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Various Credentials and Categories of Financial Advisors

There are various kinds of financial advisors out here in the world of finance-based consultancy services. One therefore needs to understand and determine a lot of things which would help determine the kind or category of advisor which would be best-suited to the kind of investment one wants to make. So, one would need to first be educated about the kind of advisor one would need for themselves. There are two kinds of advisors---1) People who are employed with some finance company, and 2) Individuals who avail of independent consultant opportunities. Below is a crash course on the different types of financial advisors that there exist out there:

C.F.P.: Expanded, this stands for Certified Financial Planner. One, who has a CFP credential, can boast of real knowledge and experience on dealing with financial activities and investment concerns.  A CFP has working knowledge on a plethora of subjects which include (but are not limited to) estate, taxes, portfolio diversification and insurance. The CFP degree also means that they have passed the ethical practice test and hence is a trustworthy person. This is further ensured by the fact that all CFPs are required to have at least three years of working experience in the finance industry and two years of apprenticeship under a senior CFP.

Certified Public Accountant: This type of investment advisor is more often seen to be employed with a financial institution or at least an advisory firm. One has to have active knowledge of auditing, bookkeeping, ethics and tax returns in order to qualify in the CPA examination.  However, there’s a serious limitation when it comes to hiring the services of someone who’s a CPA; since they would not be of much help in areas outside of accounting. So they wouldn’t be useful to private individuals much.

Enrolled Agent: They are tax preparation and tax filing experts, who are trained in all kinds of tax laws; personal, corporate and estate. They also have a very strong knowledge of ethical practices in the field of finance. They are, in short, much like CPAs, except for the fact that they don’t have knowledge of accountancy or bookkeeping.

Chartered Financial Analyst: Referred to as ‘CFA’ for short, they are the guys that you need to go to in case of investment advice. Not surprisingly, a CFA degree is one of the more difficult credentials to achieve. Most CFA degree-holders have their own investment advisory companies, or work as asset managers in banks and other financial institutions. They are especially useful if the client is looking to run a hedge fund.

Chartered Life Underwriter and Chartered Financial Consultant: These are the experts with specialisation in areas such as estate investments and life insurance schemes. There’s a variation this credential has, which is called the Chartered Financial Consultant or the ChFC, which handles all sorts of general financial planning and investment-related fields. This is the main difference that it has with the CLU, who focuses more closely on the aspect of insurance in various areas. CLU is the expert to call for in case one has to make a comprehensive insurance plan, look after a will or manage an estate.

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