5 different types of financial planners, and which one might be right for you
Not only can the finance field seem obtuse, the wide variety of people who can help you with your money – and the alphabet soup in their titles – can seem to give you a headache. According to 2020 data from the United States Bureau of Labor Statistics, there are more than 218,000 personal financial advisers, a profession that encompasses a wide range of skills, including advising clients on financial plans, knowledge of tax strategies and investment, securities, insurance, pension plans. and real estate. But, there are many specific designations under the umbrella of financial planning. Here is a cheat sheet for five of the most commonly used acronyms. (You can use this tool to be matched with a planner that meets your needs.)
CFP – Certified Financial Planner
CFPs help create and maintain a financial plan and advise on the selection of specific investments and help their clients through divorce or prepare for retirement. They are held to a fiduciary standard, which means they are required to act in the best interest of their client, without any monetary influence or commission earned by suggesting certain products. To become a CFP, a bachelor’s degree is required as well as college-level courses in a program registered by the CFP Board, a board exam and either 6,000 hours of work experience related to financial planning, or 4,000 hours. hours of learning. This makes the CFP designation one of the most rigorous certification processes for financial planning.
Best for: People looking for strategic advice in their financial life. (You can use this tool to be matched with a planner that meets your needs.)
CFA – Chartered Financial Analyst
CFAs specialize in investment analysis and portfolio management and often work in institutional investment firms, insurance companies, pension funds, banks, and universities. This designation is achieved by meeting the requirements set by the CFA Institute, which include passing three levels of the CFA exam, gaining qualified work experience, submitting professional reference letters, and applying to join. the CFA Institute.
Best for: If you have a lot of wealth to manage or want to look for investment opportunities in large companies, you can consult a CFA.
CPA – certified public accountant
While all CPAs are accountants, not all accountants are CPAs – the main difference being that the CPA designation requires specific education and experience requirements, such as a bachelor’s degree with some semester units in subjects. related to accounting and business, successful completion of the uniform CPA exam. , by passing a professional ethics exam and experience in general accounting supervised by a CPA holding an active license. As a result, CPAs are highly regarded professionally and are responsible for assisting businesses and individuals with their tax strategies and in tax return preparation, financial planning, book audits, investments, taxes. and mergers and acquisitions.
Best for: If you are looking for help with personal taxes or looking to start a business, it may be a good idea to consult with the CPA.
CLU – approved life insurer
A person specializing in life insurance and estate planning will often have a CLU degree from the American College of Financial Services after taking courses in life insurance, life insurance law, planning. estate and planning for business owners and professionals. While many financial planners have an understanding of estate planning, CLUs undergo specialized training to advise clients on all matters, including life insurance. Tiffany Lam-Balfour, Investment spokesperson for NerdWallet, said: “This designation is intended for advisors who have extensive knowledge of life insurance. Life insurance can play an important role in estate planning for individuals, families and business owners. If your financial plan has life insurance needs beyond basic life insurance, it may be helpful to consult an advisor with an EULA designation to make sure you are considering all of your options.
Best for: If you need estate planning advice when it comes to life insurance.
ChFC – Chartered Financial Consultant
This designation – which was created to replace the CFP designation – is intended for advisors who have taken courses covering advanced financial planning such as retirement and tax planning, estate and insurance planning, l ‘investing and other specialized strategies like divorce, special needs, traditional non-families and more. They are also held to a fiduciary standard. Becoming a ChFC requires more coursework (9 college-level courses) than becoming a CFP, but it does not require a full board review like a CFP designation does (although it does require a test at the end of each class). The ChFC program, a person must have at least three years of experience in the finance industry. “This designation is an alternative to the CFP designation, but both titles are appropriate credentials for advisors who are able to provide comprehensive and detailed financial planning and advice,” explains Lam-Balfour.
Best for: People looking for strategic advice in their financial life.