Broker Check

As a CFP®, it is often a Best Practice to work with third party investment specialists like CFA®s

| May 10, 2018

Why might a CFP® (Certified Financial Planner®) feel it is a Best Practice to work with Third Party investment specialists like CFA®s - Chartered Financial Analysts®?

Short professional opinion #1: Higher probability of better net results.  #2: Fiduciary Standard.

"The focus of the CFP® is to train financial advisors to create and implement financial plans  ... “The requirements for the CFP® … 10-hour exam cover(s) the following: investments planning, insurance, estate planning, risk management, tax and retirement planning.”  “ … the CFP® is essentially an entrepreneurial position.”

 The CFA® reputation in the business community is world class … The CFA program® … might be more aptly described as the equivalent of a master's degree in finance with accompanying minors in accounting, economics, statistical analysis and portfolio management.” 

“According to the CFA® Institute, 49% of charterholders work for institutional investors as in-house analysts, 16% work for broker-dealers, and the remaining 29% work for universities, the government and other areas.”


Editor's note: The above quote is verbatim.  I know the numbers don't add up!

In my own words: CFP®- Certified Financial Planner® vs.  CFA®- Chartered Financial Analyst® 

The CFA® curriculum, is heavily quantitative. CFA®s are typically employed by large institutions. The CFP® curriculum is much broader so we can competently learn to prepare and implement a Financial Plan. A CFA®'s work is primarily data and B2B - Business-To-Business. CFP®s will spend much more of their work day communicating with clients in some fashion. B2C. Business-to-consumer. A competent, experienced CFP® should understand your values, including the emotional importance and intensity that often can not be quantified. CFP®s are often entrepreneurial and can be found, especially as we gain more experience, owning our own Business, Firm or Practice.

Manage risk prudently when time is critical

If you are 55 years old and want to retire in 10 years, you don't have the luxury of 40+ years of potential investment growth and / or time to recover from financial planning errors, oversights or procrastination.  You might benefit greatly from credentialed and experienced CFP® and / or CFA® professionals!

Competence, not just disclosure, is a Fiduciary requirement - "Stay in your own lane."

"However, the reality is that being a fiduciary actually entails two core duties: the first is the duty of loyalty (to act in the client’s best interests), and the second is the duty of care (to provide diligent and prudent advice, and only in areas in which the advisor is competent to provide such advice). After all, a fiduciary obligation is relatively meaningless with only a duty of loyalty, if there’s no expectation of competency; otherwise, consumers would still be harmed by unwitting negligence, even if there was no intentional (or conflicted) self-enrichment."


In my own words - competence and disclosure

Competent experienced CFA®s and some other credentialed Third Party Investment Specialists should know more about investing minutiae than I do.  See their detailed course of study above. I know or get to know more about my clients than they possibly can. This excellent combination follows the Fiduciary Standard and is clearly in clients' best interests.

"Why God sent financial advisors into this world"

“Nick Murray talks about how an advisor earns his or her weight in gold and very little of it has to do with asset allocation or fund selection, although those aspects are obviously important. Murray was very early to the insight that guarding clients from their own emotions and protecting them from six-figure mistakes was the true calling of an advisor – and why, as he puts it, ‘why God sent financial advisors into this world.’”

Said another way, your Financial Advisor should help you avoid "unforced errors.


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