Have you ever been confused by a designation printed on a business card? Perhaps it said “John Doe, XYZ.” Well, that’s excellent for Mr. Doe, and I don’t doubt he worked hard for those letters, but what exactly does that mean? What good is a designation which isn’t recognized by a majority of people? More importantly, how is a consumer to distinguish between prestigious designations and those which don’t necessarily represent better qualification for an area of study? For example, WMS and CFP are both financial planning designations. However, becoming a Wealth Management Specialist can be done through self-study and without continuing education requirements. Becoming a Certified Financial Planner has both experience and continuing education requirements, along with a 10-hour examination. Which one would you rather work with? As I continue investigating my own credentials as a financial advisor, I’m regularly learning new and interesting facts about how the designation business really works. The reason I say business, rather than process, is to clear up the misconception that all designations exist purely for the benefit of the consumer. Some of the ways issuing organizations make money is through study guides, classroom courses, and various examination and continuing education fees. That’s not to suggest that earning money for issuing an organization is never justified, but as we always say in finance, “disclosure, disclosure, disclosure.” The issuing organization should always be responsible for explaining their designation and where a profit motive may be lurking. At the same time, I want to make clear that having an artillery of letters doesn’t mean that an advisor is better suited for your needs. There is a definite correlation between the two, but ultimately, the decision is quite personal. I find this concept analogous to the education system we have in the United States. One might think that obtaining a bachelors degree from an Ivy League university necessarily indicates a better education, more career opportunities, and higher earnings potential. Statistically, this is still is probably true, however, none of these items is a given anymore. With billionaires lacking college diplomas, and graduates of Ivy League universities searching for jobs, we have to rethink some of our assumptions. Similarly, having designations may indicate that somebody is better qualified to advise, but not necessarily to advise you.
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