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Retirement advisers by the book

By Dr. Don Taylor · Bankrate.com
Monday, July 14, 2014
Posted: 7 am ET

The FPA SmartBrief, a newsletter frequently sent via email by the Financial Planning Association, provides an overview of current issues in the industry. The top story in its July 8th issue, "Regulators heighten focus on retirement-advice industry," provides an abstract of a July Financial Planning magazine article, saying: "The Securities and Exchange Commission, the Department of Labor and the Financial Industry Regulatory Authority have all recently issued warnings about the ethical standards that financial professionals must follow if they provide retirement advice."

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An excerpt from the Financial Planning article illustrates this focus:

In December, FINRA offered its own reminder to firms marketing IRAs or handling rollovers, with an emphasis on the suitability requirements for brokers working in that sector. FINRA cautioned both brokers and advisors that they must help clients weigh the full menu of options available to them as they change jobs or retire, including leaving their funds with their current 401(k), if allowed. FINRA expects those conversations with clients to touch on considerations such as fees and expenses and required minimum distributions when contemplating a rollover. Those responsibilities extend to the marketing materials that brokers present to clients, the industry regulator cautions.

"Whether in written sales material or an oral marketing campaign, it would be false and misleading to imply that a retiree's only choice, or only sound choice, is to roll over her plan assets to an IRA sponsored by the broker-dealer," FINRA warned.

The SEC signaled its concerns about the retirement space in its 2014 examination guidance identifying advisor misrepresentation, conflicts of interest and misleading marketing and advertising, among other issues, as particular areas of alarm for investors rolling over plans into an IRA.

Needs of seniors are different

The Financial Planning article got me thinking about retirement planning advice. Seniors have different financial planning needs than individuals still in the workplace. One big difference is that retirees have transitioned from building wealth in their retirement portfolios to drawing down these portfolios to meet their retirement income needs.

Financial advisers need to work with their senior clients to meet these income needs while managing their retired clients' longevity risk -- the risk of outliving their income sources.

I have a vested interest in this discussion. I've earned the Chartered Adviser in Senior Living, or CASL, designation offered by The American College of Financial Services, and while I don't have its new designation -- the Retirement Income Certified Professional -- it has become a popular designation for financial professionals advising seniors. Full disclosure: I've also been a faculty member at the college.

The alphabet soup of professional credentials and designations in this area is daunting. When seniors talk to finance professionals that have one of these designations, it is a great idea for them to ask what type of education and experience went into the process of getting that designation. Look for a designation with a multi-course curriculum that has a code of ethics and a continuing education requirement. That trumps a designation earned over a weekend.

If you have a financial adviser, did you consider his or her experience with seniors in the hiring decision? What influenced your decision to work with that adviser?

Follow me on Twitter: @drdonsays.

Learn more by reading Financial wolves exposed by CFPB.

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