It seems that a proliferation of financial designations is flooding the professional marketplace. With the increased granularity of the profession and evolution of financial markets comes the need for greater specialization. How useful a credential is to its holder and his or her employer depends upon one's area of focus and the rigor and scope of the designation.

License Vs. Certification
At this point, it is important to distinguish between a license and a certification. A license to conduct a particular type of business is conferred upon the individual by a governmental body and is the bare minimum required in order to practice. For example, insurance is regulated at the state level. To sell life and health insurance and fixed and variable annuities in the United States, one must meet all education and ethics requirements and pass an exam set forth by the state in which one plans to transact business. To even discuss, let alone sell securities (stocks, bonds, derivatives), one must pass the Series 7 General Securities Representative license the Financial Industry Regulatory Authority administers to candidates. Candidates must then pass a background check and be sponsored by a registered broker/dealer.

Retail Services
Retail financial services providers deal directly with the individual client. Financial advisors, registered representatives and tax professionals are examples. If the license is a bare minimum that, for the most part, fails to differentiate the employee in a competitive job market, then what does? While natural ability and talent certainly help, getting the right label is quite important. Two certifications not required, but highly coveted for practice with wealthy clients, are the Chartered Financial Analyst and Certified Financial Planner™.

Chartered Financial Analyst (CFA)
Once the preserve of institutional money management, the CFA charter is now also sought after by private wealth managers looking for an edge in approaching an increasingly sophisticated clientele. A CFA charterholder must satisfy ethics requirements, have at least four years of appropriate work experience and complete three difficult examinations in securities analysis and portfolio management.

The CFA Institute's Council of Examiners keeps the curriculum relevant to the challenges of the marketplace and the evolving body of knowledge. Preparation is through self-study. The curriculum is at the graduate level. Most financial service employers list a CFA charter as required, or at least highly desirable. The cost for the entire program based upon 2012 rates is approximately $2,500. Annual national and local society dues apply as well for charterholders. Please refer to the CFA Institute for additional information about the program.

Certified Financial Planner™ (CFP®)
Practitioners inclined to a more holistic approach to planning may pursue the path to become a Certified Financial Planner™ Professional, of which money management is but one sleeve. Multidisciplinary in scope, the credential encompasses insurance, education, asset management, tax, employee benefit and estate planning. To become a CFP® Professional, the candidate must be a college graduate, complete financial planning coursework or the equivalent, satisfy a three-year work experience requirement, meet professional conduct or ethics standards and pass a two day, 10-hour board exam. CFP® certification is often the route for fee-based financial planners who take a big picture view of their clients' finances.

Although most professionals are based in the U.S., the Certified Financial Planner Board of Standards has addressed global interest in the marks by delegating administration of the exam outside of the U.S. to the Financial Planning Standards Board (FPSB). This non-profit organization sets standards for the exam in the various countries that administer it, as planning is very much a function of a nation's tax code and financial and tax law and regulation. The cost of the exam is approximately $600. Biennial dues as of 2012 are $325. Continuing education of 30 hours over the biennial period is required. For additional information, please refer to CFP's website.

Chartered Life Underwriter/Chartered Financial Consultant (CLU/ChFC)
Among the oldest designations in the financial services profession, the CLU and ChFC have their roots in the insurance industry and are conferred by The American College. Both cover subject matter that significantly overlaps that of the CFP® exam, though insurance planning is emphasized. The difference is that to attain each, one needs to complete eight separate multiple choice examinations on various subject such as taxation, estate planning and investment management.

Additionally, these two certifications are geared toward insurance and securities producers with the goal of increasing sales through enhanced knowledge on a broad range of topics. The total cost of each is roughly $2,000. Often, producers obtain both certifications as many of the courses form part of both curricula and their combined pursuit costs little more than each individual one. A three-year work experience and biennial continuing education are both required. Please refer to The American College for further information.

Certified Public Accountant
Though technically not a certification, the CPA license is a powerful differentiator in the areas of tax preparation, business planning and financial analysis. Other than a CPA, only an attorney or enrolled agent may represent clients before the IRS. Additionally, certified public accountants often pursue significant operational roles in companies. These roles may be chief financial officer (CFO) or chief operations officer (COO). Finally, CPAs are well versed in the double-entry system of accounting, making them highly proficient in financial statement analysis.

Institutional Services
With institutional services, the client is an institution such as an endowment or pension fund. Analysts in this sphere of professional practice focus on big-picture issues of security selection, investment policy, performance measurement and risk management. These areas have been and continue to be the traditional preserve of the CFA charterholder. Yet, in the past 15 years, two credentials of note have arisen to address subsets of the investment world.

Chartered Alternative Investment Analyst (CAIA)
Administered and conferred by the CAIA Association since 2003, The Chartered Alternative Investment Analyst program grounds the candidate in the fundamentals and advanced study of managed futures, hedge funds, real estate, private equity and credit esoterica (credit derivatives and structured products).

Candidates demonstrate their knowledge of products and their application over two levels, the former covering the terrain of products and the latter more advanced topics of study that build upon what the student learns at the first level. A significant part of the exam is an ethics component that borrows the CFA Institute's Code of Ethics and Standards of Professional Conduct. Each level is administered in September and March. The cost of the entire program is under $3,000 and takes about two years to complete. Work experience and continuing education requirements apply. Please refer to CAIA's website for further information.

Financial Risk Manager (FRM®)
The Global Association of Risk Professionals (GARP) administers The Financial Risk Manager (FRM®) program and confers the Financial Risk Manager certification upon candidates who complete two levels of multiple-choice examinations in the discipline of investment risk management. Difficulty is at the graduate level. Level I emphasizes the fundamentals of quantitative analysis, markets and products, valuation and risk and foundations of risk management.

Level II builds upon this foundation, focusing on market, credit and operational risks, risk management and investment management and current issues in financial markets. Created in 1997, the credential has evolved from one to two levels in the past several years in response to the financial crisis of 2008 widely viewed as a risk management boondoggle.

FRM holders work for financial institutions, regulators and consulting firms. The cost of the entire program is approximately $2,000 and could be completed within two years. There is a work experience and continuing education requirement. Please refer to GARP's website for further information.

The Bottom Line
To know what credential is most appropriate, the professional needs to understand what he or she does or is aspiring to do. Often, the right certification helps to close this gap and can lead to career and salary advancement. For the ambitious, more than one may be appropriate and a means to make oneself that much more marketable in the ever increasingly complex and evolving profession of financial services.

Related Articles
  1. Economics

    Understanding Cost-Volume Profit Analysis

    Business managers use cost-volume profit analysis to gauge the profitability of their company’s products or services.
  2. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
  3. Investing Basics

    How to Analyze a Company's Inventory

    Discover how to analyze a company's inventory by understanding different types of inventory and doing a quantitative and qualitative assessment of inventory.
  4. Professionals

    A Day In The Life Of A Public Accountant

    Here's an inside look at the workdays of two experienced CPAs, to give you an idea of what it might be like to pursue a career as a public accountant.
  5. Professionals

    A Day in the Life of a Public Accountant

    There’s no typical day in the life of a public accountant, but one accountant’s experience may shed some light on what the career entails.
  6. Investing Basics

    How to Become A Self-Taught Financial Expert

    Becoming a self-taught financial expert may not be as daunting of a task as it seems.
  7. FA

    The Basics of The Series 79 Exam

    Passing the Series 79 exam is usually necessary for anyone who wants to work in investment banking.
  8. Investing Basics

    Analyze Cash Flow The Easy Way

    Cash flow statements reveal how a company spends its money and where that money comes from.
  9. Economics

    What is a Trade Credit?

    Trade credit means that a customer purchases goods from a seller who allows the purchaser to pay for those goods at a later time.
  10. Investing Basics

    5 Tips For Reading A Balance Sheet

    If you know how to read it, the balance sheet provides valuable information on a potential investment.
  1. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  2. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  3. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  4. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  5. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  6. What can working capital be used for?

    Working capital is used to cover all of a company's short-term expenses, including inventory, payments on short-term debt ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center