Hiring a Financial Advisor: Making Sense of Certifications
NEW YORK (MainStreet) Investors seeking financial guidance are bombarded by advisor certifications. And there are many. The Financial Industry Regulatory Authority, Inc., an independent regulator of U.S. securities firms, lists pages and pages of designations on its website. It is easy to assume that a certification requires an advisor to meet certain ethical standards, gain advanced knowledge and pass stringent tests. Not always. Some of these alphabet badges are simply bought and paid for.
The Securities and Exchange Commission and the North American Securities Administrators Association are advising consumers to do a little homework before trusting an advisor with a string of letters following their name on a business card.
"Do not rely solely on a title to determine whether a financial professional has the expertise that you need -- find out what the title means and what the financial professional did to obtain it," says the SEC in an investor bulletin. "Some titles are granted by private organizations, such as a trade group. Still other titles may be simply purchased, or even made up by financial professionals hoping to imply that they have certain expertise or qualifications; such titles are generally marketing tools and are not granted by a regulator. As with any title, you should verify a financial professional is really qualified to advise you."
The SEC and NASAA note that some groups that grant titles do not even take complaints or discipline their members. The agencies
- suggest asking these questions of any advisor touting a title:
- What is the name of the organization that awards the financial professional title?
- What are the training, ethical, and other requirements to receive the title?
- Did you have to take a course and pass a test?
- Does the financial professional title require a certain level of work or educational experience?
- To maintain the financial professional title, are you required to attend periodic continuing education courses?
Consumers can usually confirm any information a financial professional provides regarding a certification by checking the website of the organization that awards the title. By contacting the issuer, investors can also learn if the advisor is currently authorized to use the title and determine if they have any disciplinary history.
Investment advisers are required to provide to their customers a brochure about their employees. If an advisor lists a professional title, the brochure supplement must include an explanation of the minimum qualifications to gain and maintain the designation. FINRA offers a website to help consumers understand investment professional designations. It includes descriptions of the education and experience requirements for certain titles, as well as information about the organizations granting them.
--Written by Hal M. Bundrick for MainStreet