Choosing an Investment Advisor and Understanding Certifications


There is no doubt that many of us would like some guidance with our finances. Between our busy work days, personal endeavors, and everything in between, our financial goals often get sidelined. Keeping on track with our broader financial goals, and formulating how to best reach them, sometimes requires the help of a qualified professional. But how do you determine which one is right for you?

Here are a few tips to choose the right financial advisor:

Consider Compensation:

Financial advising is really a pretty general term that encompasses a wide range of different services and compensation models.  Some financial advisors receive their compensation mainly in the form of commissions from products and services they recommend.  These individuals act very much like sales agents, and they earn their living by making recommendations based on products they consider “suitable” for you.  These advisors generally work for large brokerage houses (think UBS, Morgan Stanley, etc.).

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Others receive a percentage of the assets that they manage for you (so the better you do, the better they are paid). Still others charge hourly fees, or flat rates.  In both cases, these advisors are generally called fee-only, and they typically have more transparent free structures.  These advisors generally work independent of a brokerage house, and are often found at a Registered Investment Advisor, such as my firm (RGA Investment Advisors LLC).

Of course, there are financial planers who receive compensation from both commissions and fees.  These advisors are generally affiliated in some way to a broker dealer, and they may also sell insurance products.  The key point is to determine how transparent and forthright an advisor is about disclosing his or her fee, and whether or not you feel comfortable with the idea of paying commissions.  While I firmly believe that fee-only advisor maintains a compensation program that is more aligned with that of the interests of his or her client, there are certainly very competent advisors who are paid via commission, or through some sort of hybrid method.

Consider Credibility

There is a myriad of self-proclaimed financial advisors in the United States.  Of them, only a small subset of advisors have what I consider to be adequate or credentialed backgrounds.  You should vet a potential financial advisor according to their credentials, including what certifications are held, and to which professional organizations they belong.  Make sure that the advisor is properly licensed in your state, and that they maintain the proper securities licenses if they will be managing your money and/or selling you products.

There are a few professional designations I’d like discuss here, as clients have so often cited their confusion in comparing and contrasting between them:

  • CFP (Certified Financial Planner): The CFP is perhaps the most widely recognized credential in the financial planning industry.  In order to qualify, an applicant needs complete an academic component consists of five courses covering insurance, estate, retirement, education, tax and investment planning plus ethics and the financial planning process.  Once the academic requirement is complete, students must sit for the board exam. This is a 10-hour, 285-question test that spans two days and includes two comprehensive case studies.  Once a passing grade has been achieved, prospective certificants must also complete at least three years of professional experience and get a bachelor’s degree in order to obtain the CFP designation.
  • CLU (Chartered Life Underwriter) and ChFC (Chartered Financial Consultant): Both of these designations were originally created by the life insurance industry.  The CLU designation requires the same five core courses as the CFP designation, plus three additional elective courses.  The ChFC designation has the same requirements, except that it tends to cover more specific general financial planning issues as opposed to the CLU, which focuses more closely on life insurance and its laws and regulations. There is no comprehensive board exam required for either credential.  Many prospective advisors choose to enroll in a ChFC program and self-study for the CFP designation as much of the course material overlaps.
  • CPA (Certified Public Accountant): The CPA is by far the oldest and most established financial credential in the United States.  CPA requirements vary by state, but generally candidates for the licensure are required to have 150 semester hours of undergraduate level courses plus a bachelor’s degree or higher in order to sit for the 19-hour, two-day exam. There could be other requirements such as a minimum number of credits in accounting and business, or even business law.  This comprehensive CPA licensing exam covers accounting, financial statement analysis, auditing, management account, taxation, and ethics, among other topics.  The CPA designation has long been widely recognized by the public as the definitive credential of tax expertise.
  • CPA/PFS (Personal Financial Specialist): CPAs with extensive financial planning experience can pursue the PFS designation from the American Institute of Certified Public Accountants.  The requirements for the Personal Financial Specialist (PFS) credential are established by the PFP Division staff at the AICPA, the National Accreditation Commission, along with the PFS Credential Committee, and accurately reflect the depth and breadth of experience and technical expertise required to hold this credential.  Beyond the requirements of obtaining a CPA license,  a CPA/PFS candidate must earn a minimum of 75 hours of personal financial planning education within the five year period preceding the date of the PFS application and must have at least 2 years of full time work-experience in providing financial planning services.  Only after these criteria are met is the candidate able to sit for the 7 hours 15 minutes board examination.
  • CFA (Chartered Financial Analyst): The CFA is widely considered to be one of the most difficult and prestigious credentials in the financial industry, at least in terms of investment management.  The academic requirements for this designation are second only to those for CPAs.  Three years of coursework must be completed that covers a range of topics and disciplines such as technical and fundamental analysis, financial accounting and portfolio theory and analysis.  Those who earn this designation often become portfolio managers or analysts for various types of financial institutions.

Beyond these credentials, be sure that your advisor has experience providing guidance for your specific needs.  Some advisors have more experience with retirement, while others specialize in business succession planning and self-employment issue.  It’s not easy to find an advisor that has a comprehensive suite of skills, so be sure to interview around for that perfect fit.

Consider Your Best Interest

The last point I’d like to make is on whether the advisor acts as a fiduciary or not, that is, whether he or she has your best interests in mind.  This is a critical point in making an informed and thoughtful decision in who you will hire to help care for your financial well-being.  A fiduciary is a legal and ethical relationship of trust between two parties.  The fiduciary is obligated to the fiduciary standard (or fiduciary duty), which is the highest standard of care that anyone in financial services (or law, or accounting, etc.) can provide.  It means that an advisor acting as fiduciary is morally and legally bound to act in the best interest of his or her client.  This is an important criterion when selecting an advisor. Many brokers, registered representatives of brokerage firms, or financial planners who sell products are not subscribed to this fiduciary standard.  Instead, they adhere to something called the ‘suitability standard,’ which in essence means that recommendations made are consistent with the best interests of the underlying customer.  There is wide gap in the requirement of care between these two standards.  Be sure that you fully understand to which standard your advisor adheres.


Jason explains about himself: I've been managing money for high net worth individuals since 2006. I'm the founder and Managing Director at RGA Investment Advisors LLC, an independent and fee-only registered investment advisor (RIA). I'm the partner in charge of wealth management and financial planning at Rayner and Gilbert CPAs. Prior to a career in wealth management and investment advisory, I held M&A roles at both General Atlantic LLC (GA), a leading global private equity firm providing capital for growth companies driven by information technology or intellectual property, as well as Berkery, Noyes & Co. (BNC), an independent Wall Street investment bank serving the broadly defined knowledge and information marketplace. At GA, I was responsible for deal prospecting, transaction structuring, as well as value added portfolio work. At BNC I specialized in serving large and mid-sized information providers in the U.S. and international markets with strategic mergers & acquisitions, corporate and asset divestitures, strategic research, and valuations. Prior to a career in Finance, I led the due diligence efforts for numerous financial buyers within KPMGs Transaction Services practice, and provided estate planning tax consulting services at the law firm of Buchanan Ingersoll, PC in Washington, DC. I am a CPA who holds the PFS* designation for my expertise in Personal Finance and a CFF** for my accreditation in Financial Forensics. I hold a B.A. from the University of Michigan and an M.S. in Accounting and Finance from the George Washington University School of Business. I lives in New York with my beautiful wife Julianna, two sons, Logan and Henry, and dog, Samantha
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