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The Dangers of Taking a 'Quantity Over Quality' Approach to Designations

By Crucial Clips     April 17, 2019
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FAIQ Investment Advisor Forum , Feb. 11, 2019 

GARRETT KEYES, REPORTER, FINANCIAL ADVISOR IQ: Hello, my name's Garrett Keyes. I'm a reporter for Financial Advisor IQ. I'm here today at the Investments and Wealth Institute Conference in New York City with Sean Walters, the CEO of the Investments and Wealth Institute. So Sean, when it comes to designations, should advisors take a quality or quantity approach? Or what should they do when looking at what designations they need?

SEAN WALTERS, CHIEF EXECUTIVE OFFICER, INVESTMENTS AND WEALTH INSTITUTE: That's a common question within a practice. It's "How do we build out the team and the knowledge that the team members have to better serve clients?" I think the first thing to point out is there's a lot of data now that shows clients expect their advisor to go above and beyond what's minimally required by regulation.

And so earning a voluntary certification is certainly something that every professional should look at. And then how do you assess those? I think there's really four parts to look at -- and size is not one of them. Certainly, CFA and CFP have lots and lots of professionals out there that have earned their marks. But there also may be some specialty certifications that you want to look at.

And you want to know how to assess those. I think the first is that they meet the four E's: that they have an experience requirement, an education requirement, an exam requirement, and an ethics requirement. [If] they have all four, that's a valid certification.

They should have an examination that has a pass rate that's pretty rigorous. So you may want to go into a program where you're guaranteed to pass. But that doesn't show that the program is very rigorous. So about a 50%, 60%, 65% pass rate is what you should look at. There should be a re-certification requirement. And most designations in the financial services industry do not have a re-certification requirement. You earn the letters, and then you keep them, no matter what you do. And so you should have that.

And then the fourth thing would be that there's a disciplinary process. So if you do something wrong, then you lose the rights to use those marks. And again, a lot of financial services designations might have a code of ethics. But they have to enforce that code and strip those marks if somebody does something wrong.

GARRETT KEYES: Are there any dangers for advisors who seek designations that aren't legitimately accredited, or don't have rigorous pass rates, or don't require you to check back in? Is that a dangerous thing for an advisor to do?

SEAN WALTERS: That's a great question. I think danger is probably more in how they position that to the client, right? So if they position themselves as being highly competent in an area that really took a weekend course and a 10 question true-false quiz in order to earn a mark, then that's dangerous if you're going to position that to your client as advanced competency.

I think if you hold advanced competency, it should be through a certification that's objective, a non-profit, like the Investments and Wealth Institute, or CFP Board of Standards, or CFA Institute. And then the only other thing I'll mention is quality assurance. There are accreditations. There are certifications of certifications. And there's two big ones out there, the ANC, American National Standards Institute, which CMA certifications are accredited under-- addresses quality assurance under an international standard.

The CFPB Board has the CFP marks accredited under the National Commission of Certifying Agencies. So at least there's some third party, non-government agency that's saying, yeah, these certifications consistently qualify professionals. And I think having that is a big sign to clients, to the firm, and to the advisor who's earning it that this is a quality, legitimate certification.

GARRETT KEYES: Thanks for joining me, today.

SEAN WALTERS: I appreciate it, Garrett.