What Are Those Letters After Your Name? Credentials for Financial Advisors Explained

Alphabet soup. It’s a real thing. And it’s a problem.

Alphabet soup refers to the abundance of acronyms typically found after a professional’s title. Doctors, lawyers and financial advisors are especially guilty of tacking these on to their names:

Joe Smith, CFA, CPA, XYZ, MD

Chances are, you’ve seen these abbreviations before. But what do they mean? Why are the credentials for financial advisors always different? And what letters should you actually care about?

Check a Credential

Financial advisors use these letters to show potential clients their experience, education and services – these letters are supposed to represent credentials they have earned through extensive study, examinations and continuing education. However, many salespeople know this. So, they will sometimes use them unethically, to make investors assume they are experts when in fact they aren’t.

To help investors and stop this manipulation, Paladin Registry offers a completely free Check a Credential service. All an investor has to do is type in the letters that appear after an advisor’s name, and instantly, a definition, rating and explanation of what is needed to earn the credential appears. There are no registration requirements to use this service. We simply offer it for free. After hearing financial horror story after financial horror story, we feel it’s information investors need to know.

Paladin’s Check a Credential service includes 266 different credentials for financial advisors that we have researched and rated on a 1- to 5-star basis, with a 5-star rating being the best.

Of these credentials:

  • 17 (or 6.4 percent) received a 1-star rating
  • 54 (or 20.3 percent) received a 2-star rating
  • 77 (or 29 percent) received a 3-star rating
  • 50 (or 18.8 percent) received a 4-star rating
  • 21 (or 7.9 percent) received the highest 5-star rating
  • 47 (or 17.7 percent) received zero stars

What’s most important here are the 5-star ratings (financial advisors with these acronyms have earned the best credentials available in the industry) and the zero-star ratings (beware of these, as they carry no value).

While 71 of these credentials for financial advisors have a 4- or 5-star rating, 118 (or 44 percent) have zero-, 1- or 2-star ratings. These credentials represent risk to investors when they assume advisors who hold these ratings are financial experts.

The Best Advisors

The best financial advisors hold these high-rated credentials because they earned them by significant study, proctored examinations and continuing education requirements. In other words, these 5-star credentials mean a financial advisor really is an expert in the financial services field.

Some of the best credentials include:

  • CFA – Chartered Financial Analyst  
  • CIMA – Certified Investment Management Analyst
  • CFP – Certified Financial Planner
  • CPA – Certified Public Accountant

Unethical Advisors

Unfortunately, not everyone who offers financial advisory services earn their credentials. Some buy them the same way people buy degrees from diploma mills. They buy credentials to look more knowledgeable than they really are. This is a dangerous and obviously deceptive sales practice. An investor would never knowingly select this advisor if they knew the credentials of the financial advisor were not true or earned.

Beware: Many salespeople assume most investors won’t do their due diligence and check on these credentials.

Senior citizens are particularly at risk, as there are many salespeople who target this group of individuals. Working with a bad financial advisor later in life can be especially detrimental. According to the Consumer Protection Bureau, there are more than 50 fake credentials that target seniors.

Investors of any age should never sign any documents until they have validated the quality of an advisor’s credentials.

The Bare Minimum

Many investors assume that there is a minimum standard that a person has to meet to practice in the financial services field, similar to a doctor, who had complete years of schooling, or a lawyer, who had to pass the Bar. But there’s not!

I repeat, there is no minimum standard that a person must meet to offer financial advice and services.

Nope, not even a high-school diploma.

This is why it is so important for investors to use Paladin’s free Check a Credential service. Working with the wrong financial advisor can be an expensive and destructive mistake. It may take a little extra time to validate the credentials for financial advisors, but because of Paladin’s service, how to check credentials of a financial advisor just got easier.

Hiring a financial advisor is one of the most important decisions you will make. This person will affect when you can retire, how you can retire and what you can leave behind when you’re gone, if anything. They can affect where you’re able to send your kids to school, if you can pay for their college education and how you’re able to live before and after retirement.

Three simple letters can be the difference between a comfortable retirement and one that is nothing like what an investor planned for.

Unfortunately, it is up to the investor to determine if he or she is working with a real financial expert or a fake. Slick salespeople will never tell you that they are being deceptive. And they’ll never volunteer information that will cause them to lose a sale – yes, a sale.

When asking about credentials, get an advisor’s response in writing. This way, if you are being duped, you have a paper trail to prove it.

Paladin Registry has been an independent source of free information about financial advisors since 2003. Paladin’s Check a Credential service is just one of many free tools that help investors validate an advisor’s claims or experience.

Other posts from Lauren Aimes

Why Independent Financial Planners are Better than Advisors Who Work at a Big Firm
How Longevity Has Changed Retirement and the Meaning of Reasonable Risk

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