Abate the Language Barrier

Financial experts don’t always realize how much they know. In a simple conversation, an RIA, who is sometimes a CFA, CFP or CPA, might accidentally drown a potential investor in alphabet soup. Too many acronyms and heavy lingo can scare off an investor who is afraid of getting taken for a fool.

It is part of a counselor’s job to develop mutual trust with a new client, and many investment managers use lengthy initial consultations to outline a client’s investment goals and requirements.

But before making an appointment for consultation, a novice investor can do some homework to define the available options.

Financial advisers need no governmental license or permit to give advice, and over time, the industry has begun to separate its experts by accreditation. While word-of-mouth referrals still make a strong case, different titles can indicate levels of official study.

• RIA — A registered investment adviser files an annual report with the U.S. Securities and Exchange Commission. With a few exceptions for certain lawyers, accountants and engineers, anyone who manages $25 million or more in assets per year must disclose certain information to the SEC.

An RIA is not approved or lauded by the SEC for providing any financial services. Rather, an adviser becomes an RIA after filling out a simple mandatory form.

To prohibit RIAs from using the label to indicate a SEC approval or endorsement, the commission forbids RIAs to print the initials on business cards or similar identification.

• CFA — A chartered financial analyst receives accreditation from the Association for Investment Management and Research in Charlottesville, Va. CFAs complete a three-year program geared toward studying investment analysis. The CFA designation is considered by many as the most stringent test for an analyst.

Robert Kennedy, one of Arkansas’ first CFAs and a longtime professor and mentor at the University of Arkansas, directed his portfolio management students to achieve the official CFA designation. He completed the program in the 1950s.

Kennedy said he promoted the CFA designation because, as a role model for university students, he wanted to give the program some meaning in the industry.

Now retired, Kennedy said there are about 40 CFAs in Arkansas. He claimed direct influence on about 20 of those.

To confirm the good standing of a CFA with the AIMR, call (434) 951-5499.

• CFP — A certified financial planner is designated so by the CFP Board of Standards Inc. in Denver. The initials, CFP, and the accompanying logos are copyrighted trademarks of the Board of Standards.

According to www.cfp-board.org, a CFP must have three years of financial planning-related experience, complete a course of study that culminates in a 10-hour exam and sign a code of ethics. Every two years, a CFP also must take 30 hours of continuing education courses.

To confirm a CFP title, call (888) 237-6275 or visit the CFP Board of Standards Web site.

• CPA — Certified public accountants are named by individual states. The Arkansas State Board of Public Accountancy administers statutes to candidates who pass the CPA exam.

Before applying to take the test, students must have earned either a bachelor’s or master’s degree from an accredited school, and the undergraduate course study must have emphasized accounting. The UA’s Sam M. Walton College of Business is an accredited school.

An Arkansas CPA search is available at www.state.ar.us/asbpa.

CPA certification does not indicate coinciding designations of RIAs, CFPs or CFAs. Each title is earned separately.