Swimming With The Sharks In Alphabet Soup

Conrad Toner |

Financial planning in Canada continues to be an “unregulated” industry, allowing just about anyone to put out a shingle and call themselves a financial planner. So what can you do ensure that you’re working with someone who is qualified?  One thing you can do is to only work with an adviser that holds a professional designation. You know what I mean – the  alphabet soup following their name on their business card.

With over 80 so-called designations the challenge is figuring out which ones have  any real credibility or value and which ones are held by sharks hoping to look more professional.  In a study conducted a number of years ago by Lynn Gordon Research “78% of respondents who used a financial professional said this person had a financial planning designation.  However, the majority (69%) of these respondents claimed they had no idea what designation was held”.

Some might argue then, that designations are useless.  However, the same study makes me believe otherwise.  It found that “even though many respondents were unaware if their financial professional had a professional designation and what  it was, 74% indicated it was very important to have this designation”.

It would seem that we have  a paradox when it comes to professional designations.  Consumers clearly believe it’s important for advisers to have  designations. Yet most don’t know which ones their advisers have,  nor do they understand which ones mean the most to their financial well-being.  If you’re like the 74% of respondents in the Lynn Gordon study who believe it is very important to have a designation, then how do you determine which ones an adviser should have?

By title alone, many sound very impressive.  Yet if you were to dig a little deeper you’d find that just about any organization can offer a course that leads to a designation. It’s no wonder there are so many to choose from.  That said, very few designations have any real significance for someone seeking advice on retirement income planning.  In fact, I believer there are only a handful that have any real value.

With this in mind, if you want to know if the designation your adviser or prospective adviser holds is appropriate for your situation, you must consider three key questions.

1. Is the designation relevant to the advice you are seeking?  That  is, will the  knowledge and expertise that comes from having designation XYZ make a significant difference in the quality of the advice you receive?

2. Does the person/adviser holding that designation practice the principles of that designation?  Some advisers have taken the time to get a designation, yet don’t actually practice the principles that the designation represents.  They just get it to put on their business card.

3. What are the requirements to attain and keep the designation?  There’s an old joke about the doctor who got his degree from a Cracker Jack box…. but I digress.  Seriously though how is the average person supposed to know about the requirements to obtain any of the financial designations or understand the difference between them.

A professional designation is only one factor to consider when hiring the right financial adviser, and it’s a good place to start.  In upcoming posts, I’ll expand on the details of the 3 questions listed above and reveal the only designations I think are worth your consideration.