• Beware of Misleading Financial Advisor Credentials
  • March 26, 2015 | Authors: John J. Cronan; Sigmund D. Schutz
  • Law Firm: Preti, Flaherty, Beliveau & Pachios, LLP - Portland Office
  • What is an investor to make of the alphabet soup list of privately run credentialing organizations issuing credentials to financial advisors? One of the most reputable ones, the Certified Financial Planner (CFP) Board, cautions that "accredited," "chartered," "registered" and similar designations often should be taken with a grain of salt. Investors may use a FINRA tool to look up designations to see what it actually takes to earn the designation.

    The CFP Board writes, "A financial advisor hands you his business card with all sorts of letters after his name. You ask him what they mean, and when you hear the words "Accredited" or "Chartered" or "Registered," you assume you are in the right hands. After all, don't those terms mean that the advisor is regulated, just like a doctor or attorney."

    Actually, no. Many of these designations are mere marketing tools, with little or no education needed, no disciplinary process to police membership, and no rigorous or enforceable standards of ethics or practice. The punch line, according to the CFP Board, "LOOK BEYOND THE LETTERS."

    The American Association for the Advancement of Retired Persons (AARP) has made much the same point -- drawing on a report to Congress by the Consumer Financial Protection Bureau. "[S]ome of these designations don't require ... rigorous training or expertise, or even the ethics to put investors' interests first, that they imply . . . ."

    The take away, according to the Consumer Financial Protection Bureau is that "[m]ost financial advisers are well trained, reputable professionals. But credentials alone don’t guarantee expertise or the quality of someone’s training." Even worse some credentials confuse and mislead investors, particularly vulnerable investors who may be more trusting. And vulnerable investors are "too often targeted by financial services professionals with senior designations who are selling products that may not be appropriate."

    Many states have banned the use senior designations that misleadingly imply expertise in senior investor issues, including Maine, which adopted a regulation Chapter 512 of the Rules issued by the Office of Securities prohibiting such designations.