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Financial Planning > Behavioral Finance

Professional Designations: The Ethical Issues

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The various actions being taken to address advisor use of financial designations with seniors are bringing the issues of aging and ethics to the forefront. This is especially so since, now more than ever, financial professionals are trying to reach the same older clients who are at the center of the concern.

In the 20-plus years the two of us have been working with insurance companies and agents, designations have always been an issue. One concern has been whether any designation actually adds to the salesperson’s professionalism. More importantly, what are the ethics surrounding why specific designations are obtained, and how many are actually needed? Do salespeople hide behind their designations?

Crossing the ethics line with a senior can be risky, because this cohort does not ask as many questions nor are they as verbally aggressive as many baby boomers are. Their reticence to speak up does not necessarily mean that they are not aware.

In evaluating designations, advisors need to ask a number of questions, such as:

o How many years have I been in this business?

o Am I confident about what I know?

o When considering a new designation, is the ease of obtaining it what attracts me?

o Is it the affordability vs. time devoted to learning that attracts me?

o Is it the reputation of the entity behind the designation that attracts me?

o Is it the learning I will get from obtaining it that attracts me?

o Is the impression the designation will make on potential clients important to me?

Weigh all of these points before choosing a designation program. They will help in selecting the right one.

Look for rigor, too. By way of example, one of us–Ellen–had to go through an exhaustive approval process in order to be able to write a course to be used for a Bachelor’s degree program in financial gerontology. Approvals were required from school officials, the Board of Education and the State of New York, and the inquiry included every article she wrote, articles written about her, speeches she gave, her training, coaching, publishing, etc. Scrutiny should be expected by candidates for highly regarded financial designations, too. If there is no scrutiny, this is a red flag.

Once a designation is earned, going over the ethics line is not always a conscious decision on the part of the holder. But when it occurs, this should be recognized and rectified. See the chart for some questions that are typically raised in such cases.

The evaluation, from the perspective of the senior, looks a little different. Here are some of the things seniors tell us about their financial advisors:

–Seniors are more interested in whether their friends were happy with the advisor than all the designations in the world.

–Only a small percentage of seniors say they understand certain designations. Even when this is so, seniors would like the advisor to explain why the designation is meaningful in their particular case.

–’Pushing’ a designation, rather than presenting the advisor’s experience and education, can alienate a senior client.

–Seniors also don’t like it when an advisor uses a designation to ‘push’ a certain product–such as long term care insurance–only if every other product offered is not purchased.

–When offered an annuity, a senior may wonder whether that is truly the best choice or if the offer is made because the advisor will get a large commission.

Regulators have perceived sales abuses in the senior market. As a result, they are moving to establish requirements, such as suitability rules for annuity sales in some states.

This heightened scrutiny makes ethics, which are always important anyway, even more of an issue. Accordingly, we suggest that advisors do more than is required by regulators, who may have set only minimal standards as a matter of necessity.

Try to apply a common sense standard, such as how would you want to be treated yourself in such a situation (the golden rule standard). Even better, determine how would you want a salesperson to treat your mother or father (the parental golden rule standard), and do that.

As for designations, in general, an agent is held to the standards that exist in the marketplace where the agent is selling. So, if agents in Marketplace A are more competent than agents in Marketplace B, the agents operating in A are held to a higher standard than those operating in B.

In general, if an agent holds himself or herself out as having more expertise than an average agent, the agent will be held to the standard of an expert. Therefore, be careful about what goes on business cards, letterhead, websites, e-mails, etc. What appears on these can and will be held as the level of expertise that they purport to have, and the standard to which they will be held.

Ellen Eichelbaum is president of The SpeakEasy Group, Northport, N.Y., and her e-mail address is [email protected]. Douglas I. Friedman, a partner in the Friedman & Downey, P.C. law firm of Birmingham, Ala., is national counsel on estate and business planning for insurers. His e-mail is [email protected].


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