It's likely you know an elderly person who was hoodwinked by one scam or another. Whether it's in the form of an opportunistic gold-digger courting a grieving widow or phony sweepstakes offers or persistent phone calls about surefire ways to make money, the target is often the life savings of defenseless, trusting retirees. And they often succumb to these come-ons without resistance. Afterward, many are too embarrassed to report what happened to them.
These scams can have disastrous consequences on retirement planning.
On Thursday, the Consumer Financial Protection Bureau released a report revealing that deception is widespread in the financial industry, with many financial advisers affixing meaningless credentials behind their names to lure seniors into doing business with them. You've seen the alphabet soup of acronyms following the names of financial advisers. The CFPB discovered there are more than 50 such designations out there.
Though many require no training whatsoever, these acronyms suggest the financial adviser has specific expertise about retirement. As the table below shows, some credentials include the term "Accredited" in their names though in fact they're not accredited at all.
A sampling of financial adviser designations
|Senior designation||Required coursework||Accreditation|
|Accredited Retirement Adviser (ARA)||None||Not accredited|
|Accredited Retirement Plan Consultant (ARPC)||None||Not accredited|
|Certified Senior Adviser||Three-day training course||Nationally accredited (NCCA)|
|Certified Retirement Financial Advisers (CRFA)||None (optional three-day course)||Nationally accredited (NCCA)|
|Certified Specialist in Retirement Planning (CSRP)||Self-study seven courses||Not accredited|
|Chartered Adviser for Senior Living (CASL)||15 semester hours||Regionally accredited|
|Personal Retirement Planning Specialist (PRPS)||Six weeks of self-study, webcast lectures||Not accredited|
|Retired Income Specialist (RIS)||60-hour online self-study program||Not accredited|
Source: Consumer Financial Protection Bureau.
"As the past few years have revealed all too clearly, financial products have the potential to wreak havoc on every individual consumer and on the broader American economy. Older Americans are no exception, and in many cases they are the specific targets of unfair, deceptive and abusive financial practices," said CFPB Director Richard Cordray in a prepared statement released Thursday.
Older people are targets because they often have significant wealth and some may be suffering from cognitive decline, which impairs their judgment, according to the report's findings.
Legitimate advisers' reactions
Advisers who worked hard to educate themselves so they can legitimately help people with their personal finances are understandably perturbed by the deceptive practices of their competition.
"I don't like all the certifications, as it does confuse people. The biggest problem is that people are looking for someone to say the right thing that they are looking for -- such as high yield/low risk -- and they want to believe them," says Leslie Corcoran, CFP and founder of Family First Financial Planning. "Having initials behind their name allows consumers to then jump to the next conclusion -- that the person must be reputable since they earned these designations. But they don't stop and investigate and see what the certifications really are, and they don't go to BrokerCheck and Advisor Check. And they don't read the fine print..."
Certified Financial Planner Michael Kitces agrees the designations create confusion in the marketplace. "The explosion of specious designations in the past decade is clearly economically driven -- having designations connotes expertise and implies trustworthiness, even when the designation itself lacks real legitimacy," says the director of research for Pinnacle Advisory Group who himself has a slew of bona fide acronyms behind his name: MSFS, MTAX, CLU, ChFC, RHU, REBC and CASL. "It's a frustration to all advisers that have genuinely sought out credible designations and education to have to compete with those wolves in sheep's clothing who have obtained specious designations intended to demonstrate an expertise that isn't really there."
The CFPB's recommendations include that rigorous training standards be implemented by state and federal regulators, such as specific requirements for education, training and accreditation. And it would like to set a code of conduct to prevent, for example, aggressive sales of financial products at so-called educational seminars. These are just a couple of its recommendations.
Kitces says he likes the CFPB's initiative, and that for some time he's been advocating for imposing a rigorous minimum educational requirement on all financial advisers. "As long as we allow anyone to hold out as a 'financial adviser' regardless of training, education or experience, and don't require any minimum designation or certification, we continue to maintain an environment where questionable designations will flourish, which makes it remarkably difficult to stamp them out," he says.
Kitces likens these fake designations to weeds: "New ones will keep sprouting up almost as quickly as you can pluck them if you haven't fixed the underlying problem," he says.
In the meantime, keep in mind that financial elder abuse is prevalent. Until a system is put in place that better protects the elderly and the population as a whole, it behooves us all to rigorously check out the credentials of a financial adviser before placing our trust and money with one.
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Barbara Whelehan is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It is available at Amazon, Barnes & Noble, iBookstore and other e-book retailers.