Episode 3: The Alphabet Soup of Advisor Titles & Designations

Transcript:

Welcome to episode 3 of the Retire Ready Podcast, the podcast that helps Canadians prepare for all that retirement brings. I am your host Scott Sather, Founder, President, and Financial Planner at Awaken Wealth Management, and Portfolio Manager with Awaken Investments of Aligned Capital Partners in Regina, Saskatchewan. Thanks for joining me today where we’re going to talk about the alphabet soup of advisor designations and titles, what those titles out there mean, and what you should be looking for.

So just to be up front, this isn’t going to be an exhaustive look at all of the designations and titles that are out there as, quite frankly, there are way too many. Instead, we’ll try and focus on the one’s really that matter and that you should be looking for with your advisor.

Let’s start with titles. There are a lot of titles out there. For some background, during my 24 years in the financial services industry before Awaken Wealth, I’ve been a Customer Service Officer, Financial Services Officer, Investment Representative, Insurance Representative, Financial Services Representative, Financial Planner, Investment Advisor, Insurance Representative, and Portfolio Manager. That’s a lot of titles over a long period and many of those were for doing the same thing. Pretty much every firm has different titles and they can often mean the same thing but some sound more important than others. That unfortunately leads to investors and customers being not sure if the person they’re working with has the ability to fully help and advise them. Thankfully there is some regulation coming in the titles space to create some clarity. Ontario has already passed legislation and Saskatchewan and New Brunswick are in the process of passing legislation that restricts the use of the “financial advisor” and “financial planner” titles. These titles are restricted to those who hold recognized credentials from an approved credentialing entity and should lead to some credibility for those using the titles that have met the education requirements and face active supervision to weed out the bad actors. This means using a restricted title without a registered credential is now or soon will be against the law in those provinces. There is also the Portfolio Manager title which already requires either the CFA or CIM designation, which we’ll talk about shortly, years of experience, and continuing education. Most importantly with this title comes the requirement for the PM to act as a fiduciary for their clients- meaning a legal requirement to act in the clients best interest, something that unfortunately isn’t required for most Canadian advisors.

Another misleading practice that was thankfully recently changed was using the title of Vice-President. Many firms endowed top producing advisors and managers with the title of VP despite them not really having anything to do with the running of the organization other than bringing in revenue for the firm. This misled the public to think a special title was given to these advisors due to their place in the organization. The Canadian Securities Administrator stopped this practice within the last couple of years, allowing only those who truly are vice-presidents with the banks or firms to continue to use the title, of course resulting in basically no one able to use the title. However, to continue to recognize those advisors, you’ll now notice the tagline “Senior” in front of many titles. From your broker to your banker, if they have a certain amount of time in the position they can add the senior line in front of their title.

This leads into designations. The investment advisor and insurance industry has a fairly low barrier to entry. Which is good for those looking for a career but it can also create more of a sales environment vs what you would see in the legal or tax sectors. A lawyer needs to have a law degree and pass the bar to practice. An accountant would ideally have the Chartered Professional Accountant designation which requires and undergraduate degree and completing the required course work and exams to earn the CPA. Not so for advisors. All that is needed is to pass the basic entrance exams to be registered. That includes the Investment Funds in Canada course which allows you to sell mutual funds, the Canadian Securities Course which allows you to sell funds and securities like stocks bonds and mutual funds, and the Life Licencing Qualification Program or LLQP which allows you to sell insurance. These give you your ticket to play. From there, you have the various  courses that provide designations that can differentiate advisors and give them the fancy letters behind their name.

Now unfortunately, there are a lot of designations that don’t mean much, other that you paid to take an online course… so we’re not going to talk about all the designations out there but instead cover off the designations that should matter to you. And a great way to do that is by going back to our last episode and reviewing where we see advisors can add value- those being on the investment side, financial planning, or wealth management side, and lastly the behavioural coaching side. So which designations match up to these?

Behavioural coaching, which we talked about as being one of the largest values an advisor provides in the last episode- doesn’t really have anything for designations, short of getting a psych and finance degree. At this point it is more learned through various courses and experience

Two designation are at the top when it comes to investing. The first and most prestigious as well as most difficult to get would be the Chartered Financial Analyst or CFA designation. This is an internationally recognized designation representing a high commitment to ethical standards and investor protection through professional code of conduct, guidance, and outreach. It includes a rigorous, three-level certification and work experience. But for most advisors it can be a bit of overkill and is typically more useful for those who follow the analyst career route. The next investment designation being the Chartered Investment Management or CIM. This one doesn’t come with the global recognition and is not quite as difficult or time consuming as the CFA but truly is meant more for those advisors working with individual investors. Both of these designations lead to becoming a Portfolio Manager as well, one of the titles we discussed earlier.

Next up is the wealth management or planning side. The gold standard is the Certified Financial Planner or CFP designation which again has more global recognition. It involves the technical side with 2 tests, passing the first one opens up the Qualified Associate Financial Planner or QAFP designation, years of work experience and continuing education and following a code of ethics which mandates that CFP professionals place their clients’ interests first. The Registered Financial Planner or RFP is another widely recognized planning designation in Canada which involves submitting sample plans and again passing the required exams, continuing education, and

Lastly I would point out the Trust and Estate Practitioner or TEP designation. It is more focused on the tax and estate planning part of the wealth management side and is held by lawyers, accountants, advisors, planners, and many others involved in estate planning. Those with these initials behind their name must have a combination of specialist qualifications and experience, including significant involvement at a specialist level with inheritance and succession planning.

Oh and for those on the insurance side of the business there is the Chartered Life Underwriter designation which focuses on the wealth protection and estate planning side of things.

As they come with a higher required education and code of conduct, not to mention the continuing education.

So why does this matter? Well when you walk into the bank or interview that advisor you need to know who you’re dealing with and who you should be working with depending on what your needs and situation is.

I think that is it for today’s episode. Be sure to subscribe and give us a review on your favourite podcast player. If you have questions or would like any retirement related questions answered on future podcasts please email us at info@awakenwealth.ca. You can also check out the Wake-Up semi-monthly newsletter at the Awaken Wealth site, which is awakenwealth.ca.

Be sure to check back in two weeks for our next episode on advice, that talks to what to look for in your search for a real financial advisor.

Thanks again for joining us today and I look forward to seeing you back for the next episode.

Disclaimer: Thank you for listening to the Retire Ready podcast. To subscribe to this podcast or to learn more please head on over to awakenwealth.ca forward slash retire ready podcast.

Investment services are provided through Awaken Investments of Aligned  Capital Partners Incorporated an approved trade name of Aligned Capital Partners Inc/ACPI. Only investment related products and services are offered through ACPI or Awaken Investments of ACPI and covered by the Canadian Investor Protection Fund.

Tax planning, financial planning and insurance services are provided through Awaken Wealth Management Ltd.  Awaken Wealth is an independent company separate and distinct from ACPI or Awaken Investments of ACPI. Awaken Wealth are not licensed tax professionals and you should consult with your tax advisor before acting on any recommendations. Investments and investing strategy should be evaluated based on your own objectives, listeners of this podcast should use your best judgment and consult a financial expert prior to making any investment decisions based on the information found in this podcast