A warning this month from Finra could reignite concerns about the use of senior designations.
The
Financial Industry Regulatory Authority Inc. issued the warning along with the results of a survey of 157 member firms asking about the approval process and oversight of senior- or retirement-related designations.
The use of such certifications is widespread within the brokerage industry. Two-thirds of the surveyed broker-dealers allow registered representatives to use one or more of 44 different designations.
But “in certain instances, senior designations approved by firms or widely used by registered persons did not require rigorous qualification standards,” Finra said in its warning, issued as Regulatory Notice 11-52.
The self-regulator also faulted firms' supervisory procedures.
Finra's notice is the latest in a long-running dispute over the use of senior designations. Three years ago, state and federal regulators became alarmed about the growing number of “free lunch” seminars given by insurance agents and others who sported impressive-sounding designations targeted at retirees.
As a result, some states adopted rules about using designations.
Since then, the free-meal seminars have abated somewhat, observers said, due to the state regulations, which also covers sales of annuities and life insurance.
Nevertheless, Finra's new warning might spark a fresh round of scrutiny.
NEBRASKA'S LIST
As a result of the notice, a compliance officer from a broker-dealer last week called Nebraska regulator Jack Herstein. Nebraska maintains a list of 35 designations that it reviews and approves for use by brokers and financial advisers.
The compliance official wanted to “see if we had more updates” to the list, said Mr. Herstein, assistant director of the state's banking department and president of the North American Securities Administrators Association Inc.
In its regulatory notice, Finra suggested that firms follow certain oversight practices used by survey respondents, such as reviewing the coursework, prerequisites and continuing-education requirements for designations, judging the quality and standards of the issuing organization, and making sure that individuals who use designations have experience and expertise in working with seniors.
Finra reminded firms that they also must have supervisory procedures in place to prevent unethical or misleading use of the designations.
The notice “will probably make [broker-dealers] take another look to see if they're following” state rules on designations, said Jim Mumford, first deputy insurance commissioner and securities administrator for Iowa.
Finra's warning also addressed supervisory issues, “which is kind of a heads-up [for broker-dealers to] make sure you follow the rules,” he said.
Brokerage firms need help in understanding the differences between designations, said Keith Hickerson, senior strategy consultant at The American College, which offers a designation evaluation tool kit.
“Some [designations] are very rigorous ... and some are what we call "weekend designations,'” obtained by attending a hotel seminar, he said.
“The challenge has been that consumers don't know the difference,” Mr. Hickerson said.
A third of the firms surveyed don't allow brokers to use any senior designations.
That tendency to play it safe and not allow specialized training “is a perverse outcome,” Mr. Hickerson said.
Finra itself offers little help in performing due diligence. The regulator lists 120 designations on its website, including senior designations and broader certifications such as certified financial planner.
It gives explanations for each but makes a point of not endorsing any.
According to Finra's survey, the chartered adviser for senior living mark from The American College was the most popular senior designation among broker-dealers, with 50% of firms using it.
Use of the certified senior advisor designation was prohibited by 52% of the firms.
“I don't know why the [brokerage firms] do what they do,” said Edwin Pittock, founder of the Society of Certified Senior Advisors, which issues the CSA.
He said that the CSA isn't a financial designation, so the majority of newer enrollees offer home care, elder law and/or tax services.
“We try to teach people how to be a resource to help the senior find the right place for whatever their needs are,” Mr. Pittock said.
The CSA coursework is taught in-person over three days or can be completed online over six months.
The American College's CASL requires about 250 hours of study, which is a turnoff for some advisers.
“Some say, "I don't want to sign up for that. It's too long,'” Mr. Hickerson said.
Email Dan Jamieson at [email protected]
