The Consumer Financial Protection Bureau said regulators should do more to stop older Americans from being confused by the scores of “senior designations” that financial advisers use.
The government agency said increased enforcement of state or federal rules that prohibit anyone from taking advantage of seniors could help. Additionally, the Securities and Exchange Commission should consider setting up a centralized tool for investors to verify an adviser's designations and a place for seniors to submit related complaints, according to the report, which was released today.
There are more than 50 senior designations used today to claim specialized knowledge in helping older Americans with retirement, as well as a variety of products, including annuities and long-term-care insurance, and it's impossible for seniors to distinguish which really mean something.
Adding to the confusion is the fact that advisers with those designations are overseen by different state and federal regulators, so a senior seeking to complain would find it hard to even know whom to tell, the report said.
“When it comes to these specialty titles, they are anything but transparent,” Hubert “Skip” Humphrey, assistant director of the Office for Older Americans, said in a CFPB blog post today, the day the report was released. “In fact, we found that many consumers don't understand basic differences between brokers, investment advisers, insurance agents, and financial planners — let alone the 50-plus senior designations that many of those financial advisers add to their titles.”
Seniors also would be better protected if those with senior designations had to be specifically trained and be required to follow strict standards of conduct, according to the report, which was required by the Dodd-Frank financial reform measure.
The Certified Financial Planner Board of Standards Inc., which issues the CFP designation, supports the bureau's recommendations and believes that seniors need help understanding the alphabet soup of credentials.
“These recommendations mark an important step toward addressing the proliferation of designations, certifications and titles used to mislead, confuse and deceive America's seniors,” said Kevin Keller, the CFP Board's chief executive.
The CFP Board recommended in a letter to the CFPB that the Office of Older Americans create a rating system for certifications and designations aimed at providing financial services to seniors.
The CFPB isn't the only regulator worried that older Americans need more help evaluating financial professionals, as well as products.
Last week, Financial Industry Regulatory Authority Inc. officials said the self-regulator of the brokerage industry is gathering data from firms regarding the products they market to seniors, the percentage of revenue they derive from those sales and the designations they are using to market themselves to older Americans.
The increasing sophistication of financial products, combined with longer life expectancy, is creating an environment in which fraud can thrive, experts said.