Do Professional Designations Add to Advisor Credibility?
The primary reason advisors pursue a professional designation is so that the knowledge gained can help them better serve their clients. An indirect outcome of obtaining that professional designation is that it can add to an advisor’s credibility among his or her clients and the investing public at large. The degree to which these designations may add credibility rest on several factors.
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Do Professional Designations Add to Advisor Credibility?
The primary reason advisors pursue professional designations is so that the knowledge gained can help them better serve their clients.
An indirect outcome of obtaining that professional designation is that it can add to an advisor’s credibility among his or her clients and the investing public at large.
The degree to which these designations may add credibility rest on several factors, including:
- The public’s recognition of a professional designation and their perception of its value in elevating an advisor’s competency, honesty and knowledge
- What organization sponsors the certification program
- The prerequisites, course of study and the degree of difficulty attached to obtaining certification
- The requirement of continuing education to remain certified
Some Designations Count More Than Others
There are a handful of professional designations that are broadly viewed as top shelf by advisors and investors alike: Certified Financial Planner (CFP), Chartered Financial Analyst (CFA) and Certified Investment Management Analyst (CIMA).
Each of these certificate programs meets the previously-described requirements, with top tier standards for what must be learned, ethics instruction, exceptionally difficult course material and prescribed hours of continuing education.
For the advisor looking to increase his or her credibility with the investing public, he or she has two general paths to take after obtaining some baseline minimum, such as a CFP or CFA—an advisor may choose to increase their knowledge on a certain subject (e.g., retirement or estate planning) or on a certain market niche (e.g., divorce planning, LGBT planning).
There has been an explosion in the number of professional designations in recent years, which have confused investors and make it very difficult to determine if the hours of study to get those designations have an impact on the advisor’s perceived credibility or on revenue generation.
In 2016, Aite Group, a financial research and consulting firm, published a study that attempted to quantify the revenue impact of having a CFP designation. The study1 found that CFP professionals earn 26% more compensation than other financial advisors, adjusted for years of experience, and that practices with a CFP professional generate 40% more revenue.
Of course, higher revenue does not necessarily equate to gaining credibility. Addressing the question of credibility, 70% of advisors surveyed in this same study said that the CFP designation had a positive impact on client trust, confidence with clients and technical expertise.
What’s an advisor to do? Study prospective professional designation programs to see how they meet the criteria listed in this article. Determine for yourself how much knowledge you will gain. If you believe this education will help you better serve your clients, then greater credibility is sure to follow.
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Please reference disclosures: https://blog-dev.americanportfolios.com/disclosures/
