What Do All Those Letters Mean? Knowing Your Designations

August 4, 2015

Last week we found out that our Director of Research and Trading passed her second level of the CFA exam. To put into context her accomplishment, consider some of the following statistics:


* Since the first exams in 1963, the average pass rate per exam has been 46% and has been even lower in the previous ten years at only 42%


* Out of the roughly two million candidates, only 179,291 have passed all three levels through 2014


* The pass rate for the Level II for 2015 was 46%

Obviously, we are really proud of her accomplishment of passing and wish her the best of luck as she begins studying for the final exam.


For those of us who have trouble keeping track of the alphabet soup of designations in the wealth management industry, we thought we could take this moment to revisit some of the key designations and what they mean from our friends at Investopedia.


Certified Financial Planner® (CFP®)


Those with the CFP® designation have demonstrated competency in all areas of financial planning. Candidates complete studies on over 100 topics, including stocks, bonds, taxes, insurance, retirement planning and estate planning. The program is administered by the Certified Financial Planner Board of Standards Inc. In addition to passing the CFP certification exam, candidates must also complete qualifying work experience and agree to adhere to the CFP Board's code of ethics and professional responsibility and financial planning standards. (For more on obtaining the CFP designation, click here.)  A financial planner works with individuals to help them understand their options and make financial decisions suited to their personal financial situation and goals. Since, because of the nature of their work a lot of trust is placed in these individuals, the CFP Board posts information on the financial planning process and current licensees, allowing clients of CFPs to verify if their financial planners' designations are in good standing. The last thing anyone needs is to choose a CFP whose certification has been revoked.


Chartered Financial Analyst (CFA®)


This designation is offered by the CFA Institute (formerly the Association for Investment Management and Research [AIMR]). To obtain the CFA charter, candidates must successfully complete three difficult exams and gain at least three years of qualifying work experience, among other requirements. In passing these exams, candidates demonstrate their competence, integrity and extensive knowledge of accounting, ethical and professional standards, economics, portfolio management and security analysis. (For more on obtaining a CFA designation, click here.)  CFA charterholders tend to be analysts who work in the field of institutional money management and stock analysis, not financial planning. These professionals provide research and ratings on various forms of investments.


Certified Investment Management Analyst (CIMA)


This designation focuses on asset allocation, ethics, due diligence, risk measurement, investment policy and performance measurement. Only individuals who are investment consultants with at least three years of professional experience are eligible to try to obtain this certification, which signifies a high level of consulting expertise. The Investment Management Consultants Association offers the CIMA courses.  Individuals who hold CIMA designations are required to prove their expertise through continual recertification, which requires CIMA designees to complete at least 40 hours of continuing education every two years.  CIMA designation holders tend to have careers with financial consulting firms, which involve extensive interaction with clients and the management of large amounts of money.

Certified Public Accountant and Personal Financial Specialist (CPA and PFS)

Those holding the CPA designation have passed examinations on accounting and tax preparation, but their title does not indicate training in other areas of finance. Those CPA holders who are interested in gaining expertise in financial planning in order to supplement their accounting careers need to become certified as personal finance specialists (PFS). The PFS designation is awarded by the American Institute of Certified Public Accountants to those who have taken additional training and already have a CFP designation.


"Candidate Examination Results" CFA Institute.  Retrieved from:  http://www.cfainstitute.org/programs/cfaprogram/Documents/1963_current_candidate_exam_results.pdf


"CFA Exam Results" 2015.  CFA Institute.  Retrieved from: http://www.cfainstitute.org/programs/cfaprogram/exams/Pages/cfa_exam_results.aspx


Investopedia Staff.  "The Alphabet Soup of Financial Certifications"  2015.  Investopedia.  Retrieved from: http://www.investopedia.com/articles/01/101001.asp

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