The Alphabet Soup of Financial Certifications

7/29/2019 The Alphabet Soup of Financial Certifications

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The Alphabet Soup Of Financial CertificationsNovember 26 2010 | Filed Under Bonds,Economics,Hedge Funds,Insurance,Investing Basics,Options,Retirement,Technical Analysis

If you have trouble telling the difference between a CFA, CFP, CIC, ChFC or any of the other

financial certifications, you're not alone. How do you sift through this alphabet soup to find the best

financial professional for you? Here we look at the nine most popular designations with a brief

explanation of the education and expertise each designation signifies and the kind of work done by the

professionals holding them.

Certified Financial Planner (CFP)

Those with theCFP designation have demonstrated competency in all areas of financial planning.

Candidates complete studies on over 100 topics, includingstocks,bonds, taxes, insurance, retirement

planning and estate planning. The program is administered by theCertified 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.)

Afinancial plannerworks 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, theCFP Boardposts 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has been revoked.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 theCFA Institute(formerly the Association for Investment Management

and Research [AIMR]). To obtain theCFAcharter, 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

in accounting, ethical and professional standards, economics,portfolio managementand security

analysis. (For more on obtaining a CFA designation, clickhere.)

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 andratingson various

forms of investments. (For more on the different types of analysts, see the articleAnalyzing The
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Analysts.)

Certified Fund Specialist (CFS)

As the name implies, an individual with this certification has demonstrated his or her expertise in

mutual fundsand the mutual fund industry. These individuals often advise clients on which funds to

invest in and, depending on whether or not they have their license, they will buy and sell funds for

clients. TheInstitute of Business and Finance(IBF), formerly known as the Institute of Certified Fund

Specialists, provides training for the CFS, and the course focuses on a variety of mutual fund topics,

includingportfolio theory,dollar-cost averagingandannuities.

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The knowledge these CFS designees hold is kept current through their continuing education

requirements.

Chartered Financial Consultant (ChFC)

Individuals with the ChFC designation have demonstrated their vast and thorough knowledge of

financial planning. The ChFC program is administered by theAmerican College. In addition to

successful completion of an exam on areas of financial planning, including income tax, insurance,

investment and estate planning, candidates are required to have a minimum of three years experience

in a financial industry position.

Like those with the CFP designation, professionals who hold the ChFC charter help individuals analyze

their financial situations and goals.

Chartered Investment Counselor (CIC)

Given by theInvestment Counsel Association, this is a designation that CFA charterholders who are

currently registered investment advisors can study for. The focus of theCICprogram is portfolio

management. In addition to proving their high-level expertise in portfolio management, these

individuals must also adhere to a strict code of ethics and provide character references.

Individuals who hold the CIC charter tend to be some of the major players in the financial world, such

as those whomanage large accountsand mutual funds.

Certified Investment Management Analyst (CIMA)

This designation focuses onasset allocation, ethics, due diligence, risk measurement, investment

policy and performance measurement. Only individuals who areinvestment consultantswith at least
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three years of professional experience are eligible to try to obtain this certification, which signifies a

high level of consulting expertise. TheInvestment Management Consultants Associationoffers 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.

Chartered Market Technician (CMT)

To achieve this designation, an individual must pass three exams offered by theMarket TechniciansAssociation (MTA)and agree to adhere to the MTA code of ethics. Individuals with the CMT

designation have a demonstrated expertise in the field oftechnical analysis. Often CMTs will work for

hedge fundsand money management firms.

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

Those holding theCPAdesignation have passed examinations on accounting and tax preparation, but

their title does not indicate training in other areas of finance. So, 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 Accountantsto those who have taken additional training and

already have a CFP designation.

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Chartered Life Underwriter (CLU)

This designation is issued by the American College, and those who hold it work mostly as insurance

agents. The CLU designation is awarded to persons who complete a 10-course program of study and

20 hours of exams. The course covers the fundamentals of life and health insurance, pension

planning, insurance law, income taxation, investments, financial and estate planning, and group

benefits.

How Meaningful Are These Letters?

While certifications are not everything, you should give extra credit to investment professionals who

have them. Most of these certifications require candidates to put in many hours of study and meet
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high ethical and professional standards. For instance, to get the CFA designation, candidates must put

in approximately 250 hours of reading per exam, and there are three exams to write. The tests are so

intensive that approximately 64% of those who write just the level 1 exam will fail. Those who make it

through all three levels and become charterholders are also bound to a code of ethics and rules of

professional conduct, among other requirements.(For further reading, seeDispelling the Myths

Surrounding Financial Planners.)

Although the exams can be intense and the hours can be long, the designations should only be one

part of your criteria when deciding on a financial professional. (For more on this decision-making

process, seeShopping For A Financial Advisor.)

Conclusion

If you have to deal with a financial professional, it's important that you know the extent of his or herexpertise in different areas of finance. Now you have an idea of what some of the designations mean

and what they require from those who hold them.

CPA, CFA Or CFP - Pick Your Abbreviation CarefullyJune 01 2010 | Filed Under Economics,Entrepreneur,Insurance,Professional Education,Retirement

Whether you're searching for a good career path or just curious about the different financial

credentials, this article will help guide you through three of the best known professional designations

in the financial industry:Certified Public Accountant(CPA),Chartered Financial Analyst(CFA) and

Certified Financial Planner(CFP). Each of these three has a core career focus, and although their

abbreviations often sound interchangeable, each designation gives you something unique. Follow

along to discover how much coursework and study each designation requires, what careers they

typically lead to and how much you could make. (For a basic breakdown on these designations and

more, check outThe Alphabet Soup Of Financial Certifications.)

Certified Public Accountant (CPA)

For most people, a CPA is best known as the person who prepares tax returns. CPAs certainly do that,

but they do much more as well. A CPA license is legally required in order to do particular jobs, such as

public accounting (independent auditing). However, one does not require a CPA license in order to

prepare tax returns. State laws govern what CPAs can and cannot do with their license. (If you're

looking for a good accountant, check outCrunch The Numbers To Find The Ideal Accountant.)

Requirements: Requirements vary by state, but in general, in order to sit for the CPA exam,

applicants must have a bachelor's degree with 120 semester hours. To obtain the CPA designation,
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applicants must pass the Uniform CPA Exam, gain relevant work experience and meet additional

educational requirements. Overall, additional educational requirements usually consist of 24-30

semester hours in accounting, earned through a graduate or bachelor's degree in business. Many

states also require a minimum number of one to two years accounting and/or auditing experience.

Some states may require 150 semester hours to obtain the CPA.

Aside from the experience requirements, a CPA license usually takes about 18 months to complete

beyond the educational requirements. Many students choose to pursue a masters degree in

accounting to fulfill their educational requirements.

Exam: Although classroom requirements are a major requirement, the CPA exam is a difficult task in

its own right. Exams are administrated by the American Institute of Certified Public Accountants, the

governing body of CPAs in the United States. The 14-hour computerized exam consists of foursections:

1. Auditing andattestation

2. Financial accounting and reporting

3. Regulation

4. Business environment and concepts

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Careers: Many undergraduate accounting students receive job offers long before they graduate.Accounting is an in-demand field and is projected to continue to be so. According to the U.S. Bureau

of Labor Statistics, employment is projected to grow 18% between 2006 and 2016; this amounts to

nearly 226,000 new positions. For CPAs wishing to advance to senior-level corporate positions, two to

three years of experience at a major accounting firm is crucial.

For those seeking gainful employment but not wishing to climb the corporate ladder, there are

numerous positions available in every city for accountants at small accounting firms and practices. For

more ambitious job seekers, lucrative CPA positions are available in hedge fund accounting and

Sarbanes-Oxley-related work. The chief requirements for these positions are experience and an

excellent educational background. (To learn the history of the accounting profession, check outThe

Rise Of The Modern-Day Bean Counter.)

Chartered Financial Analyst (CFA)

The CFA reputation in the business community is world class, and CFA charterholders work in many
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countries around the world. The CFA program is very broad, and might be more aptly described as the

equivalent of a master's degree in finance with accompanying minors in accounting, economics,

statistical analysis and portfolio management. Although the CFA designation is not a legal requirement

to perform work as afinancial analyst(the cornerstone CFA job), it is a great way to get a foot in the

door for one of the most difficult jobs to crack. (For more on the pros and cons of this demanding

designation, seeSo You Want To Earn Your CFA?andBecoming A Financial Analyst.)

By reputation, the best way to get a finance job on Wall Street is to get a Master of Business

Administration degree from one of a handful of exclusive schools including Wharton, Harvard and

Stanford. The second best way is to earn the CFA charter and have good industry experience. In some

instances a CFA designation is even held in higher esteem than an MBA.

Requirements: The CFA designation (granted by the CFA Institute) earns its reputation mainly due tothe grueling process candidates must endure to earn the CFA charter. While the exam is very

democratic and open to anyone with a bachelor's degree, the only people with a realistic chance of

passing are those who are serious about the field. The three general requirements to earn a CFA

charter are to pass three exams, have an undergraduate degree (in any subject) and have three years

related work experience in the financial area.

Exam: To earn the CFA charter, candidates must pass a six-hour exam for each of three levels. The

first exam is available twice per year (in June and December) and the next two are only available in

June. The pass rates on the three tests are slightly above 50%, so if you don't pass the second or

third exam, you must wait one year to take it again.

Each of the three tests has overlapping material such as ethics and financial analysis. Generally,

though, the first test covers broad financial principles, the second is a very intensive exam on financial

analysis and accounting, and the third exam covers portfolio management and decision making. (For

more on surviving your CFA exams see,Pass Your CFA Exams The First Time.)

Careers: According to the CFA Institute, 55% of charterholders work forinstitutional investorsas in-house analysts, 15% work forbroker-dealers, and the remaining 29% work for universities and the

government. While not nearly as numerous as CPA jobs, CFA-related jobs are perhaps more lucrative.

CFA Institute's 2007 Member Compensation Survey reports that the median compensation for an

equity portfolio manager with less than five years of experience is $495,000. With over 10 years

experience, the median yearly salary went up to $555,000.
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Certified Financial Planner (CFP)

The Certified Financial Planner (CFP) is the only designation of the three focused on investing. It

provides an extremely practical course of study for those wishing to work directly with individual

investors. The focus of the CFP is to trainfinancial advisorsto create and implement financial plans for

investors.

Requirements and Exam: The requirements for the CFP, as specified by the CFP Board of

Standards, are a bachelor's degree in any major, three years financial planning experience, other

educational requirements (see below) and an exam. The 10-hour exam covers the following:

investments planning, insurance, estate planning, risk management, tax and retirement planning.

In order to take the exam, one must complete a prescribed course of study - unless exempt - inrelevant financial planning areas. These six required courses take about nine months to complete and

are conducted on college campuses nationally. They are:

1. Financial planning: process and environment

2. Fundamentals of insurance planning

3. Income taxation

4. Planning for retirement needs

5. Investments

6. Fundamentals ofestate planning

Careers: People who benefit the most from the CFP designation are those who usually work directly

with individual clients. Opportunities exist nationally for people with the CFP, but it is not necessarily a

key to a high-paying job, as opposed to the CPA designation. There is no typical salary with the CFP,

as it helps gain client credibility in what is essentially an entrepreneurial position. Income potential is

determined by the sales performance of the financial consultant, not by a salary scale. (If you aren't

sure financial planning is for you, check out the quiz inIs A Career In Financial Planning In Your

Future?)

Parting Thoughts

Of the three designations, only the CPA is governed by state laws (to protect the public interest). In

choosing a designation to pursue, ask yourself what kind of work you want to do, where you want to

work, and if you want to work as an employee with a guaranteed salary or an entrepreneur where the

sky (and the basement) is the limit. No matter which you choose, each of these three financial
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designations will provide ample professional opportunities for those who spend the time and energy to

earn them.

To learn the pros and cons of these designations and more, readFinancial Designations Aren't All

Created Equal.

Certifications and Designations

Business Valuation Analysts: Certifications and Designations

Business valuation practitioners should have very specific experience and expertise. The expertise isdeveloped through rigorous academic and professional training. Individuals who retain (and individuals

who rely on) valuation services should carefully evaluate the analyst's training, credentials, andexperience.

Credibility is an important characteristic for a valuation analyst. While a reputation for honesty and qualityof work is critical to building credibility, earning the appropriate professional credentials also reflects onthe analysts ability.

The certification process, from the multiple certifying associations, is at the core of the business valuationprofession. It is one of the key ways firms distinguish themselves, withstand challenges Dalbert(seearticle on expert challenges) and keep their inventory of skills current.

According to a recent BVR survey, the typical firm in the business valuation market has 2.1 educational orprofessional designations per employee. If you only include appraisers, and senior and junior analysts,the ratio jumps to 2.4 certifications per professional staff.

An undergraduate or graduate curriculum in economics, accounting, and finance provides an appropriateacademic foundation for the business valuation practitioner. Largely influenced by the presence of largeM&A and accounting firms which provide business valuation services to clients, two of the top three of themost common professional designations are specifically not necessarily appraisal-related, but, in fact,professional (the CPA) and educational (an MBA).

Also, a professional designation such as chartered financial analyst (CFA) is a common credential forvaluation analysts. The CFA designation is earned through the CFA Institute (see chart below).

The chartered financial analyst program is a widely recognized credential that demonstrates thecompetence and integrity of financial analysts. Three levels of examination measure a candidates abilityto apply the fundamental knowledge of investment principles at a professional level. To be awarded the

CFA designation, a candidate must:

sequentially pass the Level I, Level II, and Level III examinations,

have at least three years of acceptable professional experience working in the investmentdecision-making process, and

fulfill CFA Institute membership requirements.

There are four organizations in the United States that offer professional accreditations specifically in
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business valuation.These four organizations are:

the American Institute of Certified Public Accountants,

the American Society of Appraisers,

the Institute of Business Appraisers, and

the National Association of Certified Valuation Analysts.

Business appraisal designations from the AICPA, ASA, IBA and NACVA are all significantly moreprevalent than they were, say, in 2005, and are similarly common.

ASA

The American Society of Appraisers, formed in 1936, is a multidisciplinary organization that offerseducation and professional accreditation in many appraisal disciplines. These appraisal disciplinesinclude: real property, machinery and equipment, personal property, and a number of technical valuationspecialties, as well as business valuation. Since 1984, the business valuation discipline has been theASAs fastest growing area of accreditation. The ASA offers certification as (1) an accredited member

(AM) and (2) an accredited senior appraiser (ASA). Both of these certifications require (1) certain workexperience in business valuation, (2) successful completion of various exams, and (3) submission ofwritten business appraisal reports that earn the approval of the associations Board of Examiners.

ABV

The American Institute of Certified Public Accountants (AICPA) started a business valuation specialtyaccreditation program in 1997. They offer an Accredited in Business Valuation (ABV) designation forCPAs with experience in business valuation. To earn the ABV designation, a candidate must pass awritten examination. To be eligible to sit for the written examination, the candidate must:

Table of Valuation Certifications

Certification Certifying Organization URL

CPA AICPA http://www.aicpa.org

ABV AICPA http://www.aicpa.org

MBA Multiple

CVA/AVA NACVA http://www.nacva.com

ASA/FASA/AM ASA (American Society of Appraisers) http://www.appraisers.org

CFE (Certified Fraud Examiner) ACFE (Association of Certified Fraud

Examiners)

http://www.acfe.com

CFA (Certified Financial

Analyst)

CFA Institute https://www.cfainstitute.org

JD Multiple

CBA/MCBA IBA (Institute of Business Appraisers) http://www.go-iba.org

PhD Multiple

CFP (Certified Financial

Planner)

Certified Financial Planner Board of

Standards, Inc.

http://www.cfp.net

CM & AA AM&AA (Alliance of Merger and

Acquisition Advisors)

http://www.amaaonline.com


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CBV CICBV (Canadian Institute of Chartered

Business Valuators)

https://www.cicbv.ca

Chartered Accountant CICBV https://www.cicbv.ca/

CFFA (Certified Forensic

Financial Analyst)

NACVA (National Association of Certified

Valuation Analysts)

http://www.nacva.com

The standard business valuation designations are often enhanced by the advanced degrees andcertifications from non-BV associations and institutes that pepper many firm resumes. The list ofadditional degrees, in fact, it's quite impressive, if not daunting. A partial list of some of the honorificsreported in the BVR survey appears below.

Table of non-BV Professional Designations

CIA Certified Internal Auditor

MA Master of Arts

BVAL IBAs (Institute of Business Appraisers) BV Accreditation in Litigation

CLU Chartered Life Underwriter

Real Estate License

PE Mechanical EngineerCMEAA Certified Management Accountant

CBI IBBAs (International Business Brokers Association) Certified Business Intermediary

be a member in good standing of the AICPA and hold an unrevoked CPA certificate or licenseissued by a recognized state authority, and

provide evidence of 10 business valuation engagements/projects that demonstrate substantialexperience and competence to be eligible to sit for the ABV examination.To maintain the accreditation (after passing the examination) each credential holder must:

submit at the conclusion of every three-year period documentation demonstrating substantialinvolvement in five business valuation engagements, and

complete 60 hours of related CPE during the same three-year period.

CBA

The Institute of Business Appraisers (IBA), formed in 1978, offers certification as:

an accredited by IBA (AIBA),

a certified business appraiser (CBA),

a master certified business appraiser (MCBA), and

a business valuator accredited for litigation (BVAL).

Certification as a CBA is available to members of the Institute of Business Appraisers who demonstratethat they have attained a high level of professional competence and conduct. To obtain the CBA

credential:

The applicant must have successfully completed at least 90 classroom hours of upper levelcourse work in addition to having earned a 4-year college degree, or

The application must have five years of full-time active experience as a business appraiser. Theapplicants experience must include valuation of a variety of business types and appraisals fora variety of purposes.

The applicant must provide four satisfactory references, including two references as to personalcharacter and two references as to professional competence as a business appraiser.


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The applicant must complete a four-hour, proctored, written examination covering the theory andpractice of business appraisal.

The applicant must pass a comprehensive written examination on current business valuationtheory and practice.

The applicant must submit two demonstration reports demonstrating a high degree of skill,knowledge, and judgment as a business appraiser. All CBAs are required to document 24

hours of continuing professional education every two years.

AVA, CVA

The National Association of Certified Valuation Analysts (NACVA) was formed in 1991 to providecertification and member support services specifically for CPAs and others performing business valuationservices. The NACVA offers certification as:

an accredited valuation analyst (AVA),

a certified valuation analyst (CVA), and

a government valuation analyst (GVA).

In order to qualify for the CVA designation, a candidate must: hold a valid and unrevoked CPA license issued by a legal ly constituted state authority (the CharteredAccountant [CA]certification issued in Canada is considered equivalent to the CPA in the U.S.), be a member in good standing with NACVA, complete a five-day training program as prescribed by NACVA, submit three personal and three business references, and pass a comprehensive two-part examination.

Documents

The Alphabet Soup of Financial Certifications