Make Sure The Advisor Is Highly Trained In Financial Matters

Make Sure The Advisor Is Highly Trained In Financial Matters

By Dr. Jeff Camarda EA, PhD Financial Planning, MSFS, CFA | REQUEST FREE CONSULTATION


Perhaps surprisingly, it is very quick and easy to become a financial "advisor". The government licenses required can be obtained quite rapidly, with very little depth of study or knowledge required. Regulatory agencies  the States and the Federal government for securities (stocks, mutual funds, etc), and the States alone for insurance (including life insurance products and annuities)  require only fairly simple sales licensing exams which can typically be passed by a person of average intelligence with just a few weeks preparation. For instance, I was able to pass the Series 7 "full service stockbroker" exam  much more complicated than the Series 6 license common with many advisors today  the first time, cold, with only a weeks worth of study, and no background in finance (in fact I had a recent degree in chemistry). The Florida life insurance license required two weekends of classes. This kind of license does not connote much knowledge or expertise, but merely the legal permission to sell products, usually on commission.


To my mind, the first basic step on the long road to financial expertise is the Certified Financial Planner" (CFP®) or the Chartered Financial Consultant® (ChFC®). This is not the be-all, end-all, but the very first exposure to fundamentals  financial planning procedure, investments, income tax, retirement planning, estate planning, and insurance/risk management  which must be refined and internalized with later, more advanced study. Some (including myself) feel that the ChFC® "is better viewed as a good "post-CFP" educational program in financial planning to take after completing the CFP program itself. The ChFC includes a wide range of electives that advisors can select..." (Kitces). These basic "letters" are bachelors of sorts for the business, though it is interesting to note that neither requires a degree  or even any college credit  in financial planning studies. As of January 2015 web search, there were 629,500 people with securities sales licenses in the US (http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/P015174) and only some 71,400 CFP®'s (http://www.cfp.net/news-events/research-facts-figures/cfp-professional-demographics), or about 11% of securities licensees having the CFP® basic credential, when one considers the number of insurance agents offering financial planning who do not also have a securities license, the percentage drops still lower.


After the basic credential, truly expert knowledge can by gained via specialized, and more advanced designation programs.


For tax, the CPA, E.A. (an IRS credential requiring three advanced tax exams) and some masters in taxation (such as the MTAX) hone this area; but note that only attorneys, CPA's and E.A.'s may represent taxpayers before IRS.


For insurance  primarily life and health (which includes annuities, disability and long term care insurance)  the CLU® (Chartered Life Underwriter®) is the "gold standard in education for life insurance professionals... for those looking to really get a deeper base of knowledge in life insurance and its proper applications from a credible educational program& there really is nothing better than the CLU" (Kitces; ibid).


The bottom line is you want someone who is very extensively trained in multiple areas to help coordinate the extremely complex decisions you face to make the best financial moves. The FINRA licenses like Series 6, 7, and 65/66 teach very little. The CFP® or ChFC® is a start. The CFA® is very good for investments and nearly academic-grade. And there are beginning to be enough folks with Masters and even Doctorates in Financial Planning that you should consider seeking them out.


Dr. Jeff Camarda is a financial advisor located in Fleming Island & Ponte Vedra, FL. Dr. Jeff has over 33 years' experience working with local businesses and investors. More information about Dr. Jeff can be found at www.camarda.com.


This article was written by and presents the views of our contributing advisor, not the WiserAdvisor editorial staff.

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