Whether you're new to the financial services business or an experienced veteran, earning one of the many professional designations now available will provide you with a lot of benefits. Increased marketing exposure, credibility, and compensation are just some of the advantages offered to those willing to fulfill the rigorous requirements for certification.

However, the proliferation of designations, particularly in the financial planning field, has complicated the process for those trying to decide which designation will benefit them the most. Over the last several years, a host of new designations have sprung up that offer advisors specialized training in various niches of practice. However, many of these newer credentials require far less academic coursework and training than what is demanded by the older, more established designations. In this article, we'll go over some of the more respected designations and what they entail.

The increase in new designations has sparked debate in the financial services industry regarding the credibility of certain designations compared to others. While there is no black-and-white line of separation between them, a general distinction can be made between the "old school" designations that have been around for decades and the newer ones that continue to crop up.

The designations that are most respected and recognized by the financial industry and the media include:

Certified Financial Planner – CFP

This is perhaps the most widely recognized credential in the financial planning industry. The media has promoted this designation over most others for years, primarily because of its unbiased approach to teaching the financial planning process, and the rigorous certification requirements that are administered by the CFP board. The academic requirement consists of five courses covering insurance, estate, retirement, education, tax, and investment planning plus ethics and the financial planning process. Once the academic requirement is complete, students must sit for the board exam. This is a 10-hour, 285-question test that spans two days and includes two comprehensive case studies. Once a passing grade has been achieved, prospective applicants must also complete at least three years of professional experience and get a bachelor's degree in order to obtain the CFP designation.

Certified Public Accountant – CPA

The CPA is by far the oldest and most established financial credential in America. CPA requirements vary by state, but generally, it will require 150 semester hours of undergraduate level courses plus a bachelor's degree or higher in order to sit for the 19-hour, two-day exam. There could be other requirements such as a minimum number of credits in accounting and business, or even business law. Check with your state's board of accountancy for the most up-to-date requirements. This comprehensive exam covers accounting, auditing, bookkeeping, taxes, and ethics, among other topics. The CPA designation has long been widely recognized by the public as the definitive credential of tax expertise.

Enrolled Agent – EA

An enrolled agent is a person who represents taxpayers before the Internal Revenue Service (IRS) by either passing a three-part comprehensive IRS test covering individual and business tax returns or through experience as a former IRS employee. Enrolled agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years.

Enrolled agents, like attorneys and certified public accountants (CPAs), have unlimited practice rights. This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before.

Chartered Life Underwriter – CLU

The Chartered Life Underwriter and the Chartered Financial Consultant were both originally created by the life insurance industry. The CLU designation requires the same five core courses as the CFP designation, plus three additional elective courses.

Chart. Financial Consultant – ChFC

The ChFC designation has the same requirements as the CLU, except that it tends to embrace general financial planning issues as opposed to the CLU which focuses more closely on life insurance and its laws and regulations. There is no comprehensive board exam required for either the CLU or the ChFC.

Employee Benefits Specialist – CEBC

The Certified Employee Benefit Specialist is designed specifically for those who sell or administrate employee benefit plans. The curriculum for this designation consists solely of eight courses covering various business, insurance, retirement, pension, and regulatory topics. No comprehensive board exam is required. Like the CLU or ChFC, much of the material in this coursework is also covered in the CFP curriculum.

Reg. Health Underwriter – RHU

The RHU is a designation focused on health insurance. It requires the completion of several courses of intensive academic study, but as with the CLU, ChFC, and CEBC, there is no board exam.

Chart. Property/Casualty – CPCU

CPCU is another designation that focuses on insurance. Coursework covers the area of property casualty insurance. The CPCU has eight exams. It is sponsored by The Institutes.

Chartered Financial Analyst – CFA

The Chartered Financial Analyst designation is generally considered to be one of the most difficult and prestigious credentials in the financial industry, at least in terms of investment management. The academic requirements for this designation are second only to those for CPAs. Three years of coursework must be completed that covers a range of topics and disciplines such as technical and fundamental analysisfinancial accounting, and portfolio theory and analysis. Those who earn this designation often become portfolio managers or analysts for various types of financial institutions. Holders of these credentials, like CPAs, tend to be compensated chiefly by salary with performance-based incentives (if they take corporate jobs), or from business revenue, for those who start their own private investment management companies.

Other Designations

While the above designations have long since been accepted as part of the financial services establishment, the new wave of credentials that has since arisen has served to cloud the validity of some of these older certifications. However, a closer analysis of many of these designations quickly reveals that they only require a small fraction of the coursework that is demanded from the traditional sources of accreditation.

For example, the Accredited Asset Management Specialist (AAMS) and Chartered Mutual Fund Counselor (CMFC) designations can certainly aid advisors in the investment selection and management process (and will also likely sound impressive to clients and prospects).

However, the academic curriculum required for either certification barely scratches the surface of the material covered by either the CFA or even the CFP curricula. But, while the coursework required to obtain most other designations does not compare to that of the CFA, a notable exception has arisen in recent years.

The Licensed International Financial Analyst (LIFA) credential covers much of the same material as the CFA curriculum in its coursework but is considerably more flexible in terms of administration. Unlike the CFA exams, which are administered at set times in specific, approved locations, LIFA students can go to any Thomson-Prometric testing site and sit for their exams, which can be administered at least 260 days out of the year. LIFA exams are also less expensive, and students may also petition to bypass the first two levels of the exam and sit directly for level III. It remains to be seen how this designation will be compared to the traditional CFA certification.

Indeed, some designations that have recently been created function chiefly as "marketing" designations (i.e. credentials that are geared toward advising senior citizens.). These certifications often focus more on training advisors on how to effectively market certain kinds of financial products and services to senior citizens. Therefore, a substantial portion of the training is geared primarily towards exploring the mindset of the average senior citizen, and how that can be used to induce them to follow the newly credentialed advisor's recommendations.

Keeping Perspective

Certainly, not all financial professionals who earn designations with less stringent requirements are dishonest or incompetent; merely that many of them have not received the same level of training and experience as others who have earned one or more of the older designations.

But, even the lesser designations can help advisors to better assist their clients, if only in specific areas. In terms of marketing, however, the uneducated public will have difficulty discerning between the services that a Certified Senior Advisor and a Certified Financial Planner are able to provide for them. This, of course, has fostered some resentment from advisors who have earned the more difficult certifications. Many of them are seeking legislation that would either curtail the influx of new designations or clearly label them as being lesser in scope. Time and legislation will ultimately determine how this issue gets resolved.