An industry debate over the value and use of professional credentials and the preparation offered prior to their use is being renewed following a July 8 article in The New York Times.
The article explored purportedly abusive sales practices in the marketing of annuities to seniors and the proliferation of less than rigorous educational programs for insurance and financial advisors.
A chief focus of the story was the Certified Senior Advisor designation, which Massachusetts prohibited most financial advisors from using this year unless they were recognized by an accreditation organization or state. However, most states continue to allow advisors to use CSA and other credentials when marketing their services. That fact, buttressed by the allegedly substandard curriculum and exams highlighted in the Times piece, point up the need for heightened oversight of professional credentials by regulators and the insurance industry, say sources interviewed by National Underwriter.
“The confusion caused in the marketplace by the myriad of designations for insurance professionals certainly is an issue that needs to be reviewed,” says Jack Dolan, a spokesman for the American Council of Life Insurers, Washington. “It is fair to say that the Times article on credentialing has been the topic of significant additional discussion at ACLI.”
Adds Tom Potts, a certified financial planner and a professor of finance at Baylor University, Waco, Texas: “I totally agree that we have too much of an alphabet soup with respect to credentials. Many of them serve no purpose beyond being marketing tools. For a fee, advisors get to put letters behind their name on a business card.”
The credentials referenced as “less rigorous” in the Times article — certified retirement financial advisor, registered financial gerontologist, certified retirement counselor and certified senior advisor –generally entail courses that can be completed at designated locations over a period of days or through online self-study. And all focus to varying degrees on the burgeoning retirement planning market.
Ensuring the validity of credentials is a matter of ongoing debate. The Financial Planning Association, Denver, supports a proposal of the Massachusetts Securities Division to limit the use of designations to those that “meet a commonly understood baseline,” such as accreditation by the National Commission for Certifying Agencies, according to a FPA letter directed to the division in October of 2006. The FPA additionally recommends that the Securities Division collaborate with the state’s Division of Insurance to “ensure that similar prohibitions on the use of misleading designations are imposed on insurance agents.”
The FPA’s call for such restrictions has not extended beyond Massachusetts. But state authorities contacted by National Underwriter say they are exploring similar limitations or ways to enhance regulatory oversight of sales practices.
Andrew Mais, a director of public affairs for the State of New York Insurance Department, New York, says the department is looking into providing additional regulatory guidance to licensees, such as prohibiting the use of unapproved designations. The department is also seeking to enhance regulatory protections through “targeted exams;” and by creating a new “seniors” unit that is now underway.
Matt Ray, deputy commissioner for agent licensing at the Texas insurance department, Austin, says the department “does not have jurisdiction over professional designations” that might be conferred on individuals. But he notes the department is developing administrative rules to help implement new statutory protections respecting two pieces of legislations (HB2761 and HB2762) involving the suitability of the sale of annuities and the replacement of existing life and annuity policies.
Observers within the insurance community also favor greater self-regulation, as well as beefed up consumer education to aid the public in making a value judgment about credentials conferred on advisors.
“There is a huge difference between an educational program that spans two or three days in a hotel and one, like CLU, that can take up to 2 1/2 years to complete,” says Larry Barton, president of The American College, Bryn Mawr, Pa. “The industry has to say, ‘education is useful and important, but we’re not going to embrace every program on the market or reimburse advisors who enroll in them.”
Pablo Bianchi, a certified financial planner and senior vice president of DFFG Advisors, Marleton, N.J., says that his broker-dealer now allows him to use only well recognized designations on business cards and marketing literature, including CFP, CLU, ChFC, MFS and MBA.
Daniel Young, president and CEO of NYLIFE Securities, New York, adds that New York Life prohibits the use of the Certified Senior Advisor credential, as well as other designations mentioned in the Times article. He notes also that use of all designations is subject to company approval, a determination the company makes based on the substance of training, a commitment to a code of ethics, the reputation of the institution and a continuing education requirement.
David Woods, CEO of The National Association of Insurance and Financial Advisors, Falls Church, Va., says that, apart from CSA, the organization has not taken “an official position,” with respect to sanctioning particular designations.
“We’ve looked at the issue,” says Woods. “The challenge is to how to establish criteria for evaluating the different credentials. Also, I’d be reluctant to say that a prospect should not do business with an advisor who does not have a CFP, CLU or ChFC. In the course of my 46-year career, I’ve seen many outstanding agents and advisors who have no designation.”