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Report Finds Financial Advisors Using Over 50 Titles to Suggest Expertise in Senior Citizen Matters

Consumer Financial Protection Bureau's Office for Older Americans calls for action by regulators to assist senior citizens who are ‘often confused and mislead’

"With such a bewildering array of titles and acronyms, it is no wonder that older Americans are confused and misled"

April 24, 2013 – A report highlighting the well-known problem of so-called “senior designation” credentials of questionable value used by many financial advisers to market their services to older Americans was released last week. It also calls for specific action by federal and state regulators to protect seniors.

The Consumer Financial Protection Bureau (CFPB) study finds more than 50 different senior designations used by advisers to indicate that they have advanced training or expertise in the financial needs of senior citizen consumers.

“With such a bewildering array of titles and acronyms, it is no wonder that older Americans are confused and misled by these titles,” said CFPB Director Richard Cordray.

“Today’s report underscores the need for consistent high-level standards of training and conduct for those advisers who want to acquire a bona Tfide senior designation.”

The report highlights the challenges that the nation’s 50 million seniors face in navigating the complex world of financial advice and services. Older consumers have unique vulnerabilities, and are often the targets of fraud.

 

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The Dodd-Frank Wall Street Reform and Consumer Protection Act directed the CFPB’s Office of Financial Protection for Older Americans (Office for Older Americans) to make recommendations to help older consumers identify the most appropriate financial adviser and verify a financial adviser’s credentials.

The report, entitled “Senior Designations for Financial Advisers: Reducing Consumer Confusion and Risks,” includes recommendations to Congress and the U.S. Securities and Exchange Commission. Because many financial advisers holding senior designations are regulated by state securities and insurance regulators, the Bureau offers recommendations for their consideration as well.

The report found that:

    ●  The names and acronyms of senior designations confuse consumers. Titles and acronyms for the numerous designations can appear quite similar, and consumers have no simple, clear means to distinguish among these designations. Similar sounding designations can have very different requirements for earning the designation.

    ●  There is a wide variety of required training, qualifying exams, and oversight associated with different designations. Some senior designations may require rigorous college-level coursework while others may be acquired by attending a weekend seminar.

    ●  There is a lack of comprehensive supervision and enforcement. No single authority is responsible for ensuring that those who use senior designations do not mislead or harm consumers.

Older consumers can be attractive targets for the marketing of various financial products. They often have higher household wealth in the form of retirement savings, inheritance, accumulated home equity, or other assets. They are also more likely to experience cognitive decline, which can impair their capacity to manage their finances.

For example, a particular problem associated with senior designations is the participation of some designees in “free lunch seminars.” These events are often marketed as educational seminars, when in fact they are staged sales events to sell investment and other financial products.

A study conducted by the Financial Industry Regulatory Authority showed that older consumers are more likely to rely on the advice of a professional who uses a senior designation. With more than 50 designations, consumers risk paying for an adviser they believe has a breadth of experience, but who, in reality, simply paid a website for multiple designations.

Today’s report was informed by a Request for Information on senior financial exploitation that the Bureau issued in June 2012. The Bureau conducted extensive outreach to outside stakeholders, and, in addition, held roundtable listening sessions on the topic of senior designations in late 2012. The report was informed by financial planners, insurance and securities professionals, consumer advocates, social workers, and other industry stakeholders.

Based on its findings, the Bureau’s recommendations include:

    ●  Implementing rigorous training standards to obtain senior designations: The Bureau recommends that state and federal regulators implement rigorous criteria for acquiring senior designations, including specific standards for education, training, and accreditation.

    ●  Setting strict standards of conduct for those using senior designations: The Bureau recommends that state and federal regulators set consistent and strict standards of conduct for those using senior designations. Such standards could include prohibiting senior designees from characterizing sales events as educational seminars, and selling financial products and services at events that are advertised or described as educational or informational events.

    ●  Increasing supervision and enforcement: The Bureau recommends that federal and state regulators consider increasing existing supervision of and enforcement authority against misleading conduct by a holder of a senior designation.

The Bureau believes that adoption of these recommendations will help older consumers avoid financial advisers who would misuse their designations to sell inappropriate investment and financial products.

The Bureau’s Office for Older Americans conducts research and educational efforts in order to provide seniors the information they need to make safe and responsible financial decisions. Following the report’s release, the Office for Older Americans will work with federal and state regulators and offer assistance in developing a tool to help consumers verify the credentials of financial advisers who market their services and products to older adults.

      Read the complete report on senior designations (pdf)

The Consumer Financial Protection Bureau helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information - www.ConsumerFinance.gov.


Director of Consumer Financial Protection Bureau Briefs Press on Report

April 24, 2013 - Older Americans are in many cases the specific targets of unfair, deceptive and abusive financial practices, according to Richard Cordray, Director of the Consumer Financial Protection Bureau. He spoke to the media following the release of a report on April 18 highlighting problems with so-called “senior designation” credentials that many financial advisers use to market their services to older Americans.

Cordray noted, “The law requires us to have an office that focuses on serving older Americans, and that office currently is headed by my esteemed colleague, Skip Humphrey. Skip and his team have a singular focus on improving the financial lives of our growing numbers of seniors.”

Following are highlights of his remarks.

The law requires us to have an office that focuses on serving older Americans, and that office currently is headed by my esteemed colleague, Skip Humphrey. Skip and his team have a singular focus on improving the financial lives of our growing numbers of seniors.

As the past few years have revealed all too clearly, financial products have the potential to wreak havoc on every individual consumer and on the broader American economy. Older Americans are no exception, and in many cases they are the specific targets of unfair, deceptive and abusive financial practices.

In my time as Attorney General of Ohio, I saw too many heartbreaking situations where older Americans had lost their entire life savings to a scam or a fraudulent sweepstakes offer. I recall a four-inch stack of mail that one man brought me, which his elderly mother had received just in the past month after she had signed up for one of the phony sweepstakes offerings.

Many seniors have routines, and their predictable patterns can make them easier targets for predators. They can be lonely or overly trusting, and we now have many ways for perfect strangers to communicate with them, often taking advantage of their trust. We have seen this quite plainly with so-called “senior financial advisers.”

Congress directed the Bureau to make recommendations that will help older consumers identify and verify a financial adviser’s credentials or “senior designations,” which can include any degree, title, certificate, or accreditation that implies a financial adviser has some kind of senior-specific expertise or training.

We found that these so-called advisers may use any of more than fifty different senior designations to promote their services to older Americans. With such a bewildering array of titles and acronyms, it is no wonder that seniors are often confused and misled by these titles.

The designations can be earned from places as varied as a three-hour online course offered by a for-profit company to a two-year graduate degree from a reputable university. Our research found that the training and standards required to attain these credentials varies enormously.

A senior choosing between an Accredited Retirement Advisor and an Accredited Estate Planner will likely do so without knowing which one is required to have five years of experience and some graduate level education and which is not – and hence to know who is better equipped to advise them on financial matters.

Because many different types of professionals, like stock brokers or insurance agents, use these senior designations, there are multiple federal and state regulators that may oversee them. Some may fall through the cracks of a complex marketplace.

Consumer protection concerns in this arena have increased as more consumers turn to professionals for retirement guidance and advice. At the Consumer Bureau, we have requested public comments and held roundtables in order to better understand people’s experiences. We heard about the challenges people face in verifying the legitimacy of an adviser’s credentials, given the lack of consistent standards in achieving and maintaining these credentials.

A striking takeaway from these roundtables was the vulnerability of many older Americans. Seniors may assume that a financial adviser has their best interest at heart, when that is not necessarily the case. If they fall prey to a scam, they may be too embarrassed or too frail to pursue legal action.

We need to educate and inform not only older Americans but also the caregiver generation – people like me with an elderly parent. My father is 95. He grew up during the Great Depression and he has always been remarkably self-sufficient. He should not have to fend off unscrupulous advisers who are trying to raid the life savings of seniors. Those in our generation need to take time to learn about these financial products and services so we can help ensure that our parents and other older Americans are able to make the best financial decisions for themselves.

Today’s report illuminates the challenges that older consumers face in trying to navigate the complex world of financial advice for seniors. The report also highlights the need for consistent high-level standards of training and conduct for those advisers who want to acquire a bona fide senior designation. I want to thank both the SEC and FINRA for all of their collaboration with us in preparing this report.

The Consumer Financial Protection Bureau is dedicated to working in every way we can to improve the financial lives of America’s seniors – a generation that has earned the right to all the protection we can reasonably afford them. We have come to refer to them as the “Greatest Generation” because they have given so much to our nation. Now it is our job to make our best efforts to protect them, as they so richly deserve.

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