MONEY MATTERS: FINRA has new concerns about misleading credentials

Before we discuss credentials, what is FINRA and is this important? FINRA is the new abbreviation for two agencies that have combined to become the largest non-governmental watch guard over the securities industry. What used to be the National Association of Securities Dealers (NASD) and the enforcement arm of the New York Stock Exchange, NYSE Regulation, Inc., were combined to create the Financial Industry Regulatory Authority (FINRA). It is now this agency’s responsibility to safeguard the trading public, provide professional training, arbitration and mediation, licensing, as well as market regulations.

In a Sept. 10 news release, FINRA announced “The first new sweep announced today is examining whether brokers are using so-called “professional” designations to mislead and defraud investors. FINRA is concerned about the proliferation of professional designations, particularly those that require no meaningful training or specialized knowledge but suggest an expertise in retirement planning or financial services for seniors. The sweep also will help inform possible rulemaking on the use of designations. A recent survey conducted for the FINRA Investor Education Foundation found that a quarter of senior investors surveyed were told that their investment professional was specially accredited to advise them on senior financial issues. Of those investors, half said they were more likely to listen to the professional’s advice because they held a special designation.”

The purpose of credentials is to demonstrate that the holder has achieved a certain level of proficiency and expertise in an area of service. Hence, the justification by FINRA of many credentials that does little in training the holder but is more for purchase and marketing than for training. The agency listed several titles they have particular concerns, “certified senior advisor,” “senior specialist,” “retirement specialist” or “certified financial gerontologist.” The issue at hand is fair representation. Some of the organizations granting the use of their credentials do so to active members that continue to pay annual dues, and substantial training or the passage of rigorous exams are not required. Thus, a prospective senior may elect to conduct business with a financial professional based upon the credentials they hold with the expectation they are working with a highly trained individual. Unfortunately, many seniors end up buying a pig-in-a-poke. What they thought they gained in expert advice ended up being an advisor better equipped at dressing themselves up to look like something they are not than a true professional.

There are many designations that can be trusted and require substantial time and commitment on behalf of the holder to obtain and retain. One credential is the CFP, Certified Financial Planner. The CFP board requires substantial education and the passage of exams in each of five areas, plus a comprehensive multi-day exam. Another is the ChFC, Chartered Financial Consultant. This credential is offered by the American College and currently requires the passage of exams in eight different areas. Both of these credentials confirm the holder has a broad understanding of the individual’s financial needs, insurance, retirement, investment management and taxation, just to name a few.

There are other credentials that indicate the holder has achieved specific expertise, such as the area of life insurance or long term care. There are too many to discuss in this column, but with a few simple questions it may keep you from buying a pig-in-a-poke. If you are meeting with an advisor who lists a particular credential, before going too far in the meeting, you should inquire what was required to obtain the credential. You should also ask if there are annual requirements for them to continue to hold the title. You should make a note of their answers, and then, with the assistance of the Internet, search for the credential. You should be able to find every one that any professional may be claiming and see for yourself what is required to obtain and hold the credential.

Additional information may be obtained on FINRA’s website, which is For many, financial advice from a professional will be the support they need to reach their financial goals. Just make sure the professional you are speaking with truly has the training you need.

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