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Watch Out for 'Senior Specialist' Financial Advisers

Some designations sound impressive, but a government report finds huge discrepancies in training and oversight

By Caroline Mayer

Would you and your parents know the difference between an Accredited Retirement Adviser and an Accredited Estate Planner? How about a Retired Income Specialist versus a Certified Senior Advisor?
I suspect not (I’ve provided the answers at the bottom of this story) and, sadly, there’s a good reason why:
More Than 50 Confusing Titles

According to a new, damning report from the federal Consumer Financial Protection Bureau, financial advisers are using more than 50 “senior” titles or designations to suggest they have expertise helping older Americans with their investments. In reality, the credentials just mislead potential customers.
“Consumers risk paying for an adviser they believe has a breadth of experience, but who, in reality, simply paid a website for multiple designations,” the report says.

(MORE: Beware of Financial Advisers With Bogus Credentials)
And yet, a study conducted by the Financial Industry Regulatory Authority, the largest independent regulator for U.S. securities firms, found that older consumers are more likely to rely on the advice of a pro who uses an alphabet-soup senior designation, like Certified Senior Advisor (CSA) or Chartered Senior Financial Planner (CSFP).
Requirements for Credentials Vary Enormously

Trouble is, many of these similar-sounding titles have few, if any, requirements — and oversight of the designations is scattershot.
The Consumer Financial Protection Bureau’s assistant director for the Office of Older Americans, Hubert “Skip” Humphrey III (a former Minnesota state attorney general and the son of former Vice President Hubert H. Humphrey), says in the agency's blog: “Some of these titles require in-depth training, while others aren’t much more than window dressing.”
In short, many “senior specialists” or “retirement advisers” may not be qualified to help you or your parents manage the family’s money but may be quite eager to use their lofty titles as marketing ploys to lure clients.
The bureau’s findings are particularly troubling because study after study has shown that older Americans are attractive targets for investment fraud. People 60 and older make up 15 percent of the population, but account for an estimated 30 percent of investment fraud victims, according to AARP.

(MORE: How to Find a Financial Adviser Who's Right For You)
Crooked Financial Advisers are Targeting the Elderly

Last week, The Washington Post published an article noting that the elderly are being lured into million-dollar scams promising sky-high returns that prove bogus, motivated primarily by the fear they'll run out of money. Forbes just reported that New Jersey financial adviser/insurance salesman Jordan Zemlock was sentenced to up to 10 years in prison for defrauding 20 clients, mostly senior citizens, out of nearly $1.5 million, according to the Middlesex County prosecutor.
Older Americans are more susceptible to deceptive marketing, because they’re more likely to experience a decline in cognitive thinking, which could impair their ability to manage their investments.
In addition, they’re more susceptible to what are known as “relationship sales tactics” (the financial adviser will be your new best friend). Their tech-savvy children and grandchildren, on the other hand, tend to check out financial pros on the Internet, says Jack Waymire, founder of Paladin Registry, a free research site that rates financial advisers. Next week, the site will begin offering a free credential-checking service, with quality ratings for certifications and designations used by financial advisers.
The Right Adviser Can Be a Huge Help

None of this is to say that you and your parents should steer clear of financial advisers. Quite the contrary.
“Everyone over 50 needs a financial adviser if they do not have the time or specialized knowledge to do the work themselves and produce the rates of return they need to achieve their financial goals,” Waymire says.
But finding the right adviser, as the Consumer Financial Protection Bureau's report shows, isn’t easy.
Waymire estimates that 75 percent of people calling themselves financial advisers "are sales reps who are paid commissions for selling their products.”
He recommends instead using pros who make their money by charging fees for their service, whether it's hourly, fixed or a percentage of the investor’s assets.

Don’t select an adviser based purely on his or her credentials, Waymire says. As he wrote on Next Avenue, “Although some of these designations are legitimate, many others are not.”
According to Waymire’s research, at least 35 percent of credentials used by financial consultants are fake, “designed to trick seniors into believing advisers are more knowledgeable than they really are.”
What the Government Wants

The Consumer Financial Protection Bureau wants state and federal regulators to require money pros to agree to rigorous training and ethical standards to obtain senior designations. The agency is also urging regulators to increase their supervision and enforcement and is asking the Securities and Exchange Commission to create a centralized tool where consumers can verify a financial adviser’s designation.
It may take years for those recommendations to be implemented, if they ever are.


How to Scope Out Financial Advisers
So it’s essential that you and your parents do your homework before signing up with an adviser. Here’s how:
Determine what you want from a financial pro before selecting one. “Just because your neighbor or a member of your congregation used a particular financial professional doesn’t mean that person is the right one for you,” says  Gerri Walsh, senior vice president of investor education at the Financial Industry Regulatory Authority. “An estate planner may be appropriate if estate planning is what you’re looking for, but maybe not if you want someone to manage your investments.”
(MORE: How to Steer Clear of Investment Scams)
Be sure the adviser is on the up and up. For example, if you’re looking for someone to sell investments or insurance, be certain they’re registered with your state’s securities regulator or insurance commission.
Find out if there have been any disciplinary actions against the prospective adviser. The Financial Industry Regulatory Authority’s Broker Check notes any enforcement actions against investment adviser firms and individual representatives. The SEC’s Investment Adviser Public Disclosure has similar information.
Review the adviser’s credentials. You can research professional titles and certifications on the Paladin Registry site and FINRA's Guide to Understanding Professional Designations.
Among the questions to ask an adviser before hiring him or her:

  • What courses and exams were required to earn the certification?
  • What are the continuing education requirements?
  • Is the certifying organization offering the designation accredited and, if so, by whom? (Accreditation usually involves an impartial third party evaluating the program to make sure it adequately trains and tests designees).
  • Does the certifying organization have stringent ethical standards?
  • Does the certifying organization have a website verifying that an adviser is in good standing?

How Similar-Sounding Financial Titles Differ

OK, now for some of the differences between the similar-sounding designations that appeared at the top of this story:
An Accredited Retirement Adviser (ARA) is not required to complete a defined course of study or demonstrate previous professional experience, according to the Consumer Financial Protection Bureau's report. He or she may purchase a study aid before taking the 100-question, multiple-choice exam.
ARA is not an accredited designation, though, so the exam “has not been evaluated against third-party accreditation standards to ensure that competencies are being effectively tested,” the report says. There is no continuing education requirement.
By contrast, an Accredited Estate Planner (AEP) must be an attorney, accountant, insurance professional, financial planner or trust officer in professional good standing. He or she must have a minimum of five years experience in estate planning. Training requires at least two graduate-level courses offered by an accredited higher education graduate program.
A Retired Income Specialist (RIS) is not accredited; certification requires enrolling in a 60-hour, online self-study program. But a Certified Senior Advisor (CSA) requires a three-day training course and is nationally accredited.

The Consumer Financial Protection Bureau's report on financial adviser designations explains the training required for many other credentials. It's worth reading, so you and your parents won't get snookered by a meaningless title.

Caroline Mayer is a consumer reporter who spent 25 years working for The Washington Post, covering such issues as product safety, scams, and credit cards. Mayer has received several awards, including the Betty Furness Consumer Media Service Award. She has written for Consumer Reports, CBS MoneyWatch, Ladies Home Journal, Kaiser Health News and others. Follow her on Twitter @consumermayer Read More
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