Who Do You Call?

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Elaine Bedel established Bedel Financial in 1989 in Indianapolis. Elaine Bedel established Bedel Financial in 1989 in Indianapolis.

If you have a ghost problem, it's obvious to call "ghostbusters," but when you need assistance with your money, things get much more serious. Finding an advisor who has the knowledge, experience, and ethics requires you to look under the hood and kick the tires.

When it comes to investing and managing portfolios, the importance of education and experience can't be stressed enough. It is critical to ensure that any professional that you choose to work with has the proper qualifications and adheres to a strong code of ethics.

The designations and credentials of an investment advisor can provide an indication of her or his dedication to their profession. There are a wide range of credentials in the investment industry today. One that has gained respect is the Chartered Financial Analyst (CFA) designation. It is rigorously focused on investment knowledge and practical portfolio management. This designation is considered the most stringent of credentials and is often referred to as the “gold standard” for investment professionals. Getting a better understanding of the requirements of the CFA designation may assist you with evaluating the field of professional advisors that can properly assist you.

History of the CFA Charter

It all started with the great Ben Graham, the man widely considered to be the father of investment analysis, who began pushing the idea of a professional certification for financial analysts in the early 1940s to the New York Society of Security Analysts (NYSSA). While the NYSSA recognized the need for professional certification, it took over twenty years to hammer out all the details of the program, which included creating a code of ethics and a standard body of knowledge.

Finally, in 1963 the first CFA exam took place with 284 candidates. The number of candidates increased six fold after the first year to 1,742. Today, there are more than 120,000 CFA charterholders worldwide in 145 countries with about 60,000 are based in the United States and 435 residing in Indiana.

CFA Charter Requirements

Managing investments is a serious business because it can affect many aspects of your life, including your retirement. Therefore, it’s important that the advisor has the proper background to manage your money. An advisor who has attained the CFA designation brings a high level of professional investment skill as well as a commitment to a strict ethical standard. This is critical as the strength of the investment profession is based on trust.

And, it’s hard to get!  On average, only one out of five professionals who registers as a candidate is awarded the CFA designation. It takes successful candidates approximately five years to complete the process.

The CFA Program requires a level of competency and proven experience in a broad range of investment areas.  In order to receive the designation, the professional has to fulfill all the requirements below:

Education. To enroll in the CFA Program and register to sit for the first Level 1 exam, the candidate must have completed a four-year bachelor’s degree program.

Examination. The candidate must pass three graduate level exams, each requiring hundreds of hours of study. These exams are widely regarded as some of the most rigorous and all-encompassing exams in the finance industry. The average passing rate over the last ten years is only 42%. Exam topics cover ethics, quantitative methods such as statistics, economics, financial reporting and analysis, corporate finance, equity investments, fixed income investing, derivatives, alternative investments, portfolio management and wealth planning.

Experience.  At least four years of in-depth qualified investment work experience in investment decision-making is required before a candidate can publicly display the CFA mark. This ensures that each CFA charterholder has had practical hands-on experience.

Ethics. CFA charterholders are obliged to uphold the principles outlined in the Code of Ethics and Standards of Professional Conduct. This includes placing the integrity of the profession and the interests of clients above one’s own interests as well acting with integrity, competence, and respect, among other principles. If a CFA certificate holder violates these standards, he/she is subject to CFA Board sanctions, including revocation of the designation.

Summary

You’ve worked too hard for your money to trust its management to anyone other than a dedicated investment professional. Before you hire an advisor, be sure to properly assess their knowledge, experience, and forthright dedication to a high ethical standard of practice.  If you choose poorly, it can have such a negative impact on your portfolio that your retirement may be postponed and your family’s financial security placed in jeopardy.

Anthony Bykovsky, CFA, an Associate Portfolio Manager at Bedel Financial Consulting, contributed to this article.

Elaine E. Bedel, CFP, is CEO and president of Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. She is a featured guest each Wednesday on the WTHR (NBC, Indianapolis) Channel 13 News at Noon, "Your Money" segment. Elaine's book, "Advice You Never Asked For... But wished you had," is available on Amazon.com. For more information, visit www.BedelFinancial.com or email Elaine at ebedel@bedelfinancial.com.

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