Are Your Financial Advisor’s Credentials Real?

When we face critical decisions, many of us turn to professionals (financial advisors, CPAs, attorneys) who have specialized knowledge that will help us make the right decisions. One way to determine if professionals have the knowledge you need is to check the quality of their credentials (certifications, designations). For example, a professional with a CPA designation may provide better advice than an accountant who could pass the CPA exam. The same is true for financial planners. A CFP may provide better advice than a planner who did not go through the training and pass the necessary exams.

High-quality certifications and designations can make your selection process simpler, but it is also a source of hidden risk. This is particularly applicable to the financial service industry, where 35 percent of the certifications and designations are not what they appear to be. The organizations that sponsored the certifications have gone out of business or advisors buy designations that they use to convince consumers they are real financial experts.

Consider the healthcare industry. When you meet a physician in an emergency room, you can safely assume (99 percent of the time) that he or she is qualified, based on eight years of college and two years of internship and residency. Or how about the legal industry? A lawyer has seven years of college and must pass a difficult state bar exam in order to obtain a license to practice law.

Unfortunately, these types of requirements do not extend to the financial service industry. The minimum age to be an advisor is 18 and there are no minimum experience or education requirements, not even a high school diploma. We say unfortunate because advisors can impact your financial well-being just like doctors impact your physical well-being. Even worse, financial advisors can impact when you retire, how you live during retirement and your financial security late in life when you need it the most.

It may be obvious, but why do financial advisors use fake or low-quality credentials to deceive investors? They know you are seeking a competent, financial advisor you can trust. They use the credentials to convince you they are financial experts – even if they have six months of experience and bought the credentials.

What Is a Credential Check?

A credential check is a review of an advisor’s certifications and designations (letters that appear after their name: John Smith, CBA, RSO, QRP, DGI).

We made these credentials up, but that may not matter if you do not commit a small amount of time to researching their quality. If you wrongly assume the credentials make the advisor an expert, then the advisor is the winner (the strategy worked) and you are the loser (you selected an advisor who used a deceptive sales tactic).


What should you know about credentials? There are five key elements:

  • Who sponsored the designation or certification?
  • What are there prerequisites for obtaining the credential?
  • How extensive is the curriculum?
  • Is there a proctored examination when the advisor completes the curriculum?
  • Are there continued education requirements to maintain the credential?


We realize this type of research can take time. That is why Paladin Registry developed a database of more than 250 designations and certifications. Paladin has done the research for you, produced a report for your review and added a quality rating for each credential: Check a Credential. The service is free and there are no registration requirements – you can protect your privacy while you use this service to check the quality of the credentials of the advisors who want to influence or control the investment of your assets.

Some Credentials Count a Lot

As noted, there are hundreds of designations and certifications that are used by financial advisors. Some are very high-quality and some are fake or obsolete. It is up to you to know the difference before you select an advisor.

Following are three examples of very high-quality credentials that require extensive study and passing one or more difficult examinations: Certified Financial Planner (CFP), Chartered Financial Analyst (CFA) and Certified Investment Management Analyst (CIMA).


The best known financial planning designation is CFP. When an advisor has a CFP certification, you know he or she has completed graduate-level coursework to be able to sit for a grueling two-day exam. To maintain this certification, the advisor must complete 30 hours of continuing education study every two years. On top of that, CFP certificate holders are required to abide by a code of ethics that includes a requirement to act in a fiduciary capacity when advising clients.


Another top credential is the CFA, which is the most difficult credential to obtain. CFA certifiation requires approximately 900 hours of study in accounting, economics, ethics, finance and mathematics, and the three CFA exams required are extremely difficult, with fewer than 15 percent of candidates passing them on their first attempts.


The CIMA designation is the only U.S. financial services credential to meet an international standard (ISO 17024) administered by the American National Standards Institute. Asset allocation, ethics, due diligence, investment policy and financial investments comprise the course work, which is taught in a classroom for five days. Candidates must pass a proctored qualification exam as well as a certification exam. There is a continuing education requirement of 40 hours every two years.

Some Credentials are Deceptive Sales Practices

As the financial advisory field becomes more competitive, financial advisors are increasingly turning to designations as a way to differentiate themselves and add credibility. The problem is, there are no uniform standards for determining which designation programs are legitimate and which are deceptive sales practices.

For example, the Consumer Financial Protection Bureau produced a report that showed financial advisors were using more than 50 “senior” titles or designations to suggest they have special expertise that helps older Americans make better financial decisions. The report showed most of the credentials were designed to deceive seniors into following the advice and recommendations of self-purported experts.

The reality is you should be leery of financial advisors who have a virtual “alphabet soup” after their names. They could have earned the credentials or they may have bought them. You should know the difference before you make your selection decision.

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