Retirement


Learn the ABCs of Senior Specialists

EDITOR'S NOTE: This article was originally published in the January 2012 issue of Kiplinger's Retirement Report. To subscribe, click here.

To a senior seeking financial guidance, the string of abbreviations after an adviser's name on a business card -- CASL or CSFP, perhaps -- can sure look impressive. But some professional designations are more about salesmanship than expertise in advising older investors. And regulators, who have spent years scrutinizing the issue, are raising renewed alarms.

SEE ALSO: Special Report: How to Pick a Financial Planner

Financial professionals can earn a host of designations -- such as Chartered Advisor for Senior Living and Chartered Senior Financial Planner -- that make them seem well-qualified to serve older people.

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The Financial Industry Regulatory Authority, which oversees the brokerage industry, in November issued a regulatory notice reminding brokerage firms of their obligations to supervise brokers' use of senior-specific designations. The notice included some disturbing news for older investors: Some widely used senior designations don't require "rigorous qualification standards," FINRA said, and some firms are "not particularly discerning regarding the quality of the designations" that their brokers are permitted to use.

More than one-third of firms that permit brokers to use senior designations don't verify the credentials, according to a 2011 FINRA survey. "There doesn't seem to be as much monitoring as we would like," Patricia Struck, Wisconsin securities administrator, says of the FINRA findings. "As an investor, you are your own best resource to avoid being taken for a ride."

The recent FINRA notice was the latest in a string of regulatory and legislative steps to beef up oversight of senior designations. The North American Securities Administrators Association, a group of state securities regulators, in 2008 issued a model rule on use of these designations. That rule prohibits use of designations that are self-conferred or lack reasonable disciplinary procedures, among other limitations. To date 27 states have adopted the model rule, and it is pending in two others, NASAA says. The Dodd-Frank financial overhaul law passed in 2010 also charged the new Consumer Financial Protection Bureau with monitoring senior designations and provided for grants to states that adopt model rules.

Yet big variations remain in requirements for various designations. Professionals may obtain the gold-standard Certified Financial Planner designation, for example, by taking at least 18 semester credit hours of certain undergraduate-level or higher education courses and passing a ten-hour exam, among other requirements.

But they can obtain a Certified Senior Advisor designation by completing three days of classes and passing a 150-question multiple-choice exam and an online ethics exam. In 2007 U.S. Senate testimony, Massachusetts Secretary of State William Galvin said an investigation into the designation "indicated that it was primarily a marketing tool, and that CSAs did not receive meaningful training on financial issues involving seniors."

Ed Pittock, founder of the Society of Certified Senior Advisors, notes that people generally complete 75 to 90 hours of work to gain the designation. "We're not about selling products," he says. But Pittock acknowledges that "the CSA designation alone does not imply expertise in financial, health or social matters."

Deciphering the Designations

FINRA offers a free online tool at www.finra.org/investors to help investors size up designations. The tool shows the designation's issuing organization, educational requirements, examination type, public disciplinary process and other details.

Instead of relying on designations when choosing an adviser, use resources such as the BrokerCheck tool at www.finra.org, which shows a broker's employment history and any disciplinary or regulatory actions against the broker. Also check out an adviser's Form ADV, which provides information on the services offered, fee schedule and conflicts of interest. These documents are available from the adviser or at adviserinfo.sec.gov. Your state securities regulator can also provide details on an adviser's disciplinary record. To find state regulators' contact information, go to www.nasaa.org.

Such measures are likely to turn up information far more valuable than the alphabet soup after an adviser's name. "The designation doesn't make an expert," Struck says.

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