So, you're shopping for a new financial adviser. I'll tell you a secret. They are not all alike. Not only do we come in different shapes, sizes, gender, age, experience, backgrounds, but most importantly, we come with different qualifications. An adviser is a general title that covers all people who provide financial advice. It is the type of advice that differs. So what exactly do the extra letters after a person's name mean? Will those letters help you choose the adviser best suited to your needs?
Often referred to in the industry as "alphabet soup," the letters that are used to indicate the credentials of an adviser can be confusing.
There are three major sources of financial advice: banks, brokerage firms and insurance companies that sell mutual funds. Within these financial companies are their employees. Banks have private bankers, financial advisers, financial services representatives, commercial advisers and estate and trust officers. Brokerages have wealth managers, financial planners, sales assistants, investment advisers and associate advisers. Insurance companies employ mutual fund representatives and insurance agents.
All of these professionals provide some type of financial advice. It is their specialization, indicated by the letters that follow their names, that can help you determine which adviser is best suited to your needs. Each of these designations indicate the adviser has undertaken and completed specific fields of study in order to acquire the qualifications needed for appropriate licensing and registration.
The Canadian Securities Institute (CSI) is the body that offers many of the courses advisers are required to take to fulfill regulatory requirements. To obtain a licence, advisers are first required to complete the CSI's Canadian Securities Course (CSC) in order to trade general securities, such as stocks, bonds or mutual funds; or the Investment Funds in Canada course (IFC), in order to trade mutual funds. Investment advisers are also required to complete the Conduct and Practices Handbook Course (CPH) and a 90-day training program. These courses are not typically indicated on an adviser's business card as they are mandatory.
Once an adviser has completed the required courses, they can pursue additional courses/designations to improve their knowledge. These designations are typically the ones you will see added to a business card.
The most familiar is the Certified Financial Planner (CFP) credential, issued by the Financial Planning Standards Council. The CFP is an international designation in 23 countries. An adviser must have, among other strict requirements, three years of experience prior to full certification.
To obtain the Personal Financial Planner (PFP) designation, an adviser must maintain continuing educational requirements and must adhere to a code of ethics. Similar to a CFP, a PFP assesses an investor's life goals and drafts a plan accordingly.
Advisers with the Chartered Investment Manager (CIM) designation are qualified to manage portfolios in a discretionary manner. An investor would outline their objectives in an "Investment Policy Statement" that the adviser is required to adhere to.
The Chartered Strategic Wealth Professional (CSWP) qualifies an adviser to address the needs of high-net-worth individuals that have more complex financial planning needs. The investment, estate, and tax planning strategies are greatly interwoven and often require additional specialists. The CSWP can oversee these specialists to ensure an appropriate overall plan for the client.
The MTI Estate and Trust Professional designation is aimed at providing estate and trust practitioners with the knowledge required to deal with individuals with estate and trust demands.
The Fellow of the Canadian Securities Institute (FCSI) is awarded to financial professionals who have met the highest standard for experience, advanced education, ethics and leadership. They are reviewed annually to ensure their members remain in good standing.
In order to achieve the insurance licence, an adviser must complete the Life License Qualification Program (LLQP). Once the adviser completes this program, they can write the provincial government qualifying exam to obtain their life insurance licence.
The CFA, or Chartered Financial Analyst, is an internationally recognized designation representing a commitment to the highest ethical standards and investor protection through professional codes of conduct, guidance, and outreach. There are financial advisers that hold the CFA designation, a rigorous, three-level certification - but most follow the analyst career route.
All advisers are required to meet mandatory requirements of continuing education that must be completed to maintain their respective licensing.
So what does this all mean for you the investor?
It means you have the opportunity to seek out an adviser who has the specific skills you require. The more letters you see after an adviser's name provide an indication of the extent of their ability to manage your particular financial situation. If they do not, then you can ask them to refer you to someone who is licensed and experienced in that specialized area.
Don't be intimidated by the letters. Ask what they represent and how their areas of knowledge would be beneficial to you. These letters may not be as well known as MD or LL.B but they represent the achievement of knowledge and testing that adheres to the standards of the industry. Knowledge is power and in this case, your adviser's specialized knowledge can be used to give you the best advice possible.
Nancy Woods, CIM, FCSI, is an associate portfolio manager and investment adviser with RBC Dominion Securities Inc. To ask her a question, send an e-mail to asknancy@rbc.com or visit her web site at nancywoods.com
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Nancy Woods