A guide to 6 certifications for wealth management and financial professionals

What the letters mean: 6 designations every advisor and client should know

September 17, 2023 6:00 AM

Professional designations are sometimes compared to alphabet soup, but behind them are years of hard work.

Professional designations — those clumps of capital letters that often follow a financial advisor's name — can sometimes look like alphabet soup. But they're far from meaningless.

Take, for example, the gold standard of financial designations: CFP. Literally, it means "certified financial planner." But for the people who earn that certification, it means three years of financial planning experience, months of study and a commitment to a strict moral code.

"These three letters, C-F-P, signify a commitment to excellence and a dedication to competent and ethical financial planning for clients," said Kevin Keller, CEO of the CFP Board, which administers the certification. "When a financial advisor becomes a CFP professional, it sends a message to clients and potential clients that the advisor has met rigorous education, examination and ethical standards."

But beyond CFP, there are plenty of other valuable designations. Just ask Ashley Folkes, the founder of Inspired Wealth Solutions in Birmingham, Alabama. Folkes is a CFP, a certified private wealth advisor (CPWA), a certified retirement planning counselor (CRPC), a retirement income certified professional (RICP) and a certified exit planning advisor (CEPA) — and he's about halfway through the coursework to become an accredited estate planner (AEP).

"Designations create credibility," said Folkes. "For me, I just truly believe that I need to keep learning and stay ahead of the curve for my clients. I think they deserve it."

But even someone like Folkes can't rest on his laurels. For many designations, keeping them requires dozens of hours of continuing education every few years. According to Keller, this is a matter of staying up to date — as long as the economy keeps evolving, wealth managers need to keep up.

"Financial advisors must prioritize continuous learning to stay competitive, serve clients well, adhere to regulations and adapt to economic changes," Keller said. "CFP professionals must meet continuing education requirements to maintain their certification. This means they can provide clients with the best advice for the current environment."

So in terms of expertise, these letters mean a lot. The trouble is there's so many of them — by FINRA's count, there are 242 designations for financial professionals.

"They've just multiplied," Folkes said. "There used to only be about 10 or 12 of them, and it's just gone crazy."

Not all these designations are equally essential. Here are six that all financial professionals — and their clients — should know:

CFP: Certified Financial Planner

In the world of financial advising, the CFP is in many ways the GOAT. To earn those three letters, applicants must have 6,000 hours of financial planning experience and study more than 100 subjects, from stocks to insurance to retirement planning. And after that, they have to pass a six-hour, 170-question test administered by the CFP Board.

In addition, applicants must commit to a fiduciary code of ethics. So at the end of all this training, a CFP not only has wide-ranging knowledge of personal finance but is also required to do what's best for their clients.

"The CFP is the standard that all practitioners who hold themselves out to the public as planners must have," said Erik Nero, founder of First Step Wealth Planning in Saratoga Springs, New York. "Before I got the CFP, I felt like someone that had successfully gone through law school but never took the bar exam."

CFA: Chartered Financial Analyst

Like the CFP, the CFA is a highly respected and sought-after designation, but more for fund managers than financial planners. Investopedia calls it "the gold standard in the field of investment analysis."

Applicants must have 4,000 hours of qualified work experience and rigorously study portfolio management, accounting, economics and securities analysis. Then they have to pass three exams, each of them four and a half hours long.

"CFA is really the highest level of designation you can get to show your expertise in investments," said Jeremy Keil, a financial advisor at Keil Financial Partners in New Berlin, Wisconsin. "It shows you've learned all about investing in the world economy and how to evaluate specific, individual investments."

CPA: Certified Public Accountant

For accountants, the gold standard is the CPA. The requirements vary by state, but every applicant must pass the Uniform Certified Public Accountant Examination — a grueling, 16-hour test on taxes, auditing, business, financial regulations and other subjects. Applicants often study for years.

But this designation isn't just for accountants. CPAs also work in financial planning, stock analysis, forensic research and even the C-suites of corporations. Some chief financial officers get the certification, meaning they can put "CFO, CPA" on their business cards.

"For what we do, I believe that my CPA and CFP are the most helpful," said Scott Bishop, managing director of Presidio Wealth Partners in Houston, Texas. "I feel that you cannot help someone with true financial planning without being able to advise on the tax impact."

ChFC: Chartered Financial Consultant

The ChFC is an alternative to the CFP. The two designations cover many of the same topics, including financial planning, retirement, insurance and estate planning.

In addition to those, ChFC applicants also learn about a number of specific scenarios the CFP coursework doesn't cover. These include small business planning, divorce, special needs clients and how to work with same-sex or unmarried couples.

The requirements are also slightly different. To get their ChFC, advisors must take eight courses — compared to the CFP's seven — and take a final test after each one, instead of one long, concluding exam.

However, the ChFC does have a name recognition problem. According to many wealth managers, far more clients have heard of the CFP than the ChFC. The benefit of having both is mostly a matter of knowledge.

"In my practice, we pay for the ChFC and CFP for anyone who wants to pursue them, as long as they are pursuing the education and not just the letters," said Nick Gertsema, CEO of Gertsema Wealth Advisors in St. Joseph, Missouri.

RICP: Retirement Income Certified Professional

The RICP is specifically for the retirement side of financial advising. Applicants study Social Security, Medicare, retirement tax planning, 401(k) withdrawal strategies, long-term health care, life insurance and other topics that come up in a client's golden years.

To get their RICP, advisors must accrue three years of relevant work experience and complete three online courses, each followed by a two-hour, 100-question exam. According to Gertsema, it's well worth the effort.

"It completely changed the direction of my practice," he said. "We use the knowledge gained from the RICP in almost all of our portfolios and plans. It changed how we were able to communicate the importance of a retirement income plan."

CPWA: Certified Private Wealth Advisor

In a Venn diagram of CFP and CFA responsibilities, the CPWA would be somewhere in the middle. Like a CFP, the CPWA advises clients, but not in the same wide-ranging way. And like a CFA, the CPWA focuses almost entirely on choosing and managing their clients' investments. The biggest difference: The CPWA advises extremely wealthy clients.

"It's really in-depth planning for the higher end of high net worth," Folkes said. "So it's more sophisticated investment planning, working with business owners and executives at a very high level."

Applicants need to spend five years working with clients, six months studying, one week attending a class at the University of Chicago Booth School of Business or the Yale School of Management, and then four hours taking a 135-question final exam.