Making sense of designations

Licensing and designations within the financial sector can be complicated.  Part of the reason for this is the minimum required level of knowledge required between the four main pillars – banks, trust companies, insurers and securities dealers.  Beyond the minimum required level of knowledge for licensing, there are extra designations that can help a financial advisor do their job.

You have likely heard of some of them, including:

  • Certified Financial Planner (CFP)
  • Chartered Financial Analyst (CFA)
  • Fellow of the Canadian Securities Institute (FCSI)
  • Canadian Investment Management (CIM)
  • Chartered Life Underwriter (CLU)
  • Chartered Financial Consultant (CH.F.C.)
  • Certified General Accountant (CGA)
  • Certified Management Accountant (CMA)
  • Chartered Accountant (CA)
  • Certified Investment Management Analyst (CIMA)

This is by no means a complete list but it gives you an idea that there are many potential designations.  Not all designations should be treated as equal, but there are a few tips in evaluating the education level of a financial advisor.

Acronyms: One of the quickest ways to get a snapshot of an advisors education is to ask for a business card.  Designations are often abbreviated on business cards, so ask what they mean and inquire about your advisor’s educational background.

Certificates: Most financial advisors also demonstrate their achievements by displaying their certificates in their offices, including post secondary education and other professional designations.  Make them a discussion point during your meeting.

Websites: You can research professional designations on the internet. Each of the main designations would have a respective organization with a website outlining details about the program.  At the same time you will be able to confirm whether your advisor is in good standing with their organizations.

Time Commitment: Perhaps the most important component when looking at the various designations is the time commitment involved to obtain.  Some of the more recent designations may sound impressive by the name, but if these can be earned in a couple of days then we feel only a minimal amount of weight should be placed on these letters.  Often at times these types of short educational programs should be considered a course rather then a designation in our opinion.

Ongoing Education: The more designations an advisor has, the more likely that person has to continue taking courses to maintain specific licensing requirements.  This ongoing education is often referred to as professional or continuing education.  As an example, the Financial Planners Standards Council requires 30 hours of continuing education every year for Certified Financial Planners (CFP).  Regardless of your designations, IIROC (Investment Industry Regulatory Organization of Canada) requires all licensed advisors to have 30 hours of professional development continuing education every 3 years.

Code of Conduct: Once an individual has earned certain designations they must agree to the applicable code of ethics and rules of professional conduct.   A good example of this is the CFA Institute’s Code of Ethics and Standards of Professional Conduct.   The following is a summary:

  • Act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.
  • Place the integrity of the investment profession and the interests of clients above their own personal interests.
  • Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.
  • Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
  • Promote the integrity of and uphold the rules governing capital markets.
  • Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.

Years of Experience: It is important to note that an advisor’s years of experience is essential.  Those who have been through many investment cycles have great depth of market knowledge.  Investors should consider both experience and credentials when seeking the right combination of advisory services.