(Corrects that CRPC designation is available from College for Financial Planning, not the Certified Financial Planner Board of Standards)
By Suzanne Barlyn
NEW YORK, May 2 (Reuters) - Financial advisers may need to be more careful then ever when using special “senior” credentials to market themselves to older Americans after the newest U.S. financial regulator took aim at those designations, say compliance professionals.
New regulations could be coming if the Consumer Financial Protection Bureau (CFPB) has it way. A report from the agency in mid-April confirmed what investor advocates and other regulators have long known: seniors are confused by the more than 50 designations financial advisers use to proclaim expertise in giving advice to an older crowd.
At issue are credentials that require little or no training but give consumers the impression that the adviser is well versed in retirement planning and related subjects. Some 89 percent of brokerage firms allow their advisers to use senior designations, though in most cases they must get prior approval or choose from a pre-selected list of certifications.
That will mean ongoing scrutiny of practices among brokers and their firms while multiple regulators discuss their next moves, said Dan Bernstein, director of research and development for MarketCounsel, a compliance consultancy in Englewood, New Jersey.
The CFPB urged other regulators, including the U.S. Securities and Exchange Commission, to rein in potential abuses with new rules that would require mandatory disclosures and minimum standards of conduct.
For brokerages, that means making sure their policies for the designations are up to snuff, and for brokers it means sticking to those rules.
The bureau cannot make those changes on its own, because its reach extends only to limited types of financial advisers. Advisers who sell securities remain subject to oversight by the SEC, states, and the Financial Industry Regulatory Authority (FINRA), Wall Street’s industry-funded watchdog.
Some CFPB recommendations, such as a web-based tool through which seniors can verify an adviser’s designation, could require a lengthy effort among multiple regulators. The SEC is looking forward to reviewing the suggestions and continuing efforts with other regulators to protect seniors, a spokesman said.
“If multiple regulators have their eyes on this issue then it has to be important for firms to have robust procedures if their brokers are allowed to use these designations,” said Susan Axelrod, FINRA’s head of regulatory operations. Brokerages “must be confident that they are not just a title meant to attract investors or mislead them,” Axelrod said.
The CFPB, whose report was required by the Dodd Frank financial reform law, is the latest regulator to weigh in on senior designations after a series of measures by state, federal and industry regulators.
More than 30 states have adopted a model rule developed by the North American Securities Administrators Association, an organization of state securities regulators. It prohibits advisers from using senior designations that are misleading or obtained from groups that do not have “reasonable standards” to ensure, among other things, that people who obtain the credential are competent.
Designation companies, to meet the state requirements, must have their programs approved by one of two national organizations that review business standards in various industries.
In 2011, the Financial Industry Regulatory Authority (FINRA) issued guidance to the securities industry about best practices for senior designations. Roughly 68 percent of firms that responded to a FINRA survey said they allow their brokers to use senior designations. But most brokerages required brokers to use designations pre-selected by the firm or to get prior approval before promoting a designation.
Morgan Stanley, for example, allows brokers to choose from three senior designations the brokerage pre-approved based on factors such as the course work involved, a spokeswoman said. Brokers at Wells Fargo Advisors, a unit of Wells Fargo & Co may choose from five designations. They do not use the word “senior” in their titles, but may use “retirement,” a spokeswoman said.
Both firms’ lists include the Chartered Retirement Planning Counselor (CRPC). The accreditation, available through the College for Financial Planning, requires roughly 30 hours of instruction on everything from long-term care to retirement cash-flow concerns. Candidates must score at least 80 percent on a 90-question exam and attend 16 hours of continuing education every two years, a spokesman said.
Some designations have less strenuous requirements, including optional course work, according to a list from the CFPB report. Some companies maintain websites that disclose misconduct by advisers who hold their designations, while others do not.
It is unclear how many of Wall Street’s roughly 630,000 brokers use senior designations.
The SEC has also held seminars to educate seniors about the issue.
The recent spotlight could spell trouble for brokers using questionable designations behind their firms’ backs or not following their approval policies.
Brokerages often conduct surprise exams at their branch offices to look at these issues among others, said Gerald Baker, a compliance consultant in Kewadin, Michigan. Compliance staff may ask for copies of brokers’ business cards or letterhead to see which designations appear, Baker said. They may also review how brokers’ listings appear in telephone directories and on the Internet, Baker said.
Breaking the rules is a big risk with little reward, said Michael Byrnes, a business and marketing consultant in Kingston, Massachusetts who works with advisers. He points out that having the wrong senior designation could get a broker in trouble without even winning any new clients. (Reporting by Suzanne Barlyn; Editing by Linda Stern and Chizu Nomiyama)