A senior couple looking for financial advice might be comforted to know that their agent is a Certified Senior Specialist (CSS). But suppose another agent right next to that producer is a Certified Senior Consultant (CSC), and the one next to them is a Certified Senior Advisor (CSA)? Now suppose there was a line of several agents — 59, to be exact, each holding one of the NASD-charted designations that imply a special ability to handle seniors’ needs? Would that be comforting or confusing?
The state of Nebraska found it not only confusing, but also troubling and potentially misleading. With nearly five dozen designations identified by the NASD — both senior designations and others — Nebraska’s Department of Banking & Finance decided to put a fly in the alphabet soup next to agents’ names. As of Jan. 1, 2007, a special notice asked the state’s brokerage firms to prohibit senior-related designations on marketing materials, including business cards, mass mailings, advertising, and letterheads. The prohibition request applies to registered broker-dealers and their agents, as well as federally covered and state-registered investment advisors and their investment advisor representatives in the state of Nebraska.
Long time coming
Although the recent special notice focuses on senior designations, Nebraska has had issues in the past with other designations, as well. In a press release dated Feb. 17, 2006, the Nebraska department noted that “prospective investors often have insufficient information when trying to decide which designations represent a meaningful achievement by the agent or investment advisor representative or which designations simply use empty marketing devices.” The release also mentioned that various state securities regulators had opened a total of 26 cases involving those who used such designations in the previous year, with most involving securities recommendations by individuals who were not properly licensed.
According to Jack E. Herstein, assistant director of the Securities Bureau of the Nebraska Department of Banking & Finance, the state’s most recent move is merely a request that the state’s licensed broker-dealers and investment advisory firms hold off on allowing the use of designations while Nebraska attempts to get a handle on the growing area of concern.
“It’s not a rule; we’re requesting them to prohibit use of these designations,” Herstein explained. “We want to make sure that any designation that is used in the state has basically meaning both in education and the material beyond using it as a marketing tool.” He said that if agents continue to use the designations, the state will contact them and their firm’s compliance officer to find out why they’re still being used.
Five designations are specifically exempt from the request: Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC), Personal Financial Specialist (PFS), Chartered Financial Analyst (CFA), and Chartered Investment Counselor (CIC). Herstein added that three others — Chartered Life Underwriter (CLU), Financial Services Specialist (FSS), and Life Underwriter Training Council Fellow (LUTCF) — can also be used for now.
Others may be added, but in order to be included on the approved list, issuing organizations need to submit relevant information to the state, including educational and experience requirements, testing and certification details, continuing education requirements, and code of ethics details. Herstein called it an “evolving process” and noted that many organizations have already submitted information to the state for consideration.
He also noted that the state needed to act on behalf of seniors since they represent a great deal of the nation’s wealth and could be confused by the string of letters following an agent’s name. “I think (seniors are) the most vulnerable right now. Some get confused by some designations, especially ‘retirement specialist’ or ‘senior specialist,’ ” Herstein said. “Some titles are misleading and simply used as marketing tools. We’re just trying to gather as much information on designations that want to continue to be used in Nebraska.”
Pros and cons
Harley Gordon, president of the Corporation for Long Term Care Certification (CLTC), said he agrees with Nebraska’s methods and motivation.
“Seniors are a protected class. They need to have special attention paid to them because they may not be able to deal with the pitches people make to them,” Gordon said. “All (Nebraska’s) asking is for producers to comply with basic rules. You go through a certification process through some third party, and if the designation is legitimate, why wouldn’t someone want to do that?” He also agreed that some designations are simply marketing tools, and since the state’s job is to protect its citizens, Nebraska’s request is not unreasonable.
Dr. Larry Barton, president and CEO of The American College and a financial services educator, said he also understands why Nebraska is concerned about the proliferation of designations that target seniors.
“The reality is that there are some rogue designations in existence that give the appearance that those using them are specialists in the finances of older Americans. These programs are not designations; they are educational programs, often presented in hotels over a two or three-day period,” Barton explained. “The entire situation should cause anyone who is a serious educator, regulator, or consumer to be alarmed.” He also said that the qualifying courses usually have close to a 100 percent pass rate, and those who complete them then pay annual dues to the issuing society.
But Barton said he also believes that Nebraska has cast too wide a net in trapping these designations and that the state may have hampered agents who have earned valid and valuable titles. “By banning the use of certain terms for all agents and advisors, they do a great disservice to the professional advisors who have spent years to complete a program from an accredited university or college,” Barton said. “We want to encourage Nebraska to appreciate the fact that our designations, and others that may be offered by other universities with the highest level of academic accreditation, shouldn’t be punished — and that is what the Nebraska policy is doing.” The American College is accredited by the Middle States Commission on Higher Education and is responsible for issuing titles such as Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), and Chartered Advisor for Senior Living (CASL).
An emerging trend?
Nebraska isn’t the only state taking a look at the increase in senior-related designations. The Massachusetts Securities Division is proposing regulations that would affect broker-dealer agents and investment advisor representatives registered in the Commonwealth. The proposal would prohibit the use of any designation that states or implies a specified knowledge of seniors’ investment needs unless it meets specific criteria. Specifically, the proposed language states that the designations would be prohibited “unless such credentials or designations have been accredited by a nationally recognized independent accrediting organization whose purpose is to develop standards and implement methods for assuring competency.” Those organizations would have to be approved by the Secretary of the Commonwealth, and for purposes of the legislation a “senior investor” would be any person aged 50 years or older.
Other states have addressed the issue, as well. In 2005, Virginia’s State Corporation Commission urged consumers to check the credentials of those claiming to be “senior specialists,” and Oregon’s Department of Consumer and Business Services offered the same advice last year.
With so many similar words used in creating titles, different designations might look nearly identical to a casual observer or prospective client. But according to the National association of Securities Dealers Web site, the NASD requirements vary greatly. For example, to become a Senior Registered Financial Planner (SRFP), a candidate must have five years of financial planning experience and an associate’s or equivalent emphasis on personal taxation, estate and retirement planning, and investment products. But to qualify for the Chartered Senior Financial Planner (CSFP) designation, one needs only to be a licensed insurance agent. And there are no experience or licensing prerequisites to become a Certified Senior Advisor (CSA) or a Certified Senior Consultant (CSC).
Continuing education requirements also vary, ranging from 20 hours every three years (SRFP) to no CE requirements at all (CSFP). They also differ in areas such as investigation of complaints and public disciplinary procedures.
What can you market?
If it sounds complicated to field professionals, it’s no wonder that seniors are considered vulnerable to the lure of special titles. Janice Barlow, a Chartered Financial Consultant with 25 years’ experience in the industry, has seen it happen to her own clients.
“I have run into several situations where clients have been invited to a seemingly innocuous luncheon meeting, and an ‘elder care specialist’ would present information to set up a ‘trust’ to protect their money from medical expenses. The solution recommended would be to liquidate all of their assets and place them in a fixed annuity,” Barlow said. “This is very frightening to me because not only did these people not hold a securities license, but they were giving poor recommendations to seniors that could result in major income tax ramifications. This type of presentation is happening every day in cities all across America.”
Barlow, who is licensed to do business in 13 states, including Massachusetts and the heavily senior-populated Florida, also holds a CLU designation and is awaiting CASL certification. She said that most seniors would have trouble differentiating between the various titles and that they should question the agent or contact the NASD to verify what each designation means. She also believes that state agencies and advocacy groups such as AARP could help by publishing information to keep seniors informed.
But she also said it’s important to let clients (and prospective clients) know about her areas of expertise. “I wanted to achieve a high level of education and also be able to continue to add to that education by attaining additional designations beyond my choice of Chartered Financial Consultant,” she said. “The continuing education and designations are essential elements that separate me from the rest of the field and give the clients peace of mind regarding the advice I give them.”
Ed Pittock, president of the Society of Senior Advisors (which provides the Certified Senior Advisor designation), believes that removing the ability to promote designations might also remove an agent’s incentive to further their education.
“Some people will pursue additional education simply because they see the need for additional knowledge. Others will get education for that reason as well, but they’ll also be proud of what they’ve accomplished,” Pittock said. “For some people, showing that they have a credential is a benefit of having that credential. So if you take away that benefit, it has the unintended consequence of reducing the incentive to get the education the credential represents.”
Herstein disagrees, and said that Nebraska’s policy is not meant to discourage anyone from gaining valuable knowledge. “Certain designations are a concern to the department and may be misleading. These will continue to be a problem for state regulators,” he said. “These particular designations have nothing to do with an education. They’re just a string of letters after your name. If you have legitimate information, why can’t you go in there and share that knowledge with your client?”
Earning the title
Before addressing whether they can advertise their designations, agents need to determine which ones, if any, to pursue. Just as clients have been advised to do their homework in determining the value of each title, agents should do the same before signing up for any courses or paying hefty tuition fees. Barlow suggested that agents “consider name recognition, quality of materials available, and, most importantly, the reputation of the designation sponsors.”
Pittock said that agents should have specific criteria when choosing a designation. “I’d look for one that had a great faculty. I’d want a designation that had a code of conduct and a board of standards to enforce it through a disciplinary process. I would want a designation that required continuing education,” he said. “I’d also talk to someone who had gone through the course.”
Whatever agents decide, they should plan on more, not less, scrutiny with regard to designations and how professionals may use them. “I think you’re going to see a trend in this,” Gordon said. “There’s too much at stake. These marketing organizations come up with designations that are nothing more than marketing tools.”
Michael Murillo is a freelance writer. He can be contacted at vivamurillo@hotmail.com.