sievers column sig

Local Business

Check credentials of financial advisers

By From page B8 | May 11, 2014

Credentials are an indication of professional training and accomplishment. They imply competence and skill. Those who hold legitimate designations must spend years of study with difficult testing to qualify as a certified designee.

But the credential system can be abused if the granting organization has no meaningful requirements and essentially is selling the designation so the designee can fool the public in order to sell another creative “investment” product.

Unfortunately, legitimate and well-established credentials are put at risk and possibly damaged by association because the less-legitimate designations are copying their appearance. In effect, the weak designations piggyback on the good work of the substantive credentials and try to use the free ride to make some money.

Consumer groups and regulators have criticized severely the continuing emergence of many new credentials as really just another ploy to market a product, especially targeting older citizens with the training entity supported by insurance companies selling annuities. More than one-third of all cases of financial exploitation of the elderly involve annuities, according to the North American Securities Administrators Association, a group of state regulators. Hundreds of lawsuits have been filed against insurers over annuity sales to the elderly. Several years ago, just one class-action suit in Minnesota encompassed about 400,000 plaintiffs.

The magnitude and absurdity of the abuse appears clearly with more than 700 “designations” now available in the financial field. Many such designations are targeted at the senior community.

Fortunately, state regulators nationally have recognized the problem and acted to ban misleading senior designations. The North American Securities Administrators Association approved a model rule in 2008 prohibiting the misleading use of senior and retiree designations after widespread sales of unsuitable annuity products to the elderly in recent years.

North American Securities Administrators Association’s explanation was, “The use of senior designations that misleadingly imply expertise in the financial needs of seniors often results in unsuitable investments being sold to unsuspecting seniors by apparent ‘experts’ who are little more than salespersons with little or no expertise in the individual, specific needs of the senior client or understanding of the product being sold.”

The model rule has sought to prevent unscrupulous behavior targeting senior investors and would prohibit the misleading use of senior and retiree designations, provide state securities regulators with an effective weapon in the fight against senior investment fraud, and enable the state securities administrator to recognize meaningful designations conferred by an accredited organization.

Now each state must decide how to use the model rule.

The Financial Planning Association has supported this rule. Both the North American Securities Administrators Association and Financial Planning Association want to protect the legitimate designations, such as CFP, CFA and AIF, and not restrict legitimate and responsible national accrediting organizations such as these.

The Securities and Exchange Commission has also lent its support, stating, “The SEC worked closely with state securities regulators in developing this model rule to protect seniors. Fraud against seniors robs dreams, destroys lives, and erodes the very trust on which our markets depend. This national approach to senior designations at the state level will make it easier for honest firms to help their aging customers, while making it harder for fraudsters to rob our parents and grandparents of their financial security.”

The California Legislature in 2008 adopted the Model Rule on the Use of Senior Certifications and Professional Designations to protect all citizens, especially seniors. Unfortunately, I have recently noticed another spate of designations with minimal requirements appearing in the media.

For you, remember the basic rule. Investigate before you act. If in doubt, seek professional advice. Then be certain about the credentials of the professional. The Romans had it right: caveat emptor, buyer beware.

Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from the University of California, Berkeley. Contact him at [email protected]

Mark Sievers


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