the opportunity to explore the tax efficiencies of Roth contributions in your university retirement plan. Without an estate planning background, it’s common for advisers to miss the step of updating beneficiary designations to match your estate documents. This misstep can derail your intentions for your heirs and may cost them significant tax and/or legal expenses. These mistakes can easily occur even with a credentialed adviser when they are only focused on one area of your financial plan rather than the entire picture. 

 

 

The Solution

When seeking the assistance of a financial planning professional, keep your own PhD or M.D. credentials in mind. The title of financial adviser does not provide the same clarity on education and experience as your title of professor or doctor. Be sure to review any education or professional designations the individuals hold within the company. Make certain all of your financial planning needs can be covered at the same firm—from retirement planning to proactive tax planning and everything in between. Ask the adviser if they will serve you as a fiduciary, putting your best interests above their own, and if they are willing to put that in writing. With this information you’ll be able to identify a financial planning firm that can meet your needs for years to come. 

Filbrandt & Company has been working with individuals in the university community for many years. Advisers and employees in our firm hold the CFP®, CFA®, CLU® designations, as well as other industry designations. Our emphasis on the importance of credentials and continued education, along with our focus on providing comprehensive financial planning to the university community, makes our firm a strong choice when considering a partnership for your financial planning. To talk to a member of our firm call 844-948-0894.

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Related Articles

• To learn how you can evaluate a financial planner, read this report: Your 6-Step Checklist: How to Evaluate a Financial Planner
• To learn more about the importance of seeking guidance from an independent fiduciary, read this report: Who Can You Really Trust With Your Financial Future?  

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Have a Question?

As part of our commitment to promoting financial literacy among university professionals, you can schedule a 15-minute phone call with an expert at Filbrandt & Company to learn how these important topics apply to your own situation.