The Consumer Finance Protection Agency (CFPB) has released a report highlighting problems with what it called "senior designation" credentials.  These are titles and designations conferred by private entities that many financial advisors voluntarily acquire and use to indicate they have received special training or have proven expertise in meeting the financial needs of older consumers. 

The entities providing these designations can range from higher education institutions to trade or professional organizations to for-profit companies.  Some require prior licensing, specialized training through a course of study while others can be obtained through a single exam or a week-end seminar.

In a press conference announcing the report CFPB Director Richard Cordray said "Many seniors have routines, and their predictable patterns can make them easier targets for predators.  They can be lonely or overly trusting, and we now have many ways for perfect strangers to communicate with them, often taking advantage of their trust.  We have seen this quite plainly with so-called "senior financial advisers." 

"We found that these so-called advisers may use any of more than fifty different senior designations to promote their services to older Americans.  With such a bewildering array of titles and acronyms, it is no wonder that older Americans are often confused and misled by these titles.  The designations can be earned from places as varied as a three-hour online course offered by a for-profit company to a two-year graduate degree from an esteemed university.  Our research found that the training and standards required to attain these credentials varies enormously."

Cordray said Congress has directed CFPB to make recommendations that will help older consumers identify and verify a financial adviser's credentials or "senior designations," which can include any degree, title, certificate, or accreditation that implies a financial adviser has some kind of senior-specific expertise or training.

The report, entitled "Senior Designations for Financial Advisers: Reducing Consumer Confusion and Risks," includes recommendations to Congress and the U.S. Securities and Exchange Commission. Because many financial advisers holding senior designations are regulated by state securities and insurance regulators, the Bureau offers recommendations for their consideration as well.

The professionals who typically acquire these designations include investment advisers, broker-dealers, accountants, insurance agents, financial planners, and other general financial professionals.  Some recommend or sell a variety of products such as securities or investment opportunities and not all are subject to the same regulatory oversight.

As Cordray said, the report found that titles and acronyms of the designation can be similar and there is no clear means for seniors to distinguish among them.  For example, Certified Estate Planners (CEP), Chartered Estate Planning Practitioners (CEPP), and Certified Estate and Trust Specialists (CES) are different designations conferred by different organizations.  In addition to widely varying requirements for study and training, comprehensive supervision and enforcement is lacking with no single authority charged with insuring those with senior designations do not harm or mislead consumers.  The report says a particular problem is the sponsorship of "free lunch seminars."  Often marketed as educational seminars, they are actually staged sales events to sell investment and other financial products.

Seniors are increasingly vulnerable to exploitation in the financial services area because fewer and fewer are covered by defined benefit retirement plans and must plan their own retirement investments, often with little existing knowledge of the area.  Seniors are also entering retirement with lower levels of savings and investments to rely on during the following years. They have higher household wealth and are more likely than younger consumers to be experiencing cognitive decline which has a particular tendency to affect the ability to manage finances.   

Cordray said that in the seminars the Bureau conducted for seniors in developing their recommendations one striking takeaway was the vulnerability of many seniors.  They may assume that a financial advisor has their best interests at heart and if they fall victim to a scam they may be too embarrassed or too frail to pursue legal action.

Cordray said there was a need to not only education and inform seniors about the subject but also the caretaker generation.  Citing his own 93 year-old father he said, "Those in our generation need to take time to learn about these financial products and services so we can help ensure that our parents and other older Americans are able to make the best financial decisions for themselves."

The Bureau's recommendations include:

• State and federal regulators should implement rigorous criteria for acquiring senior designations, including specific standards for education, training, and accreditation.
• Those regulators should also set consistent and strict standards of conduct for those using senior designations such as prohibiting senior designees from characterizing sales events as educational seminars, and selling financial products and services at events that are advertised or described as educational or informational events.
• Federal and state regulators should consider increasing existing supervision of and enforcement authority against misleading conduct by a holder of a senior designation.

Hubert (Skip) Humphrey, III, Assistant Director for the Office of Older Americans said that additional recommendations include that the Securities and Exchange Commission consider establishing a centralized tool that makes it easy for seniors to verify their financial adviser's designation.  Congress and SEC should also consider requiring financial advisers using senior designations to provide their clients with information that will enable the clients to verify those credentials.