Get the Marcus mobile banking app
Easy mobile access
If you’ve never worked with a financial advisor before and are in the market for one, the good news is that there are plenty out there to choose from. The challenge is finding the right one for you.
In a way, it’s kind of like dating. But you and your financial advisor don’t necessarily have to be soulmates. You just want to make sure their expertise or specialization is a good fit for your personal financial needs.
When you’re shopping for a financial advisor, you’ll notice that many of them have a few extra letters after their name: CFP, CPA, PFS and CFA are a few common examples. These are professional designations, and there are over 100 financial designations and certifications available! Some certified financial advisors could even have multiple ones.
The alphabet soup of certifications can get confusing, especially since many of them sound similar to one another. But these designations can be helpful because the term “financial advisor” by itself can’t really tell you much about someone’s qualifications when it comes to dispensing financial advice. With the designations, you can at least get a basic idea of an advisor’s level of education and training as well as their areas of financial expertise.
For example, if you’re only interested in tax planning, you may want to work specifically with a financial advisor who is a Certified Public Accountant (CPA). But if you need help with more comprehensive financial planning, you may want to consider hiring a Certified Financial Planner (CFP).
While we can’t cover all 100+ designations, we can go over three common professional certifications you may see during your search. Hopefully, this will help you find your match!
Financial advisors with the CFP designation after their names are kind of the “know-it-alls” when it comes to money management. They’re professionally trained to give advice on a number of financial topics like investing, buying a home, retirement, insurance, tax and estate planning. In short, they know a bit of everything when it comes to financial planning.
For example, CFPs can work with you to put together a comprehensive financial plan and help you reach your goals no matter what stage of life you’re in.
CFP professionals are also fiduciaries which means they’re required to act in a client’s best interest when providing advice. And this is a big deal because not all financial advisors or planners have this obligation. (You can check out our article on “What Is a Fiduciary” to learn more.)
Certification. The Certified Financial Planner Board of Standards (or CFP Board) is the official organization that oversees the CFP certification process. They set and enforce the professional requirements for CFPs. And the certification process is a rigorous one. Some even consider CFP standards to be one of the most difficult ones in the financial services industry.
To become a CFP, you have to meet a series of education, examination, experience and ethics criteria. For instance, you have to complete 6,000 hours of professional financial planning experience (or 4,000 hours of apprenticeship experience) to fulfill the experience requirements. The CFP exam is no walk in the park either. According to Kaplan Financial Education, an exam prep provider, only 63% of people passed the CFP examination in 2020. (And this pass rate has been relatively consistent over the years, giving you an idea of how tough the exam is.)
You know how we often say it’s a good idea to consult a tax professional if you have tax questions? (Broken record, we know.) Well, a CPA is one option for you to go to because many of them are considered experts on tax issues, whether it’s tax preparation or other tax planning services. And if you ever run into an IRS tax audit, CPAs can actually represent you before the agency.
But taxes aren’t necessarily their only focus – CPAs can also work with companies to provide auditing services, forensic accounting, business consulting and even information technology services.
Certification. CPAs also have to go through a series of education, examination and experience requirements to receive their certification. These requirements vary state to state, but all CPAs have to pass the Uniform CPA Exam administered by the American Institute of Certified Public Accountants (AICPA). This examination takes about 16 hours to complete.
Personal Financial Specialist (PFS). While a CPA designation generally means you know your stuff when it comes to taxes, it doesn’t necessarily mean you’re an expert when it comes to other areas of financial planning, such as wealth management or retirement planning.
This is why some CPAs may choose to pursue a PFS designation as well, which is a supplementary credential from the AICPA.
PFS professionals are essentially CPAs who received additional hours of personal financial planning (PFP) education, attained a certain level of related experience and passed a PFP exam. Generally speaking, financial advisors with a PFS designation are able to work with clients in the areas of investing, retirement planning, estate planning and more.
Not all financial designations start with the letter “C,” but a lot of them do (over a hundred). And a Chartered Financial Analyst is another credential you may see out there.
CFAs specialize in investment research and management. So if you’re looking specifically for a financial advisor with investment strategy, portfolio management or wealth management expertise, a CFA may be an option.
You can find CFAs working across the financial services industry in areas like asset management, private wealth management and investment banking.
Certification. The CFA Institute is the organization that manages the certification process. There are four general steps to becoming a CFA “charterholder.” First, you have to enroll in the CFA Program and pass three examinations (yes, three and they are six hours each!). The exams cover a wide range of investment topics, including ethical and professional standards, various investment products, portfolio management, quantitative methods and wealth planning.
Second, you have to demonstrate a certain level of work experience. Next, you have to provide two to three professional references from people who can vouch for your work experience and professional character. Finally, you have to apply to become a member of the CFA Institute.
Understanding some basic financial advisor designations can help you find the right type of financial expert for your needs. (Sometimes you may even need to assemble a team of experts to address all aspects of your financial life.)
But keep in mind: While you can get a basic idea of a financial advisor’s professional qualifications through their designations, that alone can’t guarantee their quality of service. You’ll still need to do some homework and set up a meeting to see if they’re a good fit.
You may also want to double check an advisor’s credentials online and see if there have been any disciplinary actions filed against them.
The Financial Industry Regulatory Authority or FINRA is a good place to start your research. FINRA is a government-authorized organization who works to protect investors, ensure market integrity and oversee broker-dealers. FINRA maintains a webpage where you can get more information about any specific financial professional designations – with links to various membership directories where you can look up an advisor and confirm their status.
Also, check out this article where we share some tips on what to consider when looking for a financial advisor.
This article is for informational purposes only and shall not constitute an offer, solicitation, or recommendation to buy or sell securities, or of an account type, securities transaction, or investment strategy. This article was prepared by and approved by Marcus by Goldman Sachs®, but is not a description of any of the products or services offered by and does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA and Goldman Sachs & Co. LLC are not providing any financial, economic, legal, accounting, tax or other recommendation in this article and it is not a substitute for individualized professional advice. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, Goldman Sachs & Co. LLC are or any of their affiliates, none of which are a fiduciary with respect to any person or plan by reason of providing the material or content herein. Neither Goldman Sachs Bank USA, Goldman Sachs & Co. LLC nor any of their affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.
Investing involves risk, including the potential loss of money invested. Past performance does not guarantee future results. Neither asset diversification or investment in a continuous or periodic investment plan guarantees a profit or protects against a loss.