I came across this article: “The Alphabet Soup of Financial Certifications” while doing research on a book I’m writing called “Wolves in Sheeps Credentials”
I also presented it in the Renovating Retirement Podcast Episode 022, but I also wanted to explain my thoughts it in this weeks post as well. Do you have any idea what all of those letters behind your advisors’ name mean? Most people don’t.
In this particular episode, I cover how none of the licensing, certification courses (this is where all the letters behind your advisors name come from), or the continuing education classes we take actually train us to be good at working with your money. They are memorization tests with no hands on training.
Here are some of the conclusions the author of this article came to and my notes on each
Most of these certifications require candidates to put in many hours of study and meet high ethical and professional standards
Hours of Study? Does doing hours of study on how to dance the tango make you a world class dancer? Would you need to actually go dance the tango…..like a lot? Why don’t the certifications require hundreds of plans built correctly before you can build one for a real person. Would you fly with a pilot who’s never been in a plane? Someone has to be the first patient for every brain surgeon cutting into your head but would you CHOOSE TO if you knew you were first?
For instance, to get the CFA designation, candidates must put in approximately 250 hours of reading per exam, and there are three exams to pass.
Ah yes, because 750 hours of READING about doing the tango teaches you to move your body that way where only 150 hours would not be enough right? Would doing hours of reading only prepare you for being a good….reader?
The tests are so intensive that approximately 64% of those who take just the level 1 exam will fail. Those who make it through all three levels and become charter holders are also bound to a code of ethics and rules of professional conduct, among other requirements.
This quote mentions “code of ethics” and “rules of professional conduct” and the first one I listed said high ethical and professional standards.
What does this really mean when advisors who hold these certifications are allowed to work at companies that admit they are screwing you in their revenue sharing agreements posted on their sites? These joker brokers “plans” prepare you for only one of the five lives of retirement which is Rough Life….you can get your money if you need to. What about the other four lives? Long Life, Short Life, Sick Life and The Next Life? They carry a certification, and read for hours and hours and hours but you’re not guaranteed your income will last, you don’t know if your spouse will be ok if you die, if you get sick you are on your own to pay for it and we don’t know if you’ll leave anything to loved ones when you die. Their plans are inferior because they offer one crappy tool that pays them the most but does nothing well for you…..and they do this because the pitch has been working on unsuspecting Americans for decades and most people reward them for it by becoming clients. I don’t think sticking people in the crappy mutual funds that give your company is ethical. I don’t think selling overpriced life insurance is ethical. I don’t think bad mouthing annuities or selling someone an annuity with income lower than another company would offer is ethical. But these crooks are allowed to carry certifications that say they meet high levels of ethics. It’s a sham.
Although the exams can be intense and the hours can be long, these designations should only be one part of your criteria when deciding on a financial professional.
One part…? Should the other part be whether or not the advisor is good at actually making the financial plan which no one is monitoring? I think actually proving you can do the job, and not hurt people, is a quality I’d want in an advisor. I’ll take someone with no college education, no letters behind their name, and minimum licensing who can build a better plan than anyone on the planet before I would work with a joker broker with lots of letters behind his name.