As regulators and Congress scrutinize the proliferation of financial advisory designations aimed at bilking elderly investors, the organization that grants the certified financial planner credential is investigating whether its name is being improperly used by groups that promote bogus certifications.
The Certified Financial Planning Board of Standards Inc. has assembled a task force to determine how extensively its name — and the
continuing-education credits it awards — are being used to promote questionable designations. The Denver-based organization particularly is concerned about financial advisers’ use of credentials that suggest an expertise in the financial needs of the elderly.
“We want to make sure [organizations using many adviser designations are] not using any relationship they might have with CFP Board to give legitimacy to their credential,” said Kevin Keller, chief executive of the CFP Board. “They’re using the imprimatur of our good name to give legitimacy to something that may not be very rigorous at all.”
The formation of the task force comes as regulators move aggressively to protect elderly investors from scam artists.
The Securities and Exchange Commission today will unveil the results of a six-state sweep of brokerage and investment advisory firms that use “free lunch” seminars to sell products to older Americans. The sweep exams were conducted in conjunction with the
Financial Industry Regulatory Authority Inc. of Washington and New York and the North American Securities Administrators Association Inc. of Washington.
The CFP Board announced the formation of the task force last week as the Senate Special Committee on Aging heard securities regulators testify about the need for better controls over the use of such designations.
The four-member Task Force on Continuing Education and Competency will release its report next July.
In assembling that report, the task force will review the approximately 100 designations listed on a website that FINRA operates.
The CFP Board, which licenses about 55,000 CFPs, has allowed organizations to use its CE credits for accreditation as long as they are consistent with the 89 topics covered by the CFP exam, Mr. Keller said.
The task force also will look at financial advisers’ use of multiple designations, he said.
“We control how people use the CFP mark,” Mr. Keller said. “We want to look at that, as well. We think this confuses people.”
NASAA plans to have its members vote on a model plan aimed at limiting advisers’ use of senior designations by the end of the year.
“It would be a violation [of securities regulations] to misuse, mischaracterize or fraudulently represent a designation that has little or no value,” said Joseph Borg, NASAA president and Alabama securities commissioner.
The SEC is “looking into whether we, our counterpart regulators in the states or state legislators and the Congress should do more” to exercise oversight of designation use, SEC Chairman Christopher Cox said last week at the Senate hearing.
Aging Committee Chairman Herb Kohl, D-Wis., plans to develop legislation that would provide a uniform standard for accreditation of senior financial advisers that state regulators would be encouraged to adopt, he said at the hearing.
So far, Massachusetts, Nebraska and Washington have taken action to regulate financial advisory designations aimed at seniors, and Mr. Borg said he is likely to recommend that Alabama follow the Massachusetts regulation, which requires that senior designations be approved by a national accrediting organization.
The Financial Planning Association of Denver wants consistency in regulations governing senior designations, said its president, Nicholas Nicolette, who also testified at the Senate hearing.
There is a “proliferation of designations,” said Mr. Nicolette, who also is a principal at Sterling Financial Group Inc. of Sparta, N.J.
The president of the group that offers a senior designation also expressed support for a national standard for designations for advisers.
“We have a disclosure statement, and we think all designations should have a disclosure statement” about what the designation represents, said Ed Pittock, president of the Society of Certified Seniors Advisors in Denver.
Aging Committee members questioned Mr. Pittock about the rigor of his organization’s standards.
Other industry officials questioned how regulators would determine what credentials are valid.
“Some things that might appear to be bogus may be legitimate trade associations that just happen to be new,” said Neal Nakagiri, president of NPB Financial Group LLC, a broker-dealer in Burbank, Calif.
Others think that regulators are overreaching.
The state of Washington may not have regulatory authority to issue a proposed regulation requiring anyone using the term “financial planner” to be with a registered investment advisory firm, said Bryan Hill, president of RIA Compliance Consultants Inc. of Omaha, Neb.
“We’ve been concerned about designations for a long time,” said Elisse Walter, senior executive vice president of FINRA’s office of regulatory policy. “We have always taken the position that firms can’t make exaggerated statements, and that extends to designations.”
However, “We don’t want to discourage people from learning more about their customers, even if it’s not financially oriented,” Ms. Walter said.
A theme FINRA will emphasize, she said, is “educating people about their behaviors” and advising people about what tactics they should use “when someone calls them with the deal of the century that they must take in the next three minutes.”
