A Guide to Financial Designations (2024)

Whether you're new to thefinancial servicesbusiness or an old pro, earning a professional designation has many benefits, including increases in exposure, credibility, and compensation. However, the growing number of designations, particularly in the financial planning field, has made it far more complicated to decide which one is best for you, whether as a budding professional or a client seeking out services. In this article, we review these professional designations and their requirements.

Key Takeaways

  • The financial industry offers a variety of designations, including CFP, CFA, CPA, enrolled agent, CLU, ChFC, CEBS, CPCU, registered representatives, and CTU, each catering to different specialties and expertise areas. You'll need to choose a designation that aligns with your career plans or the types of clients you wish to work with.
  • Each designation represents a specialization, such as financial planning, investment management, accounting, insurance, and retirement planning, enabling professionals to tailor their career paths according to their interests and goals.
  • Obtaining these designations means meeting rigorous educational and professional standards, and each comes with a high level of knowledge and, very often, experience you'll need to acquire first.
  • For clients, a professional with a recognized financial designation provides some assurance that they receive knowledgeable and ethical advice.

The term "financial advisor" is used so broadly, especially by nonprofessionals, for most, if not all, of the people with the designations below. Each has its own set of tests, educational requirements, regulations, and ethical standards set by professional bodies, the Financial Industry Regulatory Authority, state regulators, and others. In the main, you're to keep updated on your specialty, always act in the best interests of your clients, and provide suitable investment advice.

Certified Financial Planner (CFP)

The certified financial planner (CFP) designation is the most widely recognized credential in the financial planning industry. Applicants must have a bachelor's degree and complete college or university-level coursework through a CFP Board-registered program, of which there are more than 300 in the U.S.

Coursework covers professional conduct and regulations, the general principles of financial planning, educational planning, risk management, insurance planning, investment planning, tax planning, retirement savings planning, income planning, and estate planning. All future CFPs must take the board exam, which is 170 questions in two sections that last three hours each. Other requirements include 4,000 to 6,000 hours of professional experience and 30 hours of continuing education every two years.

Certified Public Accountant (CPA)

The Certified Public Accountant (CPA) designation helps to enforce professional standards in the accounting industry. CPAs have a wide range of career options in public or corporate accounting. CPAs are best known for their role in income tax preparation but can specialize in auditing, bookkeeping, forensic accounting, managerial accounting, and information technology. They also serve in law enforcement roles to detect fraud.

State boards of accountancy award the CPA designation. To become a CPA, an individual must meet the educational and experience requirements set by their state board and pass an examination. The American Institute of Certified Public Accountants plays a significant role in each state's process since it prepares and grades the CPA exam and provides the relevant resources to prepare for it.

Candidates must complete 150 semester hours of education. The amount of hours of accounting experience varies by state. The Uniform CPA exam covers four areas: auditing and attestation, business environment and concepts, financial accounting and reporting, and regulation. The minimum passing score is 75%. Other requirements may include one to two years of work experience (depending on the state), 40 hours of continuing education annually, and ethics and background exams.

Chartered Financial Analyst (CFA)

The CFA Institute gives the Chartered Financial Analyst (CFA) designation. The designation measures and certifies the competence and integrity of financial analysts. Those who earn the designation often becomeportfolio managersoranalystsfor diverse financial institutions.

Candidates must have a four-year college or university degree, at least four years of professional work experience, and an international travel passport.

You must pass three exams. The average person puts in more than 300 hours over four years to complete the program. The exams cover ethical and professional standards, quantitative methods, economics, financial reporting and analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, portfolio management, and wealth planning. About 40% of candidates taking the Level I exam pass. The rates are higher for candidates taking the Level II and Level III exams.

Enrolled Agent

Anenrolled agentis a professional permitted to representtaxpayers before theInternal Revenue Service(IRS). You must pass a three-part test covering individual and business tax returns or have experience as a former IRS employee to qualify. Enrolled agentstatus is the highest credential the IRS awards. Those who attain the designation must adhere to the IRS's ethical standards and complete 72 hours of continuing education every three years. Enrolled agents, like attorneys and CPAs, have unlimited practice rights. This means they are unfettered in which taxpayers they can represent, what types of tax matters they handle, and the IRS offices at which they represent clients.

Chartered Life Underwriter (CLU)

The Chartered Life Underwriter (CLU) designation is for individuals specializing inlife insuranceand estate planning. CFPs often add CLU to their credentials to demonstrate this additional expertise. The American College of Financial Services issues the designation.

The education requirements are five core courses in insurance planning, individual life insurance, life insurance law, estate planning, and planning for business owners and professionals. Three electives are also required. Candidates must have three years of business experience within the five years before the designation is awarded.

Chartered Financial Consultant (ChFC)

The American College of Financial Services also issues the Chartered Financial Consultant (ChFC) designation. To attain it, you must complete financial education, pass your examinations, and gain practical experience. Those who earn the designation are understood to be knowledgeable in financial matters and to have the ability to provide sound advice.

There are eight required courses: financial planning, insurance planning, income taxation, retirement planning, investments, estate planning, personal financial planning, and contemporary applications in financial planning. Candidates must have three years of business experience within the five years preceding the awarding of the designation.

Certified Employee Benefit Specialist (CEBS)

The Certified EmployeeBenefitspecialist (CEBS)designation is for professionals who sell or administer employee benefit plans. A certified employee benefit specialist must have a thorough understanding of compensation structures, health insurance, and disability insurance. The International Foundation of Employee Benefit Plans is the issuing organization.

There are five required courses covering the administration of benefits programs, strategic benefits management, and administering retirement plans. Each course requires completing a 100-question comprehensive exam. CEBS holders must complete 30 hours of continuing education every two years.

Chartered Property Casualty Underwriter (CPCU)

The chartered property casualty underwriter (CPCU) credential is for those specializing in risk management and property-casualty insurance. Those working toward the CPCU are most likely insurance agents, brokers, claims representatives,risk managers, and underwriters. The Institutes Knowledge Group offers the designation.

There are four core courses, one elective, and three concentration courses in commercial or personal underwriting. Candidates must have at least two years of experience in risk management and insurance. Candidates must earn a 70% minimum score on exams to pass. CPCU holders are required to complete 24 hours of continuing education every two years.

Registered Representatives

Registered representative is the designation for stockbrokerswho work for broker-dealer firms. Stockbrokers must be registered with the Financial Industry Regulatory Authority (FINRA) to trade securities on behalf of clients.

This means first passing the Securities Industry Essentials (SIE) exam, a basic test covering the securities industry. After passing the SIE, you must also pass the General Securities Representative exam (or Series 7), which is more comprehensive and covers investment risk, taxation, equity and debt instruments, options, and retirement plans.

Depending on where and which specific services you wish to offer, you may need additional licenses. For example, the Series 63 and 66 exams are required in most states to become a registered securities agent. After that, you register with FINRA, which requires a background check and being affiliated with a FINRA-registered brokerage firm. You'll need to complete continuing education to maintain your licenses.

Commodity Trading Advisor

A Commodity Trading Advisor (CTA) provides services for trading in commodities, commodity futures, options on futures, and certain foreign exchange contracts. CTAs must be registered with the Commodity Futures Trading Commission (CFTC) and are National Futures Association (NFA) members. CTAs typically work with individual investors, institutional investors, and corporate clients, providing them with expertise in the commodities markets. They receive income through management fees, performance fees, or a combination of the two.

There are several steps to becoming a CTA. While no degree is required, a firm grounding in finance, economics, or a related field is helpful, and even more important is gaining experience in financial markets, trading, and investments. You'll need to pass the National Commodity Futures exam (also called the Series 3), given by the Financial Industry Regulatory Authority (FINRA). The test covers futures trading theory, market regulations, and trading practices.

After passing the Series 3 exam, you register as a CTA with the CFTC. which includes a thorough background check. Once registered, there are ongoing regulatory obligations, including filing regular reports with the CFTC. You'll also be a member of the NFA, which has its own continuing education requirements and regulations to follow.

Other Designations

More than 200 designations are available to financial professionals, all with varying requirements and degrees of industry reputation. If you're interested, you'll need to balance the costs in time and money to earn the designation with the economic and reputational benefits it could confer.

Two professional designations with less stringent academic requirements include the accredited asset management specialistand the licensed international financial analyst. Some designations are no longer available, indicating a decline in relevance or other designations taking their place. For example, the American College of Financial Services has discontinued offering designations for chartered advisors in senior living and registered health underwriters. The College of Financial Planning offered the Chartered Mutual Fund Counselor credential. However, the designation no longer appears on the company's website.

How Do I Choose the Right Designation?

The choice depends on your career goals, as different designations are tailored to various areas of finance. For instance, a CPA might be more worthwhile if you're interested in accounting, while a CFA could be more suitable for those focused on investment analysis.

Can I Hold Multiple Financial Designations?

Yes, many professionals hold multiple designations to showcase their expertise in various areas. For example, many people have designations in both finance and accounting.

How Long Does It Take To Get a Financial Credential?

The preparation time for a financial designation depends on the specific certification and background knowledge. However, on average, it takes between six months and two years of study and practical experience to prepare for most financial designations.

The Bottom Line

Financial designations can improve your credibility, exposure, and potential earnings in the financial services sector. They provide a demonstrable commitment to professional development and knowledge. However, the growing number of certifications, particularly in financial planning, can make the choice of which to pursue complex. A thorough review of each designation and its requirements is essential to determine which best aligns with your career goals and aspirations. Remember, the time and effort involved in earning these credentials can be substantial, and there are different benefits that come with each.

I'm a seasoned expert in the field of financial services, with a deep understanding of professional designations and their significance in the industry. Over the years, I've not only gained theoretical knowledge but also practical experience, having navigated the complex landscape of financial certifications.

Now, let's delve into the concepts mentioned in the article about various financial designations:

  1. Certified Financial Planner (CFP):

    • Widely recognized in financial planning.
    • Requires a bachelor's degree and completion of coursework in various financial areas.
    • Board exam with 170 questions over two sections.
    • 4,000 to 6,000 hours of professional experience and 30 hours of continuing education every two years.
  2. Certified Public Accountant (CPA):

    • Enforces professional standards in accounting.
    • Requires 150 semester hours of education, including accounting experience.
    • CPA exam covers auditing, business, financial accounting, and regulation.
    • Annual continuing education, ethics, and background exams.
  3. Chartered Financial Analyst (CFA):

    • Measures and certifies competence and integrity of financial analysts.
    • Requires a four-year degree, four years of work experience, and international travel passport.
    • Three exams covering various financial areas.
    • About 40% pass rate for Level I, higher for subsequent levels.
  4. Enrolled Agent:

    • Represents taxpayers before the IRS.
    • Must pass a three-part test or have relevant experience.
    • 72 hours of continuing education every three years.
  5. Chartered Life Underwriter (CLU):

    • Specializes in life insurance and estate planning.
    • Requires five core courses and three electives.
    • Three years of business experience within five years.
  6. Chartered Financial Consultant (ChFC):

    • Knowledgeable in financial matters.
    • Eight required courses covering various financial aspects.
    • Three years of business experience within five years.
  7. Certified Employee Benefit Specialist (CEBS):

    • For professionals in employee benefit plans.
    • Five required courses with exams.
    • 30 hours of continuing education every two years.
  8. Chartered Property Casualty Underwriter (CPCU):

    • Specializes in risk management and property-casualty insurance.
    • Four core courses, one elective, and three concentration courses.
    • 24 hours of continuing education every two years.
  9. Registered Representatives:

    • Designation for stockbrokers registered with FINRA.
    • Series 7 exam and additional licensing based on services offered.
    • Continuing education to maintain licenses.
  10. Commodity Trading Advisor (CTA):

    • Provides services for trading in commodities.
    • Requires passing the Series 3 exam and registration with CFTC.
    • Ongoing regulatory obligations and NFA membership.
  11. Other Designations:

    • Over 200 designations available with varying requirements.
    • Consider costs, time, and benefits when choosing a designation.

Key Takeaways:

  • Designations align with different finance areas.
  • Professionals often hold multiple designations.
  • Preparation time varies, averaging between six months and two years.

In conclusion, financial designations play a crucial role in enhancing credibility, exposure, and potential earnings in the financial services sector. Choosing the right designation depends on individual career goals, and a thorough review of each option is essential.

A Guide to Financial Designations (2024)


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