The alphabet soup that follows the names of financial planners and investment advisers can be confusing for investors of all ages. For seniors, the designations can be especially tricky. There are more than 50 senior-specific designations available for all kinds of financial service providers, according to the Consumer Financial Protection Bureau, or CFPB. Attorneys, insurance sales people, financial planners and stock brokers -- nearly any financial professional -- can pursue a certification ostensibly denoting expertise and specialization in senior issues. The problem is that only some of the designations actually represent any specialized education or ethical standards. Investors are on their own to figure out which are worthwhile and which are window dressing.
"Some represent significant educational accomplishment and can take years to earn, while others represent little more than participation in a weekend seminar. The strongest credentials represent at least 150 hours in study time with a minimum of three college-level courses plus ethics, experience and continuing education requirements," says Keith Hickerson, senior strategy consultant with the American College of Financial Services. "All designations are not equal, and consumers should be comfortable asking questions about any credentials an adviser uses to promote his or her practice."
American College does offer a senior designation: the Chartered Advisor for Senior Living. That's not to be confused with designations offered by other organizations -- for instance, the Chartered Senior Financial Planner or the Chartered Retirement Planning Counselor.
At first glance, they all seem the same, and that can cause confusion among older investors, according to a new report from the CFPB.
Separating the wheat from the chaff
Both the North American Securities Administrators Association and the National Association of Insurance Commissioners came up with standards for professional designations, but that led to a perverse result.
"Some companies, early on in the debate, after the introduction of the model rules, felt they'd have less compliance risk if they just prohibited advisers from pursuing some types of professional education," says Hickerson.
That clearly makes no sense. What investors need, particularly seniors who may be interested in complex guaranteed income products, are experienced, educated and ethical advisers, planners or money managers.
Until regulators figure out some solution, investors are on their own to navigate the ABCs of advisers' credentials and ask questions.
"The initial issue comes down to 'What service does the investor need?' Once they figure that out, it's easier to find the right person who can fulfill those services, whether it's brokerage, financial planning or managing their money," says Robert Stammers, director of investor education at the CFA Institute, which offers its own credential with rigorous standards.
Once investors get an idea of what kind of service they need, they can do due diligence on individual service providers. Both the Securities and Exchange Commission and the Financial Industry Regulatory Authority keep databases on their websites of licensed professionals and disciplinary actions against them.
Step two is making sense of the extra designations. The only way to do that is by asking questions. Ask what the designation means, and go home and look it up. Make sure that designation matches the services you need. The Internet makes it so easy, there is no reason not to independently verify that a potential adviser has the level of education necessary for your situation.
A weekend certification may not necessarily be a red flag, but, again, it depends on the needs of the client.
"If you need someone to manage your entire portfolio of wealth, then rigor would be more important on whether to hire someone or not," says Stammers.
Similarly, for seniors considering a guaranteed income product, or annuity, which can be very expensive and potentially inescapable, high levels of education and ethics are a necessity. Does your adviser have your best interests in mind, and do they understand complex products and investments?
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Senior investing reporter Sheyna Steiner is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It's available at all the major e-book retailers.