Some federal government action will be needed to help protect seniors from so-called experts offering investment advice, the head of the Securities and Exchange Commission said at a Sept. 5 hearing of the Senate Committee on Aging.
Among the main problems facing seniors, SEC Chairman Christopher Cox told the Senate panel, is the “cacophony” of designations that purport to label an advisor as an expert in senior issues. “There’s a lot of alphabet soup,” he said.
Committee members were also focused on the issue of designations, and the hearing itself was called in response to media reports of seniors being convinced by advisors with such credentials to purchase annuities that were clearly unsuitable for their needs.
The committee’s ranking minority member, Sen. Gordon Smith, R-Ore., actually charged one of his staffers with trying to obtain one these designations. After an hour of preparation, he said, the staffer completed a supposedly 3-hour exam in half that time, “and she was able to obtain a passing score of 82%.” Although he noted that the staffer is intelligent, Smith added that she was by no means an expert qualified to advise seniors on investing for their retirement.
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Sen. Claire McCaskill, D-Mo., also said she examined the materials used by the Society of Certified Senior Advisors to solicit advisors to seek the designation. “They talk about marketing and marketing, and marketing and marketing,” she said, adding that there was little discussion, if any, of the actual information involved. Later in the hearing, McCaskill opined that perhaps the government should offer a “simple warning” and tell seniors “beware of designations.”
In terms of specific actions the government might take, Sen. David Vitter, R-La., asked Cox if the government should effectively codify a set of designations and criteria for obtaining them. In response, Cox said that while he remains “absolutely certain that there is a role for federal government” in helping to resolve the issue; the SEC has not determined what that role might involve. However, he added, the issue will be among the main topics at a “seniors summit” the SEC is hosting along with several other groups in the near future.
Another possibility raised by state regulators testifying before the panel would be to combat unscrupulous advisors by increasing the responsibility of the insurance companies whose products they sell.
“I think it’s important that they be held accountable,” said Lori Swanson, Minnesota Attorney General.
William Galvin, Secretary of the Commonwealth of Massachusetts, echoed Swanson’s sentiments, saying that if lawmakers “do not go up the food chain, then you aren’t solving the problem.” State regulators, he added, have been “putting out forest fires” throughout the nation. “We’ve got to figure out who’s holding the match.”
However, Sandy Praeger, Kansas insurance commissioner and incoming president of the National Association of Insurance Commissioners, disputed that idea and argued it is the agents, rather than the products, that are taking advantage of seniors.