Getting investing advice sometimes involves a lot of wading through alphabet soup — IRAs, 401(k)s, CFPs, CFAs…
All the acronyms can be very confusing to the untrained eye!
Predictably, some unsavory players in the investment world want to exploit your confusion so they can separate you from your money.
How do they do it? They’ll misrepresent their credentials when they woo you with promises of great financial products.
Their hope is that you’ll either be either wowed or stupefied into believing they’re qualified to handle your money because of the crazy patchwork of letters behind their name.
To help cut through the confusion and clutter, the Financial Industry Regulatory Authority (FINRA) has a database that allows you to vet the credentials of anybody who tries pitching you on an investment.
Beware of faked or defunct credentials
The financial planning field can be rife with pitfalls. So it’s imperative that unsuspecting investors do their homework before working with any financial professional.
The dangers can come in many forms.
In one instance, the Securities and Exchange Commission (SEC) reports that an advisor claimed to be a “Top 25 Rising Business Star” as minted by Fortune magazine. Yet when you check with Fortune, no such designation exists.
The SEC made that particular advisor pay a $25,000 penalty and banned him from the issuance, offer or sale of certain securities for five years.
In other cases, someone may flaunt their credentials without telling you the issuing organization either no longer recognizes the designation or is itself defunct. Such would be the case with a 3 Dimensional Wealth Practitioner (C3DWP) designation, according to FINRA.
The C3DWP designation is basically up for grabs to anyone who wants to claim it. That’s because the credentials are no longer offered or recognized by the issuing organization. Furthermore, FINRA reports the issuing organization no longer exists!
You can check credentials through this database
To help you ferret out the good from the bad, FINRA maintains a database of 177 professional designations in the financial planning world.
While that number of acronyms may seem overwhelming to wade through, FINRA makes it easy by breaking up the list alphabetically.
For example, when you look under “P,” you’ll find the entry below (among many others) for a Personal Retirement Planning Specialist (PRPS).
It lets you know who the certifying organization is for PRPSes, the requirements necessary to hold the designation, how to check professional status online, how to file a complaint with the governing body overseeing this designation and more.
These credentials are among the legit ones
Here’s a partial list of a few designations recognized by FINRA. This list is not intended to be complete in any way. For questions about a particular designation, see the FINRA database.
Disclaimer: FINRA does not approve or endorse any professional credential or designation.
- Registered Financial Planner (RFP)
- Qualified Financial Planner (QFP)
- National Social Security Advisor (NSSA)
- Master Certified Estate Planner (MCEP)
- Life Underwriter Training Council Fellow (LUTCF)
- Global Financial Steward (GFS)
- Fraternal Insurance Counselor (FIC)
- Enrolled Agent (EA)
- Certificate in Investment Performance Measurement (CIPM)
- Certified Divorce Financial Analyst (CDFA)
- Certified Income Specialist (Formerly Retirement Income Specialist) (CIS)
- Accredited Wealth Management Advisor (AWMA)
Check out these sites, too
Of course, a lot of the mystery surrounding investing and wealth management can be reduced by working with a fee-only financial advisor.
Garrett is best used for one-time hourly advice when you just want someone to look over a portfolio that you’re basically self-directing.
NAPFA is geared more toward ongoing financial advice over a lifetime — not the occasional check-in.
For the younger crowd, XY Planning Network is geared toward people in their 20s to 40s who want to pay a monthly fee for advice and comprehensive financial planning.