An alphabet soup of designations!

When assessing a financial advisor's qualifications, most Canadians just don't know where to begin. Besides academic degrees, the plethora of professional designations in the industry tend to make people a little confused. Here is a mini-glossary of some of the more popular ones out there:

CIM: Certified Canadian Investment Manager -- a discretionary portfolio management designation of Canadian Securities Institute.
o Completion of 3 levels (courses), including the Canadian Securities Course.
o Experience Requirement: None

FMA: Financial Management Advisor -- A financial planning designation of the Canadian Securities Institute.
o Completion of 3 levels (courses), including the Canadian Securities Course.
o Experience Requirement: None

DMS: a professional designation of the Canadian Securities Institute specializing in the advanced concepts of derivatives and risk management.
o Completion of 5 levels (courses)
o Experience Requirement: None

FCSI: Fellow of the Canadian Securities Institute -- senior financial services designation *
o One of the above designations is needed (CIM or FMA), a licensing course, an additional course and dedication to continuing education (42 hours per year)
o Experience Requirement: at least 5 years of financial services experience in 8 years.
o Required to complete the Ethics Module and Case Study or the Ethics Seminar

CIMA: Certified Investment Management Analyst -- senior financial services designation *
o Pass 2 levels of exams, as well as maintain an average of 20 hours of Continuing Education per year
o Experience Requirement: 3 or more years of financial management experience


CFA: Chartered Financial Analyst -- the senior designation for investment analysis *
o Pass 3 levels of exams
o Experience Requirement: 4 years of acceptable professional work experience


CFP: Certified Financial Planner -- senior financial planning designation *
o Pass one exam after completing a FPSC approved education program, as well as maintain 30 hours of Continuing Education every year
o Experience Requirement: at least 2 years of personal financial planning related work experience

* Acceptance of these designations requires their holders to abide by certain ethical standards and guidelines set forth by the institution they are accepting it from.

It's okay that Certified Financial Planners don't always give full financial plans?

The Investment Executive, Canada's newspaper for financial advisors, published interesting results completed recently for the Financial Planners Standards Council. The Financial Planners Standards Council administer and enforce the ethical standards of the Certified Financial Planner designation. I thought I'd share some of the results (my commentary is in italics below):

Of those surveyed:

• 70% have used a financial planner
• Less than 10% used the services beyond investments that a planner can provide (ie estate planning, insurance, tax advice, etc.), although a majority of them are aware that these services exist.
• In 2006, 59% of CFPs provide financial planning to over half of their clients, which was a drop from 71% in 2004.
• 97% of CFPs do full financial plans for at least some of their clients, while only 40% do so for "most"(that number was 13% higher four years ago).

The conclusions presented today by Cary List, president and CEO of the FPSC, at the annual conference for the Canadian Institute of Financial Planners (CIFPs):

Financial planners are still in the sales profession, as far as people are concerned. Furthermore, comprehensive financial planning is not so much a priority of the Canadian public, and it's the perceived lack of need [not lack of trust] that is the reason for this. Therefore, there has been a significant downward trend in CFPs administering financial plans to their client base.

The article actually presented 8% as the percentage of those surveyed that don't pursue comprehensive financial planning due to a lack of trust. Instead, it has been concluded that it is the "perceived" lack of need that clients don't get this service done for them. The question I feel that should have been broached at the conference is what can be done to change this.

Obviously, comprehensive financial planning is far better than hiring somebody to just sell investments. Are CFPs doing enough to present the full package? Intuitively, you go to a doctor, and they set the dynamics of the check-up. You go to a lawyer, and they give you their take of how your case should be pursued. It just seems natural to me that you go to a CERTIFIED Financial Planner, and you'll just be provided with a full financial plan. If for no other reason, then because it's the service. It's the profession and the professional that should dictate the standards, not an 'out-of-the-loop' public. Is it wrong to believe that it's up to the Certified Financial Planner to set the pace for their service? Who is it to correct this perceived "lack of need?"

"Maybe that's not such an awful thing," List concludes, as people have come to respect the CFP for other reasons.

The article, itself, ends with "...so List suggests perhaps it's 'okay' that CFPs are not planning as much." Now, this wasn't a direct quote of Cary List, but the author's interpretation of his remarks. That being said, quite frankly, I am a little concerned that Mr. List didn't present this as a problem, commenting instead "Can we do something to reverse this trend or do we want to? Do we care?" and "...is this a trend that we just have to live with? Perhaps, maybe to some extent." I would, intuitively, think that he should believe that 100% of CFPs should be providing "full financial planning" and not be relegated to a role of just selling investments.

It is the standard that I've held the CFP to. As Onus Consulting Group has been indexing the advisor community and filtering out ones according to our stringent standards, it does disconcert me as we have held advisors with a CFP designation with a higher regard. This has a great deal to do with the great work of the Financial Planners Standards Council. To hear Mr. List speak in such a manner, I am a little concerned.

I always felt if I heard such statistics being concluded in a survey, I'd be hearing this remark from the President of the FPSC, but here it is coming out of my fingertips:

A downward trend in financial plans for the clients of CFPs? I think we can fix that.

Source: Ray, Regan. "Financial Planners caught in a Catch-22." Investment Executive 5 May 2008: http://www.investmentexecutive.com/