What is the difference between a Financial Analyst, a Financial Adviser, a Financial Consultant, an Investment Consultant and a Wealth Manager? The answer to this trick question is “None.” These are all approved designations that can be used by anyone who has earned a Series 7 securities license.
However, the federal Consumer Financial Protection Bureau (“CFPB”) has identified more than fifty different "senior designations" that some financial advisors are using to fool current retirees and baby boomers saving for retirement. Many of these titles confuse consumers by falsely implying that the financial advisors have some special expertise, when it may be that they just sat through a three-hour online course or – in some cases – just paid for the title.
As CFPB Director Richard Cordray explained, "A senior choosing between an Accredited Retirement Advisor and an Accredited Estate Planner will likely do so without knowing which one is required to have five years of experience and some graduate level education and which is not – and hence to know who is better equipped to advise them on financial matters." See if you can guess whether the “Accredited Retirement Advisor” or the “Accredited Estate Planner” is the legitimate accreditation. The answer is at the end of the article.
The CFPB warns that impressive sounding, meaningless titles are often used by the same financial advisors who invite consumers to “free” dinners to target them for “inappropriate and sometimes fraudulent financial products and services.”
Director Cordray’s report might be making news now, but the Vernon Litigation Group law firm has been warning consumers, attorneys and CPAs about this problem for years. In 2008, we warned about a phony “certification” program that promised on its website to ”dramatically increase your income potential and enhance your credibility in the marketplace… [without] requir[ing] an extensive time or financial commitment…” Although that website was taken down, others popped up to take its place.
A year later, in 2009, the Florida Office of Financial Regulation prohibited the misleading use of a senior-specific designation as “a dishonest and unethical business practice in the securities industry.” Unfortunately, as the CFPB report shows, that did not put an end to the practice.
To be perfectly clear, we are not talking about Chartered Financial Analysts (CFAs), Certified Financial Planners (CFPs) or Registered Investment Advisers (RIAs). CFA and CFP designations are conferred by accredited agencies that have their own requirements for training and examination. Under federal law, RIAs assume strict fiduciary obligations toward their clients, which may require them to exceed the level of care required of other financial professionals. CFAs, CFPs and RIAs earned their designations and their right to use them.
But if you guessed at the beginning of this article that your money would be safe with an “Accredited Retirement Advisor,” you may end up with heartburn from that free dinner. According to the CFPB, the Accredited Retirement Advisor title requires no coursework and is not accredited by any agency.
You worked hard for your money and you deserve a financial professional with the training and experience to advise you about investing for retirement. Don’t be fooled by someone whose impressive-sounding title was sold online. For a list of all fifty designations identified by the CFPB and their requirements, go to the Government’s Consumer Finance website. To check your broker’s background or to investigate a broker before you invest, use Vernon Litigation Group’s Investigate Your Broker form.