Massachusetts’ Securities Division has adopted new rules restricting financial advisors from citing credentials suggesting they have special expertise in the financial needs of seniors.
The rules, which went into effect June 1, prohibit advisors from using a credential or professional designation that implies they have been trained in providing advice or service to investors aged 65 or older, unless the designation is approved by the division.
To date, the agency has not approved any designations, although a spokesman notes the division aims to issue a list of approved designations.
The new regulations warn that a broker-dealer who uses a professional designation in combination with words such as “certified,” “chartered,” “adviser” or “specialist” could illegally suggest that the individual has expertise or qualifications that he or she doesn’t have.
The state is concerned that senior citizens are particularly vulnerable to dishonest financial advice, said William Galvin, Secretary of the Commonwealth. Their vulnerability is at least partly due to the wide number of credentials financial advisors use, he adds.
Beginning June 1, financial advisors can use only senior designations that have been accredited by 1 of 2 national certifying organizations recognized by Massachusetts, Galvin announced.
Brian McNiff, a spokesman for Galvin’s office, says his agency has not yet accepted any senior designations. It will, however, soon begin to accept designations approved by the National Commission for Certifying Agencies, which is part of the National Organization of Competency Assurance, and the American National Standards Institute, both in Washington.
Anna Bookwalter, a spokeswoman for NOCA, says advisor associations can submit their accreditation programs to NOCA for review.
“We have not yet accredited any senior advisor organizations,” Bookwalter says.
The Society of Certified Senior Advisors, which offers the “certified senior advisor” designation, expects to meet Massachusetts’ accreditation requirements, even though it disagrees they are needed, spokesman Dan Banbom says.
“We are for anything that benefits seniors but are not sure being accredited is being of benefit to seniors,” he says. “If you are going to set out to cheat, I don’t think you are inhibited by rules.”
The state has cited only a few recent cases of senior fraud, and none involved the use of fake professional designations, he says.
In a statement, SCSA President Ed Pittock said that “because there are hundreds of professional designations, the initials behind someone’s name sometimes aren’t clear to consumers. The ethical thing to do is to be very clear on what a designation means and what it doesn’t mean.”
The society recently began requiring individuals who hold its CSA designation to make the following disclosure in their marketing materials:
“Certified Senior Advisors have supplemented their individual professional licenses, credentials and education with knowledge about aging and working with seniors….The CSA designation alone does not imply expertise in financial, health or social matters.”
Nebraska has also been cracking down on the number of professional designations financial advisors can use.
“Anyone who wants to can have some kind of designation,” observes Jack Herstein, assistant director of the Securities Bureau of Nebraska’s Department of Banking and Finance.
This year, the department notified broker-dealers and registered investment advisors that they can no longer use any professional designations that imply special knowledge of the needs of seniors–or, in fact, anyone else–unless the designation is specifically approved by the state.
“They were getting out of hand,” Herstein says. “There are so many out there, and new ones spring up seemingly every week.”
Herstein is in the midst of deciding which designations will be approved for use in the state. So far, his agency has named 8:
o Certified financial planner (CFP)
o Chartered financial consultant (ChFC)
o Personal financial specialist (PFS)
o Chartered financial analyst (CFA)
o Chartered investment counselor (CIC)
o Chartered life underwriter (CLU)
o Life Underwriter Training Council fellow (LUTCF)
o Financial service specialist (FSS)
Herstein says is considering applications for 16 additional designations, but declined to say when decisions on those designations will be completed.