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Unless you have very limited financial
assets, one piece of advice you will hear
repeatedly is that you should seek advice from a
financial professional before making any
serious financial decisions. Unless you happen to be a
trained financial professional yourself this is
excellent advice. You'll see that same
advice on the bottom of this very page. In the case of this site, this is because
I am not a financial professional, and I do not
give financial advice. I know just enough to
know how much I don't know in this field, and I
turn to the professionals when I have questions.
So should you.
One of the questions you will face when you need
competent financial advice is who to consult.
There are a host of certifications. The alphabet
soup on business cards is stupefying. I refer to
it as goulash because you can sometimes see to
the bottom of the alphabet soup bowl (it's at
least semi-clear, depending on how many alphabet
letters are in the bowl). You can't see to the
bottom of the goulash bowl (it's clear as ...
well ... goulash).
How do you know who you're talking to when it
comes to the financial advice alphabet? Here's a
brief rundown of the four most common acronyms
you're likely to run into.
CLU (Chartered
Life Underwriter..."John Agent, CLU")
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A Chartered Life Underwriter (CLU) specializes
in insurance. In order to achieve this
designation he or she is required to have at
least three years of experience in life or
health insurance sales and to pass ten (10)
individual examinations or tests administered by
the American College of Life Underwriters. Compensation
is generally commissions generated on products
sold.
CPA (Certified Public
Accountant...("Jane Accountant, CPA")
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Each state specifies the requirements for
becoming a CPA in that state. These requirements
are usually the completion of a secondary level
accounting course (college or university),
obtaining work experience in public accounting
(the length and kind of experience is governed
by the individual states) and passing the
Uniform CPA Examination. The Uniform CPA exam is
a rigorous four-part, two-day examination. A
number of states also require CPAs to pass state
exams as well. A CPA will generally provide
accounting and taxation services to businesses
and individuals. Compensation is generally via
hourly or project fee.
CFP (Certified Financial Planner..."Jim
Planner, CFP")
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The Certified Financial Planner designation is
awarded by the Certified Financial Planner Board
of Standards to individuals who have three to
five years of financial planning-related work
experience and who have passed the CFP
Certification Examination, a two-day, ten-part
examination. A CFP will consult with
individuals, families or businesses to establish
overall financial goals that are in line with
defined short and long-term objectives. In many
cases the CFP will then manage the client's
investments, as well. A CFP will often work in concert
with the client's CPA and Attorney to develop
and implement a plan. Compensation is generally
through one or a combination of the following:
Flat fee on an hourly or project basis; a
percentage of the assets under management;
commission on the sale of financial products;
salary if the CFP is employed by a financial
services firm.
CSA (Certified Senior Advisor..."Joan
Advisor, CSA")
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An individual with the CSA designation has
completed four short courses and an exam
covering "general aging-related issues such as
health and nutrition, caregiving, long-term
care, spirituality, and grief and loss;
financial topics such as Social Security,
Medicare and Medicaid issues and financial and
estate planning; and business concerns such as
marketing to older adults and ethics in the
elder market." According to their website these
courses will require about 3-1/2 days of
classroom time or can be completed by
self-study. CSAs often sell annuities and other
insurance products, although they are not
restricted to insurance. Their income is often,
but not always, commission based.
In an effort to be as well-informed as possible
about my own business and family matters I
consult regularly with a CLU about insurance
issues, a CPA regarding taxes, and a CFP about
long term financial goals. All three of these
gentle people are sometimes involved as a team
in finding the best answer to a single
complicated question. I personally do not work
with a CSA, as I feel the educational and
experiential requirements for the CSA
designation simply aren't up to my standards.
This is my personal opinion.
You would be wise to interview several financial
advisors before making a commitment so you and
the advisor are both confident that you will
have a mutually beneficial working arrangement.
There is nothing wrong with choosing an advisor
who makes a commission on the products he is
selling, so long as you understand the basis of
his financial arrangement with you, and you have
confidence in both his education and expertise,
and your ability to understand the products he
is presenting.
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