Picking the right financial planner is incredibly important. You're selecting the person who will be in charge of your money and who (you hope) will make that money grow over the years. Hire the wrong financial planner, and you could end up spending your golden years struggling to scrape by.
There are a lot of factors to consider when comparing planners, but the first consideration should be the certifications they hold. A prestigious certification doesn't guarantee that a planner is at the top of their field, but it does mean they've proven their expertise in at least one aspect of financial planning. Thus, knowing what the different certifications mean can help you narrow down your options to planners who specialize in topics that are relevant to you.
Many investors assume that any professionals who refer to themselves as "financial planners" have received some kind of certification. Unfortunately, there's no rule governing who can go by the title of financial planner; anyone can set up shop using that title, whether or not they know anything about finance or have any experience. You're better off sticking with financial planners who have an actual certification by a governing agency, be it state or federal.
A registered representative, also known as a stockbroker, is a salesperson working for a broker-dealer. Registered representatives have demonstrated basic knowledge of investment products by passing the Series 6 and/or Series 7 exams. A certified registered representative is required to register with FINRA (the Financial Industry Regulatory Authority) and is licensed by the state's securities regulator. Stockbrokers are not generally the best financial planner, because their job is to sell you products, not to advise you. Most registered representatives are paid commissions based on what and how much they sell. That means they have an inherent conflict of interest between recommending the best product for your needs and recommending the product that would make them the highest commissions.
These financial planners are in the business of providing advice about securities (but not usually other types of investments) to their clients. Many investment advisors are also registered representatives, but the two titles don't mean the same thing. Investment advisors are required to register with the SEC (if managing $110 million or more in client assets) or with the state securities regulator (if managing less than $110 million), so they may refer to themselves as registered investment advisers, or RIAs. Like stockbrokers, investment advisors are usually more focused on selling than on advising, and the fact that they are trained only to provide advice on securities means they aren't likely to consider other types of investments.
Chartered financial analyst (CFA)
The CFA designation is granted only by the CFA Institute. To gain this certification, advisors must meet significant education and work experience requirements and pass a series of three exams. CFAs have expertise in investment analysis and portfolio management, and they've also proven that they're serious about mastering their craft, given the time and effort required to attain this certification. However, while continuing education is recommended by the CFA Institute, it's not required, thus a CFA could potentially fall behind the times. Before hiring a CFA, you may wish to ask them about their continuing-education efforts.
Personal financial specialist (PFS)
Offered by the American Institute of Certified Public Accountants (AICPA), the PFS designation is an "add-on" certification for CPAs. It's intended for CPAs who want to branch out into financial planning and requires that the CPA in question have at least two years of personal financial planning experience, either in business or teaching. PFSs must maintain their CPA designation (which requires them to meet significant continuing-education requirements, among other things) and must also follow the standards laid out in the Statement on Standards in PFP Services. Because PFSs are always CPAs, a financial planner with this certification would be a good choice for someone who needs an expert with a deep tax or accounting background.
Certified financial planner (CFP)
The CFP certification is offered by the CFP Board and is generally considered the gold-standard certification for financial planners. CFPs meet stringent education and experience requirements, complete a board-registered education program, and are required to take continuing education once certified. They must also abide by the Board's Standards of Conduct, which consist of a code of ethics, rules of conduct, and practice standards. CFPs are always fiduciaries, meaning they are legally required to put their clients' interests ahead of their own at all times.
Which one should you choose?
For most investors, a CFP would be the best choice, followed by a CFA. Someone who needs an advisor with strong tax-planning or other accounting-related skills should consider a PFS. Financial planners with any other designation (and there are hundreds) are held to much less stringent education and experience requirements, if any, and are also less likely to hold themselves to fiduciary standards. Given that you are placing your financial life in this person's hands, you're better off sticking with someone who has proven that their knowledge and ability.