Can You Trust a Financial Adviser's Title?

A financial professional may use various titles, whether or not he or she is registered or licensed with a regulatory authority.

The problem is that there are at least 150 designations in use. As a 2013 Investor Bulletin from the SEC and the North American Securities Administrators Association pointed out: “The requirements for obtaining and using” [professional designations] vary widely, from rigorous to nothing at all.”

Misleading designations are a particular problem for older investors trying to determine the qualifications and expertise of the certifications financial professionals claim to possess. The use of “senior adviser” types of certifications have increased significantly in recent years.

There were more than 50 such designations in use in 2013, according to the U.S. Consumer Financial Protection Bureau (CFPB), with many of the titles practically identical.

Some designations fit no one’s idea of rigorous. Individuals who claim to be a Certified Senior Adviser or a Chartered Retirement Planning Counselor do not have to go through any specialized training and they do not have to meet any regulatory qualification.

The Accredited Retirement Adviser designation requires no coursework, no accreditation, and there is no website to check on disciplinary actions.

Among the findings in the CFPB report:

  • Titles and acronyms for the numerous designations can appear quite similar, and consumers have no simple, clear means to distinguish among these designations. Similar sounding designations can have very different requirements for earning the designation.
  • Some senior designations may require rigorous college-level coursework while others may be acquired by attending a weekend seminar.
  • No single authority is responsible for ensuring that those who use senior designations do not mislead or harm consumers.

The CFPB also reported that a study conducted by the Financial Industry Regulatory Authority (FINRA) showed that older consumers are more likely to rely on the advice of a professional who uses a senior designation. With more than 50 designations, consumers risk paying for an adviser they believe has a breadth of experience, but who, in reality, simply paid a website for multiple designations.

Investors need to look beyond the acronym or designation to determine what’s behind it: the exams, ethical standards, and oversight body, as well as the continuing education required to maintain the designation.

One resource is FINRA’s Understanding Professional Designations site, which provides a snapshot description of what steps, if any, are required to earn a designation. The site is not comprehensive, and does not allow a comparison of the designations. But it’s a good place to start.

If a financial professional tells you that he or she has a certain credential, ask some direct questions:

  • Who awarded you the credential?
  • What are the training, ethical, and other requirements to qualify for this credential?
  • Do you have to take a course and pass a test?
  • Does the designation require a certain level of work experience or education?
  • To maintain the designation, are you required to take refresher courses?
  • How can I verify your standing with this organization?

A certification may look good on paper, but before hiring any financial professional investors should thoroughly investigate the study and training needed to earn a certification. Next, contact the State Securities Board to ask for a free regulatory background check on a broker or investment adviser.