The various designations used by many of the people who are involved in advising clients or managing money is very confusing. CFP, CFA, CLU, CPA, PFS, CIMA, ChFC, RIA, FA….it can all seem like one big bowl of alphabet soup.

 Who is right for your needs? What type of advisor or advice are you seeking? What does a designation mean? Do I need an advisor? A planner? A money manager? Or all three? Do I need tax advice? Advice about insurance? Or a mutual fund expert?

 Here are some explanations and a mini primer on who does what:

 CFP: This stands for CERTIFIED FINANCIAL PLANNER™ and is governed by the College of Financial Planning and the CFP Board. Someone who has earned this designation has taken two years of coursework in a variety of areas and has passed both an intensive test at the end of each course and a comprehensive exam after completing all coursework.  A CFP practitioner is required to maintain their knowledge with 30 hours of continuing education - including an ethics course - every two years.

 What can be confusing is that anyone can call themselves a financial planner. However, only those who have passed the CFP coursework and exam and maintain their license in good stead can use the CERTIFIED FINANCIAL PLANNER™ designation.  A CFP® practitioner generally utilizes software to assist clients in assessing risk in their financial lives and then creates a plan of action to mitigate those risks. If you wish to get a plan of action in place and overall advice including but not limited to investment advice, this professional is a good person to seek advice from and get started.

 Be aware however that even within the CFP® practitioner community, there will be a lot of variety in fees, types of plans they deliver, whether or not they manage money themselves (or just make macro recommendations) and whether they simply make insurance recommendations or actually sell insurance, for example.  Determine what it is you need before seeking advice so you have a clear definition of your needs.

 CPA: This designation stands for Certified Public Accountant.  Most people identify their CPA’s solely with their taxes and while this is true for the majority of CPA’s, there can be – and are, variations within the field.  Some CPA’s have a specialty such as divorce litigation, business valuation, corporate governance or succession planning.  Some have practices which service individuals. Others prefer to service small and mid sized businesses.  Others – generally the very large accounting firms – will have a variety of practice specialties at their disposal.

 Some CPA’s now carry an additional designation of Personal Financial Specialist, PFS, which is not unlike a CFP designation. The AICPA is the governing body for all CPA’s and they issue and oversee the PFS designation. A CPA who is also practicing as a PFS will deliver services similar to a CFP, perhaps with more emphasis on tax planning.

 Also similar to CFP designees’, someone who holds themselves out to be an accountant does not have to be a CPA.  One thing to keep in mind is that any CPA will carry Errors & Omission insurance and an accountant may not.  An example of what this means could be a tax situation that is not handled properly and a non-CPA made the mistake.  You may have difficulty seeking recourse as they may not have insurance or the financial means to reimburse you for whatever penalties and fines you incurred due to their mistakes.

 CFA stands for Chartered Financial Analyst. This type of designation is most often necessary for an analyst or money manager who is reviewing balance sheets and the fundamentals of a company. Some of these folks do service individuals, however the majority of analysts are found working as analysts on Wall Street assisting the portfolio manager or managing assets themselves.

 RIA stands for Registered Investment Advisor. This is a designation that independent planners and investment advisors utilize.  They must file with either individual states to charge fees for financial planning or with the SEC to manage money for fees.  If you are seeking an independent source to manage your assets and wish to work with a fee-based or fee-only advisor, seek out an RIA.

 FA stands for Financial Advisor.  Wall Street firms are always seeking to stay current with the marketing that is necessary to attract their clients.  In the 1980’s, most large Wall Street firms did not think that financial planning was important.  Now, more and more of them are licensing their brokers and moving to fee-based investment advice to compete with the independent advisor community (which continues to grow).  At most large firms broker are now called Financial Advisors.  They may still charge commissions for stocks, bonds and mutual funds so do not assume since they are called FA’s that they charge fees.  Ask questions about how they charge, what types of products they recommend, whether they use proprietary products, how often they review your portfolio and so on.

 CLU stands for Chartered Life Underwriter.  This is a designation utilized by practitioners within the insurance industry.   Granted by the American College in Bryn Mawr, PA, the CLU certification is awarded to individuals who have completed training in Life Insurance and personal insurance planning.  The training is broad and consists of advanced courses and exams spanning insurance, investments, taxation, employee benefits, estate planning, accounting, management and economics.

 ChFC stands for Chartered Financial Consultant and is another designation granted by the American College and utilized within the insurance industry.  To become a Chartered Financial Consultant, an individual must have at least three years’ experience in the financial industry and passed an exam on the fundamentals of financial planning – including income tax, insurance, investment and estate planning.