Three cheers for the
Consumer Financial Protection Bureau for sounding the alarm on the dizzying array of “senior certification” designations being used by financial advisers, planners, brokers, insurance agents and, unfortunately, some crooks.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 directed the CFPB to make recommendations to Congress and the Securities and Exchange Commission on how to better protect senior citizens from unscrupulous advisers' use of credentials to defraud them.
There are now more than 50 senior-certification designations in use — all with widely varying educational or experiential requirements behind them, according to a report published by the CFPB. The glut of credentials, coupled with the fact that the acronyms for some of those credentials are nearly identical, puts older adults at serious risk of fraud, the report concluded.
The bureau put forth a handful of recommendations, many of which we agree with, and one we think warrants more-careful consideration.
We support, for example, the bureau's recommendation that the SEC establish a centralized portal through which senior investors could verify a financial adviser's designation. Ideally, the SEC would coordinate this effort with other regulators, including the
Financial Industry Regulatory Authority Inc. and the North American Securities Administrators Association Inc.
The database of advisers' senior designations should include details about the coursework necessary to obtain the designations and whether the designations are accredited. This would allow users to quickly assess the legitimacy of the credentials.
We also like the recommendations that the SEC begin tracking complaints and enforcement actions against senior-designation holders and that rules and regulations be established that would require advisers to provide clients, or prospective clients, with certain disclosures about any senior-specific certifications being touted.
Where we deviate from the CFPB is in a recommendation that policymakers consider minimum standards for acquiring senior designations, and the amount of training necessary to earn a designation. It should not be up to Congress, or the SEC, to set specific standards regarding the use of senior designations.
A better approach to regulatory intervention is the one being taken in Massachusetts. There, financial advisers can use only those senior designations that have been accredited by a national agency recognized by the state's security regulators.
No matter what, the CFPB is right to take steps to make sense of the alphabet soup of senior designations. Older investors are significantly more vulnerable to financial fraud — as a group, they tend to possess more wealth and to decline in financial acuity as they age.
Making sense of senior designations is a good first step in protecting this fast-growing group of investors.
