Advisor DefinitionsUse these definitions to understand the jargon and acronyms often used by financial advisors, career coaches and life coaches. CFP or Certified Financial Planner® Fee-only Advisor CFP or Certified Financial Planner®A CFP® professional is an individual who has a demonstrated level of financial-planning technical knowledge and experience in the field, and holds to a client-centered code of ethics. Most CFP professionals have earned a four-year college degree in a finance-related field and a course of study in financial planning approved by the Certified Financial Planner Board of Standards, Inc., which administers the CFP. There are four main requirements to earn the CFP designation. 1. Examination—CFP practitioners must pass a two-day, 10-hour certification exam that tests their ability to apply their financial planning knowledge in an integrated format. Based on regularly updated research of what planners do, the CFP Board’s exam covers the general principles of financial planning, insurance planning and risk management, employee benefits planning, investment planning, income tax planning, retirement planning and estate planning. 2. Experience—CFP practitioners must have a minimum of three years’ experience working in financial planning prior to earning the CFP mark. As a result, CFP practitioners have demonstrated a working knowledge of counseling skills in addition to their financial planning knowledge. 3. Ethics—As a final step to certification, CFP practitioners must pass an ethics review and agree to abide by the CFP Board's Financial Planning Practice Standards and a strict code of professional conduct, known as the CFP Board’s Code of Ethics and Professional Responsibility. The Code of Ethics states that CFP practitioners are to act with integrity, offering professional services that are objective and based on client needs. 4. Continuing Education—It is also necessary for every CFP certificant, once certified, to be recertified every two years. Those seeking to maintain their certification must attain a minimum of 30 hours of continuing education in order to stay current with developments in the financial planning profession and to better serve their clients. Two of these hours must be spent studying the CFP Board's Code of Ethics and Professional Responsibility. CPA or Certified Public AccountantA certified public accountant, or CPA, may be engaged by clients for a variety of services including accounting, auditing, tax preparation and consulting, personal financial planning, technology consulting and business valuation. All CPAs are accountants, but not all accountants are CPAs. In many states, anyone can call himself an accountant. In order to become a CPA, most states require that an individual meet educational, experience and ethical requirements and pass the Uniform CPA Examination. Precise requirements vary from state to state. The American Institute of Certified Public Accountants is the professional organization for CPAs in the United States. While it does not license CPAs—that is the responsibility of state boards of accountancy—it does seek to promote the highest possible level of uniform certification and licensing standards. The AICPA does award a credential called the PFS, or personal financial specialist, for its members who specialize in financial planning. CPAs who are AICPA members, have business experience and lifelong learning within the five-year period preceding their date of application and pass any one of six financial planning exams may obtain the PFS. CLU or Chartered Life Underwriter®A CLU® professional is usually a life-insurance agent. The designation was created in 1927 and continues to be administered by the American College in Bryn Mawr, Pa. Applicants must complete a series of five required courses (fundamentals of insurance planning, life insurance law, individual life insurance, estate planning and planning for business owners) and three elective courses (choices include financial planning, retirement planning and investment planning). There is no exam. ChFC or Chartered Financial Consultant®Introduced in 1982 and also administered by the American College, the ChFC is an alternative to the CFP®. Applicants must complete a similar curriculum, slightly more expansive, than is required for the CFP®; however, unlike with the CFP®, no exam is required. RLP or Registered Life Planner®This designation is awarded by the Kinder Institute in Littleton, Mass., to financial advisors who have gone through the Institute’s training and mentoring program. This program focuses on financial life planning, a method which rests on the idea that advisors must first discover a client’s most essential goals in life before formulating a plan to make sure the client’s finances fully support those goals. Only about 100 financial advisors have received the RLP certification; some 1,000 have received training toward their RLP. To receive the RLP, advisors must go through two- and five-day training programs and then complete a six-month “mentorship.” The Kinder Institute was founded by George Kinder, author of The Seven Stages of Money Maturity: Understanding the Spirit and Value of Money in Your Life and generally recognized as the father of life planning. In addition to training financial professionals, the Institute also offers workshop opportunities to the public. Fee-based AdvisorMost financial advisors earn income from their clients one of three ways: by charging fees for their services, by charging commissions on sales and transactions, or by a combination of the two. When interviewing or hiring an advisor, you should ask as many questions as needed until you are absolutely clear how your advisor will be compensated for serving you. A fee-based advisor is compensated through a combination of direct client fees and commission on products sold. The fees can be hourly, annual, or as is common, calculated as a percentage of the assets you have assigned the advisor to manage. Again, it's important to ask your advisor to explain all fees and other charges that you will incur as a client. Fee-only AdvisorTypically, these advisors aren’t registered reps for any financial services company; usually, they are self-employed RIAs or work for a firm of independent planners. You pay all the fees, but the planner has no bias toward any one product or solution. You’ll find fee-only advisors working in several ways: Hourly: Recommended for clients who need advice about a specific topic or two. Especially good for people who manage their own finances but would like a professional check-up. Flat fee: The fee covers a package of services, such as analyzing whether you’re saving enough for retirement and investing properly. This can be a good option if you think the flat fee won’t exceed what you’d pay for hourly services. Retainer fee: Typically calculated as a percentage of assets managed for you or a percentage of your net worth. Use this approach only if you want some to manage everything for you. Life Coach“Life coaching” has become one of the better-known names for a field that likes to describe itself more simply as “coaching.” Individual coaches may choose to call themselves life coaches, leadership coaches, executive coaches, business coaches, professional coaches, retirement coaches or career coaches. These labels may describe the focus of their particular approach, but in most cases practitioners across the spectrum have received similar coach training. The largest certifying organization, the International Coach Federation, defines coaching as partnering with clients in a thought-provoking and creative process that inspires them to maximize their personal and professional potential. Coaching is a distinct service and differs greatly from therapy, consulting, mentoring or training. Associate Certified CoachOne of three levels of credential offered by the International Coach Federation, the Associate Certified Coach (ACC) credential is for the practiced coach. It requires completion of a set amount of coach-specific training, a minimum of 100 coaching experience hours and at least eight clients, among other requirements. Applicants also must document 10 hours of work with a qualified mentor coach. Further details can be found on the ACC application form on the ICF website. Professional Certified CoachThe Professional Certified Coach (PCC) credential is awarded by the International Coaching Federation for the proven coach. It requires completion of a set amount of coach-specific training, a minimum of 750 coaching experience hours, and at least 25 clients, among other requirements. Further details can be found on the PCC application form on the ICF website. Master Certified CoachThe Master Certified Coach (MCC) credential is awarded by the International Coaching Federation for the expert coach. It requires completion of a set amount of coach-specific training, a minimum of 2,500 coaching experience hours and at least 35 clients, among other requirements. Further details can be found on the MCC application form on the ICF website. IAC Certified CoachThe International Association of Coaching defines coaching as a transformative process for personal and professional awareness, discovery and growth. It certifies coaches who demonstrate “an astute understanding of their clients, in such a way that allows consummate success.” Applicants for certification must pass an online test that covers coaching proficiencies, legal boundaries and ethical standards. Then they must submit recorded coaching sessions demonstrating their abilities in working with clients to a review board. Career CoachA career coach is someone who helps others to find the right career and/or to succeed in achieving career objectives. Career coaches can come from a wide variety of backgrounds. Some provide a broad range of career advice; others choose to specialize in particular aspects, such as job hunting, resume writing, career exploration or re-entry, finding one’s dream job, or succeeding in the job one already has. There are a number of career-coaching organizations, some of which offer certifications and others which simply serve as professional associations. CMP or Career Management ProfessionalThe Institute of Career Certification International is a nonprofit institution that certifies career services professionals. Certification is portfolio-based: Applicants must demonstrate “proven professional experience and expertise” and agree to be bound by ethical standards. Applicants with a minimum of two years of experience in career services may be granted an associate certification; those with a minimum of four years in career services and eight total years of work experience are eligible for the CMP designation. CMF or Career Management FellowAlso awarded by the Institute of Career Certification International, the CMF is a higher-level designation requiring 12 total years of experience and six years in career services.
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