CFPB Recommends Regulation of "Senior Designations"

by devteam April 19th, 2013 | Share

The Consumer Finance Protection Agencyrn(CFPB) has released a report highlighting problems with what it called “seniorrndesignation” credentials.  These arerntitles and designations conferred by private entities that many financialrnadvisors voluntarily acquire and use to indicate they have received specialrntraining or have proven expertise in meeting the financial needs of olderrnconsumers.  </p

The entities providing theserndesignations can range from higher education institutions to trade orrnprofessional organizations to for-profit companies.  Some require prior licensing, specializedrntraining through a course of study while others can be obtained through arnsingle exam or a week-end seminar.</p

In a press conference announcing thernreport CFPB Director Richard Cordray said “Manyrnseniors have routines, and their predictable patterns can make them easierrntargets for predators.  They can be lonely or overly trusting, and we nowrnhave many ways for perfect strangers to communicate with them, often takingrnadvantage of their trust.  We have seen this quite plainly with so-calledrn”senior financial advisers.”  </p

“We found that these so-calledrnadvisers may use any of more than fifty different senior designations tornpromote their services to older Americans.  With such a bewildering arrayrnof titles and acronyms, it is no wonder that older Americans are often confusedrnand misled by these titles.  The designations can be earned from places asrnvaried as a three-hour online course offered by a for-profit company to arntwo-year graduate degree from an esteemed university.  Our research foundrnthat the training and standards required to attain these credentials variesrnenormously.”</p

Cordrayrnsaid Congress has directed CFPB to make recommendations that will help olderrnconsumers identify and verify a financial adviser’s credentials or “seniorrndesignations,” which can include any degree, title, certificate, orrnaccreditation that implies a financial adviser has some kind of senior-specificrnexpertise or training.</p

The report, entitled “SeniorrnDesignations for Financial Advisers: Reducing Consumer Confusion and Risks,”rnincludes recommendations to Congress and the U.S. Securities and ExchangernCommission. Because many financial advisers holding senior designations arernregulated by state securities and insurance regulators, the Bureau offersrnrecommendations for their consideration as well. </p

The professionals who typicallyrnacquire these designations include investment advisers, broker-dealers, accountants,rninsurance agents, financial planners, and other general financialrnprofessionals.  Some recommend or sell arnvariety of products such as securities or investment opportunities and not allrnare subject to the same regulatory oversight.</p

As Cordray said, the report foundrnthat titles and acronyms of the designation can be similar and there is nornclear means for seniors to distinguish among them.  For example, Certified Estate Planners (CEP), Chartered Estate Planning Practitioners (CEPP), and Certified Estate and Trust Specialists (CES) are different designations conferred by different organizations.  Inrnaddition to widely varying requirements for study and training, comprehensive supervision and enforcement is lacking with nornsingle authority charged with insuring those with senior designations do notrnharm or mislead consumers.  The reportrnsays a particular problem is the sponsorship of “free lunch seminars.”  Often marketed as educational seminars, theyrnare actually staged sales events to sell investment and other financialrnproducts. </p

Seniors are increasingly vulnerablernto exploitation in the financial services area because fewer and fewer arerncovered by defined benefit retirement plans and must plan their own retirementrninvestments, often with little existing knowledge of the area.  Seniors are also entering retirement withrnlower levels of savings and investments to rely on during the following years. Theyrnhave higher household wealth and are more likely than younger consumers to bernexperiencing cognitive decline which has a particular tendency to affect thernability to manage finances.   </p

Cordray said that in the seminarsrnthe Bureau conducted for seniors in developing their recommendations onernstriking takeaway was the vulnerability of many seniors.  They may assume that a financial advisor hasrntheir best interests at heart and if they fall victim to a scam they may be toornembarrassed or too frail to pursue legal action.</p

Cordray said there was a need to notrnonly education and inform seniors about the subject but also the caretakerrngeneration.  Citing his own 93 year-oldrnfather he said, “Those in our generation need to take time to learn about thesernfinancial products and services so we can help ensure that our parents andrnother older Americans are able to make the best financial decisions forrnthemselves.”</p

The Bureau’s recommendationsrninclude: </p<ul class="unIndentedList"<liState and federal regulators should implementrnrigorous criteria for acquiring senior designations, including specificrnstandards for education, training, and accreditation. </li<liThose regulators should also setrnconsistent and strict standards of conduct for those using senior designationsrnsuch as prohibiting senior designees from characterizing sales events asrneducational seminars, and selling financial products and services at eventsrnthat are advertised or described as educational or informational events.</li<liFederal and state regulators should consider increasing existingrnsupervision of and enforcement authority against misleading conduct by a holderrnof a senior designation. </li</ul

Hubert (Skip) Humphrey, III,rnAssistant Director for the Office of Older Americans said that additionalrnrecommendations include that the Securities and Exchange Commission considerrnestablishing a centralized tool that makes it easy for seniors to verify theirrnfinancial adviser’s designation.  Congress and SEC should also considerrnrequiring financial advisers using senior designations to provide their clientsrnwith information that will enable the clients to verify those credentials.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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