Say what you will about the expansive alphabet soup of financial-planning credentials and designations, but new research shows consumers are migrating toward those advisers with letters listed after their names.
"We found that consumers value the designations, and are willing to pay more for advice from credentialed advisers," said Sterling Raskie, a lecturer at the Gies School of Business at the University of Illinois Urbana-Champaign, and co-author of the study published last month.
While the research did not identify which credentials and designations consumers are most drawn to, it did show a growing interest among consumers in advisers who have attained some designations.
"In the financial planning industry, we're not quite there yet as a profession because there are so many different methodologies when it comes to compensation and types of advisers," Mr. Raskie said. "I think consumers are becoming more educated and aware of things like fiduciary duty, and when an adviser sends the signal in terms of a designation, it doesn't take away the due diligence that a consumer should do, but it makes it easier."
As far as which credentials carry the most swagger, it depends on who you ask.
Linda Leitz, co-owner of Peace of Mind Financial Planning, is a certified financial planner, a certified divorce financial analyst and an enrolled agent of the IRS.
"What we're finding more and more, unless you're a CFP there's a big question mark in a lot of consumers' minds," she said. "Those credentials tell people you have the ability and expertise, and a lot more consumers are realizing they have to have a CFP and someone who is acting as a fiduciary."
Tim Holsworth, president of AHP Financial Services, is a CFP, a chartered life underwriter and a chartered financial consultant.
"It's all about credibility, I believe," he said. "I also believe many, many registered people do a terrible job managing assets. And I believe several designations are complete garbage."
For consumers what are paying attention, or trying to figure it all out, the industry does not make it easy.
The Financial Industry Regulatory Authority lists 184 designations on its website, ranging from accredited adviser in insurance to wealth management specialist.
In that mix, you'll also find such vague designations as global financial steward, master certified estate planner and qualified financial planner.
"I think clients should look for a CFP, but I don't know if they do or not," said Mr. Holsworth. "It's easier to market yourself as a planner with an actual demonstration of competence, but I don't think clients insist on it as much as they should."
Rose Swanger, president of Advise Finance, is a CFP, retirement income certified professional, certified divorce financial analyst and an enrolled agent of the IRS.
But even with such credentials, Ms. Swanger is not convinced of the value of designations.
"Clients value your personality, charisma and trustworthiness more than the knowledge," she said. "Having said that, without the knowledge and specialty training to back it up, the warm fuzzy feeling doesn't last long because ultimately all clients demand results."
Paul Schatz, president of Heritage Capital, has been in the business for 30 years and is only now coming around to the notion that consumers might be paying attention to designations.
"I'm not a big designation person, which is probably the main reason I have not committed to earning any," he said. "It just hasn't mattered, as far as I can tell, although I would imagine some prospects saw that I did not carry a designation and perhaps wouldn't even interview me."
Proving that times are changing, Mr. Schatz added that "there's a chance I will study for the certified fiduciary designation, as I do believe that can help."