Would You Hire a Plumber to Clean Your Teeth?
Swimming With The Sharks In Alphabet Soup” I discussed whether or not having a “so called” professional designations can help you select a qualified financial adviser. Just having a designation though won’t guarantee success. You need to ensure that the adviser meets 3 criteria with respect to the particular designation they hold. The designation needs to have relevance to your needs. The adviser should actually practice the principles of the designation they hold. And finally you want to consider the requirements they needed to meet in order to get and maintain the designation.
Today I want to explain why relevance is so important. Start by asking yourself the question – Will the knowledge and expertise that comes from having designation XYZ make a significant difference in the quality of the advice you receive? In days gone by you could put just about any letters you wanted after your name. In fact, I knew an advisor who had PPL on his card. So what does PPL stand for? Personal pilots license of course – nothing to do with financial planning, but it apparently gave him credibility.
CASE STUDY
Mary and Jim are both 56 and want to retire sometime within the next 5- 10 years. Mary has a pension at work, but doesn’t really understand her options and how it will fit into the family situation. Jim doesn’t have a pension but has considerable savings in his RRSP’s. They haven’t had much luck with their investments of late, and their current adviser doesn’t do financial planning. They’re getting concerned about this whole retirement thing, since it’s just around the corner. They’ve decided it’s time to get retirement income plan and are looking for a new financial adviser to help.
They’ve met two prospective advisers. One has an RHU™ designation and the other has a CFP®. They both work for the same reputable firm, and they’ve both been in the business roughly the same length of time – 20 years. Based on this information alone, which would be the best choice?
Given the goal of retirement income planning, Mary and Jim probably shouldn’t hire the adviser who holdsonly the RHU™ designation. The Registered Health Underwriter (RHU) designation is a specialized, yet limited, qualification in Canada that focuses on assisting clients with their living benefits needs. As such, an RHU™ adviser has specialized knowledge in selling disability, critical illness and long-term care insurance, but not necessarily in retirement income planning. The CFP® adviser would be a more appropriate choice, because of that designations more holistic approach to planning, which includes: cash flow analysis, tax planning, retirement planning, risk management planning and estate planning. All of these area’s are integral to creating a proper retirement income plan.
If, on the other hand, Jim and Mary were not looking for any financial planning advice at all, but instead wanted someone who was highly trained in investment portfolio construction and investment management, then they might consider someone with a Chartered Financial Analyst (CFA) designation.
As you can see not all designations are created equal. In your search for the right adviser, focus on someone with the kind of professional designation that arms them with specialized knowledge that’s relevant to your situation and needs.
However, just because someone holds a relevant designation doesn’t mean they are right for you. In my next post, I’ll discuss the importance of advisers practicing what their designations preach. Please feel free to comment below or share any experience you’ve had as it relates to financial advisers and professional designations.