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The ABCs of Picking a Financial Advisor


Financial advisors often have an alphabet soup of letters after their names. Here's a look at some of those titles and what they mean.

When you start looking for a financial advisor to help with your investments, you’re likely to find professionals with an alphabet soup of letters after their names, letters that show that they have earned some credentials. Here's a look at some of those letters and what they mean.

CFP: Certified Financial Planner

To earn a CFP designation, the advisor must have taken a series of courses in finance, taxes, estate planning, insurance and employee benefits, and have passed a two-day exam. He or she must also have at least three years of related experience.

CFA: Chartered Financial Analyst

A CFA must have met standards set by the Association for Investment Management and Research, including a passing grade on a series of six-hour exams covering subjects like ethical standards and portfolio management.

ChFC: Chartered Financial Consultant

A ChFC must complete 10 courses on the basics of financial planning, investments, taxes, insurance, and general financial and estate planning. He or she must also have at least three years in the financial industry.

RR: Registered Representative

This is your garden-variety stockbroker. He or she has to pass an exam covering basic investment product knowledge and securities law. A broker has the advantage of access to research and other services available from his or her brokerage firm, but the recommendations you get may not always be completely objective. That’s because much of the broker's income may be based on commissions on the products he or she sells.

According to many financial experts, the latter situation is one to avoid. A financial advisor whose money is at risk along with yours is a good choice, but may be hard to find. The next option is a fee-based advisor, who charges for his or her advice but has no financial interest in whether you follow it.

One way to find a fee-based advisor is to check out the National Association of Personal Financial Advisors.

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