The Consumer Financial Protection Bureau on Thursday told Congress, the Securities and Exchange Commission and state regulators that the alphabet soup of “senior designations”—more than 50 of them—confuse older Americans and that a three-pronged approach is needed to protect the elderly from fraud.
The CFPB in its report, “Senior Designations for Financial Advisers: Reducing Consumer Confusion and Risks,” recommended lawmakers and regulators take the following three steps to protect older Americans:
- Implement rigorous training standards to obtain senior designations: The bureau recommends that state and federal regulators implement rigorous criteria for acquiring senior designations, including specific standards for education, training and accreditation.
- Set strict standards of conduct for those using senior designations: The bureau recommends that state and federal regulators set consistent and strict standards of conduct for those using senior designations. Such standards could include 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.
- Increase supervision and enforcement: The bureau recommends that federal and state regulators consider increasing existing supervision of and enforcement authority against misleading conduct by a holder of a senior designation.
“With such a bewildering array of titles and acronyms, it is no wonder that older Americans are confused and misled by these titles,” said CFPB Director Richard Cordray, in a statement. “Today’s report underscores the need for consistent high-level standards of training and conduct for those advisors who want to acquire a bona fide senior designation.”
SEC spokesman John Nester said that the SEC “appreciates the Dodd-Frank-required report and [we] look forward to reviewing the recommendations as we continue our collective efforts with Congress, fellow regulators and the states to protect our nation’s senior investors.” He added that the SEC has long had a focus on "protecting seniors from financial scams and pursuing those who prey on the elderly," noting the examination sweeps the agency has conducted in such areas as free lunch sales seminars.
The SEC, Nester said, "regularly reaches out to older Americans through seminars and investor alerts, and maintains an investor hotline for those with questions or complaints."
The more than 50 different senior designations currently used by advisors are recommending or selling a variety of products, the report said, such as securities, investment opportunities, financial products, and insurance products like annuities and long-term care insurance.
Kevin Keller, CEO of the Certified Financial Planner Board of Standards, said in a statement that the CFPB's recommendations were "an important step toward addressing the proliferation of designations, certifications and titles used to mislead, confuse and deceive America’s seniors." CFP Board "fully supports the Bureau in its efforts to shine a light on this significant problem and hope policymakers and regulators will quickly implement these common sense recommendations to better protect older Americans.”
CFPB requested information on senior financial exploitation in June 2012. The CFPB says that it conducted “extensive outreach to outside stakeholders, and, in addition, held roundtable listening sessions on the topic of senior designations in late 2012.” The report was informed by financial planners, insurance and securities professionals, consumer advocates, social workers and other industry stakeholders.
Dodd-Frank directed the CFPB’s Office of Financial Protection for Older Americans to make recommendations to help older consumers identify the most appropriate financial advisor and verify a financial advisor’s credentials.
CFPB noted that some troubling findings from the report include:
- The names and acronyms of senior designations confuse consumers. Titles and acronyms for the numerous designations can appear quite similar, and consumers have no simple, clear means to distinguish among these designations. Similar sounding designations can have very different requirements for earning the designation.
- There is a wide variety of required training, qualifying exams and oversight associated with different designations. Some senior designations may require rigorous college-level coursework while others may be acquired by attending a weekend seminar.
- There is a lack of comprehensive supervision and enforcement. No single authority is responsible for ensuring that those who use senior designations do not mislead or harm consumers.
Read Top 10 Ways to Stop Elder Financial Scams on AdvisorOne.