Financial advisers have an alphabet soup of credentials. What do they mean?

The list goes on and on. Today, the Financial Industry Regulatory Authority’s website lists a total of 235 credentials that you may find decorating the business card of a financial adviser. (Finra doesn’t endorse any of them.) A total of 25 new designations were added last year alone, according to advisers who have tracked these listings.

“The number of professional credentials that financial advisers can add to their business cards has just exploded in recent years,” says Patrick Lach, an assistant professor of finance at Indiana University Southeast.

Most of these new specialties are designed to provide professionals training in specific niches of financial planning, and give them a way to advertise that specialty to clients. But it can be tough for investors to know if those titles hold much value. There are no industrywide standards for certifications, and the requirements for getting them vary widely. So, investors need to do legwork to figure out what their adviser’s title really represents.

Mr. Lach, for one, is a financial adviser who can add nine letters to his name: Ph.D., CFA (chartered financial analyst) and CFP (certified financial planner). Acquiring those qualifications took him thousands of hours, he calculates—so he was startled to encounter other advisers with credentials that could be acquired with a weekend-long program and multiple-choice test.

“It was a wake-up call,” says Mr. Lach, who now is researching the potential for credentials to mislead individual investors. “Given the amount of damage that less competent or skilled advisers can do, the combination of a lack of universal educational requirements and these sometimes fly-by-night credentials is alarming.”

“I suspect that a significant majority of them are just designed to enhance someone’s résumé,” says Harold Evensky, a veteran financial adviser and founder of Evensky & Katz/Foldes Wealth Management. “Certainly, no governing agency exists to warn people what’s useful and what is more of a marketing gimmick.”

Many needs

This proliferation of credentials mirrors the growth and diversification of the financial-planning business itself. As traditional pension plans gave way to defined-contribution plans like the 401(k), individual investors had to shoulder the burden of managing their own money, each with unique situations and questions. A 55-year-old high-school teacher with two adult children has vastly different needs than a 40-year-old entrepreneur with young children from two marriages, or a 35-year-old single parent whose child has special needs. It is logical that each will seek the kind of adviser best suited to help them address their unique challenges.

That’s why many advisers are adding more credentials to their list and more letters after their name. Cecil Pope Staton, a financial adviser in Athens, Ga., works primarily with millennials who acquired hefty student-debt loads along with their medical educations.

Young doctors or dentists who don’t plan student-loan repayment properly can jeopardize their other financial objectives, Mr. Staton says, so “I felt compelled to earn the CSLP [certified student loan professional] to serve my clients better.”

Earning the designation required him to take the equivalent of four postgraduate courses and pass a comprehensive exam on the nuances of analyzing student loans.

Like many of his peers, Mr. Staton also is a CFP—certified financial planner—a credential that investors often view as the gold standard. To add CFP to their name, advisers must complete two years of part-time study, pass a 10-hour exam and have a few years of real-world experience working with clients, either independently or as an apprentice with someone who already has the CFP designation. Maintaining that CFP requires continuing education and compliance with ethical standards.

But Mr. Staton says the CFP curriculum didn’t cover the growing planning challenges surrounding student loans and student debt in enough depth. Other advisers agree, pointing out that each credential signals either additional expertise or commitment to a distinct area of planning. Just as someone with a heart condition needs a doctor—but more specifically a cardiologist rather than a dermatologist—many advisers note that there is a growing degree of specialization in financial planning.

But drawing an analogy between specialization among physicians and financial advisers is problematic. To become a doctor—and then a cardiologist—requires a college degree and years of additional education and training, and maintaining licenses. Hospitals and regulators all monitor compliance. The financial-advisory world offers nothing comparable.

“Caveat emptor, or buyer beware, is fine when what you’re doing is buying a new TV,” says Mr. Lach. “It’s an altogether different matter when entrusting someone else with your life savings.”

He would like to see an easy-to-read guide to each adviser’s credentials, describing the rigor (or lack thereof) of the education required to acquire the designation, what kind of exam (if any) was required, and what it takes to maintain that credential over time…