As we enter the New Year many of you may have goals that involve better organizing your financial affairs. As part of that, as an estate planning attorney, it is my hope that you are planning to review your will and trust documents to determine if updates are needed (and taking the appropriate steps to get those updates completed) or, maybe you’re FINALLY going to take steps to work with an estate planning attorney to create your estate plan. If so, good for you! It is a loving and responsible act, knowing that you’re doing what you can to care for your loved ones. Whatever your situation, if you’re in a “let’s finally get this done” mood and are considering hiring or changing financial advisors, I thought this article I found on MarketWatch, 1/12/22, written by Alisa Wolfson would be helpful. It helps to sort out who’s who out there in the world of financial advisors.
Not only can the field of finance feel obtuse, the wide variety of people who can help you with your money — and the alphabet soup that their titles contain — can seem headache-inducing. According to 2020 data from the U.S. Bureau of Labor Statistics, there are more than 218,000 personal financial advisers, a profession that encompasses a broad range of skills including advising clients on financial plans, knowledge of tax and investment strategies, securities, insurance, pension plans, and real estate. But, there are many specific designations underneath the financial planning umbrella. Here’s a cheat sheet for five of the most commonly used acronyms.
CFP — certified financial planner
CFPs assist with creating and maintaining a financial plan and advice on selecting specific investments and helping their clients navigate divorce or prepare for retirement. They’re held to a fiduciary standard, meaning they’re required to act in their client’s best interest, without any monetary influence or commission earned from suggesting certain products. To become a CFP, a bachelor’s degree is required along with university-level coursework through a CFP Board registered program, a board exam, and either 6,000 hours of professional experience related to financial planning or 4,000 hours of an apprenticeship. This makes the CFP designation one of the most rigorous certification processes for financial planning.
Best for: Individuals looking for strategic guidance with their financial lives.
CFA — chartered financial analyst
CFAs specialize in investment analysis and portfolio management and often work at institutional investment firms, insurance companies, pension funds, banks, and universities. This designation is earned by meeting requirements set forth by the CFA Institute, which include passing three levels of the CFA exam, acquiring 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 into large corporate investment opportunities, you may want to 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 educational and experiential requirements, such as a bachelor’s degree with certain semester units in accounting- and business-related subjects, passing the Uniform CPA exam, passing a professional ethics exam and general accounting experience supervised by a CPA with an active license. As a result, CPAs are highly regarded professionally and are responsible for helping both companies and individuals with tax strategies and the preparation of tax returns, financial planning, book auditing, investments, taxes, and mergers and acquisitions.
Best for: If you’re looking for help on personal taxes or looking to start a business, it may be wise to consult a CPA.
CLU — chartered life underwriter
Someone who specializes in life insurance and estate planning will often have a CLU credential earned from The American College of Financial Services after completing courses in life insurance, life insurance law, estate planning, and planning for business owners and professionals. Though 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, investing spokesperson for NerdWallet says, “This designation is for advisers who have deep life insurance knowledge. Life insurance can play an important role when it comes to estate planning for individuals, families, and business owners. If your financial plan has life insurance needs beyond basic life insurance, consulting with an adviser with a CLU designation can be useful to ensure you’re considering all your options.”
Best for: If you need estate planning guidance as it relates to life insurance.
ChFC — chartered financial consultant
This designation — which was created as an alternate to the CFP designation — is for advisers who have completed coursework covering advanced financial planning such as retirement and tax planning, estate and insurance planning, investment, and other specialized strategies like divorce, special needs, non-traditional 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 comprehensive board exam like a CFP designation does (though it does require a test at the end of each course.) To enroll in 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 designations are appropriate credentials for advisers who are able to provide comprehensive and detailed financial planning and advice,” says Lam-Balfour.
Best for: Individuals looking for strategic guidance with their financial lives.
Remember: “An ounce of prevention is worth a pound of cure.” When making your estate plans or when probating an estate or administering a trust, do not go it alone. Be sure to engage a Cincinnati estate planning attorney.
For more information about estate planning, probate, or trust administration in Cincinnati (and throughout the rest of Southwest Ohio) and to review free resources regarding estate planning, probate, or trust administration, visit my website https://davidlefton.com/ If you have questions regarding this article or a particular legal matter, feel free to contact me at 513-399-PLAN (7526). David H. Lefton is an Estate Planning and Probate Attorney. He is a partner in the law firm of Barron, Peck, Bennie & Schlemmer.