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Money Matters: Make sense of financial credentials

Aug. 31, 2010 at 3:31 a.m.


The competition to manage your money has never been greater.

With poor investment returns and a slew of national scandals, people in the Victoria area may be left scratching their heads wondering what to do and who to trust.

Buyer beware. You must determine if the person offering "advice" is truly giving critical insights or are they just offering a slick sales pitch? It is confusing enough that there are absolutely no standards for who can call themselves a "financial planner" or "financial adviser."

Furthermore, the broad financial services industry knows fancy initials after a name gives the impression of accomplishment and expertise. There are now more than 100 designations for financial advisers. Some genuinely give an adviser a solid foundation to help clients, while others are nothing but marketing ploys.

The Certified Financial Planner designation is probably the best known credential. To obtain this designation, a professional has to pass five, four-hour exams covering insurance, investments, taxation, retirement plans and estate planning.

After passing all five individual exams, a candidate takes a two-day, 10-hour comprehensive exam. Throw in a background check and three years of experience and your professional can earn the CFP designation. CFP designees also must take 30 hours of continuing education every two years.

Other designations, which sound very impressive, may only require a two-hour open-book exam taken in their own office without a proctor. Both may allow a person to have initials after their name, but obviously, the two are not an apples-to-apples comparison.

So what is a consumer to do?

First, request in writing an individual's educational accomplishments. Where did they go to school and what degree(s) or designations did they achieve?

Next, obtain contact information for their governing body. Although it is easy enough to figure this out on your own, it will give you a sense of their willingness to work with you. Go to the governing body and determine if they actually have the designations they claim to have and if they are in good standing.

What did they do to get the credentials? Don't just take their word for it, verify it. It is your money and you need to learn whether the credentials in question are worth anything - or if they're just advertising.

How will these credentials actually help you? If someone is a certified divorce specialist but you need help with college planning, the credentials might be irrelevant. Make sure you hire a professional who can get you where you need to go.

How is the professional compensated? All financial professionals charge for their services - regardless of their credentials. The goal here is to determine if they are compensated for selling you a product or if they are compensated for helping you achieve your goals. If they are compensated by selling a product, the credentials might not matter and you should be on alert.

Are they a fiduciary? A fiduciary is legally obligated to do what is in a client's best interest - and not just sell them a product. Certain credentials require a professional to function as fiduciary - while others don't.

The bottom line: Make sure that credentials actually signify legitimate accomplishment and an ability to help you - and not just sell you the deal of the day.

Dave Sather is a Victoria Certified Financial Planner and owner of Sather Financial Group. His column, Money Matters, publishes every other Wednesday.

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