NEW RULES PROPOSED
FOR REPS CLAIMING SENIOR-CITIZEN EXPERTISE
From The States
David Giusti

David Giusti is a Director for State Net's Financial Services Division (www.statenet.com), an online federal and state legislative research company located in Washington, DC.

IN RECENT YEARS, there has been a proliferation of professional certifications used by sales representatives who sell insurance and investment products to senior citizens.

Titles such as "Senior Specialist" and "Retirement Advisor" have been used in the marketplace to indicate expertise in retirement planning for seniors. According to the New York Times, at least two dozen senior certification programs exist throughout the country, and the number of certified senior advisors has increased by 78 percent during the past five years.

Presently, many states and insurance companies offer flexibility by letting insurance and investment representatives use various designations. Legitimate accreditation programs offer extensive training, impose rigorous exams, and specify continuing education requirements.

In contrast, there are a number of certifications geared toward marketing and selling practices that offer no financial training. Many of these courses tend to last only a few days, and some of the designations can be earned simply by paying membership dues.

The use of "senior" or "retirement" credentials by sales professionals to convey expertise in financial or estate planning has become misleading and inappropriate in many instances. A recent survey conducted by the Financial Industry Regulatory Authority (FINRA) determined that 25 percent of senior investors were told by an investment professional that the professional was specially accredited to advise them on senior financial issues, and, as a result, half of those investors were more likely to listen to his or her advice.

More complaints and investigations

This has led to a dramatic increase in complaints and investigations related to senior sales practices during the past couple of years. Lawmakers have begun to take notice of insurance and investment sales representatives with inadequate training.

This past year, legislation concerning insurance and securities sales designations was introduced in California, NEw Hampshire, and New Jersey.

In 2007, Massachusetts started the ball rolling by issuing regulations that limit the use of purported credentials that imply agents have special expertise in servicing senior citizens, unless the credentials are genuinely accredited. Later in the year, the Nebraska Department of Banking and Finance, Bureau of Securities issued an Interpretive Opinion that was even more specific. The notice listed acceptable designations that could be used by broker-dealers and investment advisers on business cards, stationery, and advertising materials.

Although industry representatives supported the intent of both state regulatory actions, many expressed concerns about a state-by-state regulatory approach and encouraged the North American Securities Administrators Association (NASAA) to standardize guidelines governing the use of senior-specific certifications.

The Task Force on Senior Designations was thereby created to formulate uniform accreditation standards that could be adopted by every state. The Model Rule on the Use of Senior-Specific Certifications and Professional Designations was released in April 2008. The model, which incorporates provisions from the Massachusetts and Nebraska rules, prohibits the use of senior specific designations that are misleading. The rule also establishes how a non-accredited entity can attain certification through the American National Standards Institute (ANSI), National Commission for Certifying Agencies (NCCA), and regulator approved educational institutions.

Furthermore, the National Association of Insurance Commissioners (NAIC) issued a bulletin to remind insurers that they will be held accountable if producers who sell their products use misleading designations. The NAIC has also released a consumer alert warning seniors to question the credentials of individuals who present themselves as senior or retirement specialists.

With these established guidelines, a number of states have already taken action. This past year, legislation concerning insurance and securities sales designations was introduced in California, New Hampshire, and New Jersey. Regulations were also proposed in Florida, Missouri, and Washington. Depending on the state, violations could result in penalties up to $10,000 or suspension of the offending party’s license.

Congress has been supportive of the states’ pursuit of illegitimate financial advisors who are targeting senior citizens. Senator Herb Kohl (D-WI) introduced the Senior Protection Act of 2008 to provide state grants that would enhance senior investment protection efforts. It would allocate resources for staff, training, and technology to identify, investigate and prosecute fraudulent behavior. The bill also encourages states to distribute educational materials to increase awareness. This legislation is unlikely to generate serious momentum before the end of this year, but prospects for passage look favorable in 2009.

Seeking a single standard

Although these efforts are encouraging, the financial services industry is committed to the development of a single, uniform standard for accrediting a senior financial advisor. Considering the overlapping oversight of insurance and securities products, many firms are hoping that the NASAA and NAIC will engage in a more collaborative effort.

Moreover, since many products are sold by independent agents who are not affiliated with one specific company, many organizations are assuming greater responsibility to safeguard their own reputation. Some firms maintain a more restrictive list of approved certifications that can be used by their sales representatives. Others prohibit the use of senior-specific designations altogether. Other companies have set additional certification and training standards to assure competency.

The Model Rule on the Use of Senior-Specific Certifications and Professional Designations was released in April 2008.

Since misbehavior hinders public trust and undermines the reputation of producers who have earned legitimate certifications, the industry will continue to embrace the efforts of federal and state lawmakers to weed out bad actors from those who have legitimate expertise in selling financial products to seniors.