Decoding Finance Industry Designations

Elizabeth Hutton, CFP® Vice President, Financial Planner – Brett Boyer, CFA Equity Analyst – Mary Grace Paoletti, CPA Financial Planner

If you’re not immersed in the finance industry yourself, it can be confusing to understand what different credentials mean after an advisor’s name. We’re here to break it down for you, and we’re starting with some of the more common designations that are represented at Howe & Rusling: the CFP®, CFA, and CPA. Without getting lost in alphabet soup, these certifications are not only difficult to earn, but they’re very meaningful. Let’s dive in.

Hi, I’m Elizabeth Hutton, Vice President and CERTIFIED FINANCIAL PLANNER™ at Howe & Rusling. The CFP® mark is highly recognized and respected in the financial planning industry, and is currently held by just 95,000 individuals in the U.S. To receive the CFP® certification a candidate must hold a bachelor’s degree or higher and complete in-depth coursework across major personal financial planning areas through a CFP Board Registered Program. The average time required to complete the coursework requirement is between 12 and 18 months. After the completion of the education requirement, the candidate for CFP® certification must then pass a comprehensive examination covering topics including the financial planning process and principles, insurance, investment planning, income tax planning, retirement planning and estate planning.

The difficulty of the CFP® exam is emphasized by the 10-year average pass rate of only 63.5%. In addition to passing the exam, a candidate must complete 4,000 hours of direct engagement with individual clients under the direct supervision of a CFP® professional or 6,000 hours of professional experience related to the financial planning process.

One of the most critical aspects of working with a CFP® professional is their commitment to the fiduciary standard. The fiduciary standard is intended to ensure that individuals and organizations act with integrity and honesty when dealing with their clients’ finances or assets.

As fiduciaries, CFP® professionals are legally and ethically obligated to always act in their clients’ best interests.

This means that they must put their clients’ interests ahead of their own and disclose any potential conflicts of interest that may affect their advice or recommendations. The fiduciary standard is critical because it ensures that your financial advisor is working for you and not for their own financial gain. 

Overall, the importance of the CFP® certification lies in its recognition as a symbol of competence, knowledge, and professionalism in the financial planning industry.

CFP® professionals will work with you to create a financial plan that is tailored to your specific needs. They can help you make informed decisions about your investments, retirement planning, tax planning, and risk management. 

My name is Brett Boyer, and I’m an Equity Analyst at Howe & Rusling and also have obtained the chartered financial analyst designation, better known as the CFA designation. 

In order to receive a CFA designation, a candidate must pass 3 tests and complete 4,000 hours of work experience in a minimum of 3 years within the investments industry. 

The tests vary in structure and cover ethics and professional standards, quantitative methods, economics, financial statement analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, portfolio management and wealth planning.  

The CFA charter is considered by many to be the gold standard of professional designations in the investments industry and the most difficult to obtain.  To illustrate the difficulty in obtaining a charter, I will share a few statistics and facts. 

Only 14% or 1 in every 7 candidates that enroll in the program pass all 3 tests, complete the necessary work experience requirements, and ultimately receive a CFA charter. 

This low success rate is explained by the difficulty of the tests and time commitment required to complete the program.  The passing rates for the tests are fairly low historically, with 10 year average pass rates of 41% for the level 1 test, 45% for level 2, and 52% for level 3.  Given the challenge of the tests and the time commitment required, it takes most candidates 4 or more years to complete the program on average.  

Given the long history of the CFA Institute and the steady increase in interest in the designation, there is now a community of 190,000 CFA charterholders globally with approximately 56% or 106,000 in North America.  The most common jobs among CFA charterholders include: portfolio manager, research analyst, executive, consultant, risk manager, corporate finance analyst, relationship manager, and financial advisor. Above all else, I believe that obtaining a CFA charter demonstrates an individual’s commitment to continuing education, giving CFA charterholders a broad knowledge base from which they can draw upon in numerous aspects of their jobs throughout the financial industry.

In my opinion, the commitment and dedication required to earn a CFA charter is a good indicator that an individual is likely willing to go the extra mile in their jobs and in serving clients.   

Hi, I’m Mary Grace Paoletti, here to talk about what it means to be a Certified Public Accountant. A CPA is a licensed accounting professional who has met a series of education, experience, and exam requirements put forth by their state’s board of accountancy. In order to satisfy the requirements of this designation, you must have a bachelor’s degree in business, finance, or accounting, complete 150 hours of education, and have at least one year of public accounting experience. Additionally, you must satisfy the exam requirement by scoring a 75% or greater on four separate tests within an 18-month window.

Topics tested include auditing, financial accounting, regulation, and business environment concepts.

CPAs are also subject to a code of ethics put forth by the American Institute of Certified Public Accountants (AICPA). In order to maintain a valid license, CPAs are required to satisfy the continuing education requirements in their state of licensure.

In New York, CPAs must complete 24-40 hours of continuing education each year, depending on the content of those courses. In addition to keeping their technical knowledge up-to-date, CPAs are also required to have 4 hours of education related to professional ethics every 3 years.  

The CPA credential is highly regarded in the accounting industry, and signals to both employers and clients that the individual is being held to a set of ethical and knowledge-based standards.

Most importantly, CPAs are considered fiduciaries which means that they are legally required to act in the best interest of their clients. 

In summary, when selecting an advisor, it’s essential to consider their qualifications, expertise, and ethical standards. Choosing a financial professional of any kind is a crucial decision that can have a significant impact on your financial future. Thanks for tuning in to Street$marts!

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