"The SEC has directed the IRS to verify and FBI report that an estimated 2M ATMs in the US require a SSN rather than a PIN to withdraw money."

First things first: Stop worrying!  The above statement is entirely fictional.

But its implications were probably quite clear to you. Despite several abbreviations, you probably knew exactly who and what was being referred to throughout.

More than ever, abbreviations are taking over the vernacular. Text-talk is now the norm, making dinosaurs of sticklers for spelling and syntax. If you can’t express something in 140 characters or fewer, you, too, may become extinct.

Abbreviations can be helpful in a professional context: When consumers see an MD, they know it means “medical doctor” and that the services they are seeking are health-care related. But the process for finding a trusted, competent financial advisor is less straightforward.

There are CPAs, PFSs, CFAs, CLUs, RICs — and the list continues to unfurl as a virtual alphabet soup of letters. From the consumer’s point of view, it may seem more like a thick, indigestible stew.

It is up to the consumer to do his or her own analysis of the various financial designations. This means going beyond a simple translation of the letters into words, and learning what the words themselves entail of the 150-plus certifications and designations that the Financial Industry Regulatory Authority has identified. If you look closely, you’ll find that some designations require little more than an afternoon’s seminar and the payment of a fee.  Others require months of study.

To get a truly sufficient understanding of the financial industry’s alphabet soup, here are the questions you should ask when evaluating the worth of a financial professional’s credentials.

What do the letters tell me about:

  • Educational requirements, both qualifying and ongoing, that have been met by the professional?

  • His experience in the profession, in terms of years?

  • His professional standing, conduct, and character?

  • Assessment of the professional’s competence?

  • His obligations to me, with regard to disclosure of conflicts of interest, compensation, and terms of engagement?

  • His commitment to put my financial interests ahead of his own?

  • Whether he is regulated or supervised?

  • Whether there are significant consequences for demonstrated malpractice?

Take the CFP® professional. It’s one thing to know, for example, that the “C” in CFP® stands for “Certified.” But it becomes a lot more meaningful when you find out that the certification comes from non-profit CFP Board, whose mission is to benefit the public by upholding it as the recognized standard of excellence for financial planning. It achieves this by qualifying professionals through education on a comprehensive array of personal finance topics, two-day examination, years of experience in financial planning, continuing educational requirements, and bi-annual recertification require commitment to a professional code of ethics and practice standards.

The meaning of “C-F-P” becomes even more powerful when you learn that CFP Board’s certification process has itself been certified by the International Organization for Standardization. And a CFP® professional is subject to enforcement action by CFP Board if found by a disciplinary panel to have violated an ethical principle or practice standard.

Those who embark upon the serious process of finding a good advisor likely wish that financial advisors, like soup, were required to carry FDA-type labels testifying to their “ingredients.” What goes into those letters after their names? And what is the priority and significance of those inputs? While we wait to get calorie counts printed on our CPAs’ lapels, use the list of research topics above to inform yourself about the importance – or lack thereof – of your financial advisor’s qualifications.