By Cyril Tuohy
Judging by all the certified expert financial advisors working today, retirees would seem to have nothing to worry about, even those without quite enough put away to last them until the day they die.
Platoons of certified advisors serving the retirement segment stand ready to help make assets last: over here, an advisor who is also an Accredited Estate Planner, over there another who doubles as a Certified Income Specialist, and beyond, the advisor who calls himself a Plan Sponsor Retirement Professional, followed by the advisor who hawks her talents as a Registered Financial Consultant.
Welcome to the professional certification bazaar, where advisors signal their expertise with two, three or four letters following their names, and where some advisors even trail an alphabet soup of four, six or even 10 certifications behind their names.
There is little doubt that these professionals have become officially certified. What they’ve actually done to deserve the designation is another question. In fact, there’s evidence to suggest that some do nothing at all beyond spending a few hours filling out forms on an Internet site, according to a report by the Consumer Financial Protection Bureau (CFPB).
If the certification game were an exercise in intellectual vanity, no one would pay much attention. But the designation treadmill has become a well-funded marketing machine. For unwary consumers, certifications suggest that advisors are more qualified to manage a particular group of assets than they really are, the report also said.
“Unfortunately, older consumers are too often targeted by financial services professionals with senior designations who are selling products or services that may not be appropriate,” noted the report titled “Senior Designations for Financial Advisers: Reducing Consumer Confusion and Risks.”
More than 50 professional designations targeting the senior segment alone are available to financial advisors.
But retirees, many of whom are vulnerable in the face of complex financial decisions regarding their retirement assets, are confused by the designations, the report found. There’s no way to tell which advisor is better than another, the report found.
“The problem is particularly dangerous to the financial health of older Americans, who often have little capacity to absorb and recover from financial losses,” CFPB Chairman Richard Cordray said in the introduction to the report.
Jack Waymire, founder of the Paladin Registry of Financial Professionals and author of Who’s Watching Your Money?, takes a harder line. He draws parallels between the professional certifications available to the financial services industry and the diploma mills that sell academic credentials.
“Basically, the industry has its own diploma mill spewing out these designations,” Waymire said in an interview with InsuranceNewsNet. Certifications of dubious provenance offer con artists and swindlers flimsy credentials as bona fides to siphon off a retiree’s assets and run for the hills, he said.
He estimates that financial professionals have access to as many as 232 separate designations offered by the investment, insurance and tax planning industries. All but 10 or 15 of them are worth anything, he said.
Seniors are particularly vulnerable because many of them have spent their lives with employers who had retirement plans managed by outside advisors. With retirement assets now under the sole control of the retiree, the decisions a retiree makes have consequences.
For many recently retired seniors, it is their first time working with advisors. Reeling in retirees and their assets with impressive-sounding designations is like “throwing fresh meat to a shark,” Waymire said.
Although it’s true that investors shoulder the responsibility for entrusting assets to a reputable advisor, the industry still has a responsibility to investors as well. “It’s just amazing to me that (the Financial Industry Regulatory Authority) and (the Securities and Exchange Commission) have done nothing to regulate credentials,” he said. “They’ve made it the investor’s responsibility to tell between good credentials and bad credentials.”
FINRA, which regulates broker-dealers, has been discussing advisor credentials. FINRA “looks forward to continuing to collaborate with the SEC, the CFPB and others to equip investors with helpful tools and resources,” a FINRA spokesman said in an e-mail to InsuranceNewsNet.
“Over the past year, FINRA has sought public input on ways to further improve BrokerCheck,” FINRA said. “FINRA is focused on making it easier for investors to make the right choice in selecting a financial advisor or financial firm.”
CFPB recommendations to the SEC include the establishment of a centralized tool through which seniors can verify an advisor’s designation, letting investors track complaints and enforcement actions against advisors, and setting minimum standards for advisors to be able to acquire professional designations.
Kevin R. Keller, chief executive officer of the Certified Financial Planner Board of Standards, said in a statement on the group’s website that the CFPB recommendations “mark an important step toward addressing the proliferation of designations, certifications and titles used to mislead, confuse and deceive America’s seniors.”
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He has also written about food, restaurants and travel. He can be reached at [email protected].
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