In FINRA’s Regulatory Notice 11-52, firms are called upon to update (and in some cases create) their supervisory procedures regarding the use of senior specific certifications and designations. The notice also includes survey results taken from various broker-dealer firms about how they use and supervise senior designations.
The survey findings indicate that there is widespread use of senior designations among registered representatives. It’s also clear that there is not much consistency in existing supervisory standards to determine the approval of a designation. It is up to firms to put into place their own measures to comply with supervisory obligations. FINRA’s survey shows that of the 68% of firms that allow senior designations, 66% require approval and verification of credentials. However, 11% do not require any approval and do not verify credentials. FINRA itself has a list of designations available on their website, none of which they endorse. They also state: “Nor does a designation’s inclusion in this database imply that FINRA considers the designation to be acceptable for use by a registered representative.” As Mad-Eye Moody (any Harry Potter fans out there?) says, “Constant vigilance.”
While some may feel that too much regulations may lead to firms playing it safe by banning designations altogether, I come back to this question: How would I feel if one of my relatives ended up talking to someone in the 11%? There is a chance that that individual is being honest and truly has the knowledge and expertise to work with senior needs, but there is also a chance that they’re not.
The same goes for insurance producers. While many states have regulations set up stating that senior-specific certifications or designations are not allowed if they’re self-conferred, not actually earned or if they’re issued from an organization who is primarily engaged in the business of sales or marketing etc., our Advertising and Producer Compliance Department sees a lot of advertising that uses titles as general as “retirement specialist.” Again, constant vigilance.
Advertising compliance is always walking that fine line between being full disclosure and effective marketing. With baby boomers heading into retirement age, combined with many who fear investing their money in the stock market or mutual funds, a powerful demographic and target market has been created for annuities and insurance. Everyone, it seems, is suddenly a “retirement specialist.”
FINRA’s Regulatory Notice does offer some examples of sound practices that some firms use and others may want to adopt. Many state insurance departments have spoken to this as well. For example, in determining if a designation could be used, some firms review course work, other prerequisites and continuing education requirements prior to approval. Some firms rely on state requirements and others simply allow only a few select designations.
The notice goes on to suggest that firms may “reduce the risk of confusion or over-reliance by their customers by implementing procedures aimed at only permitting their registered persons to use senior designations that instill substantive knowledge to better serve and protect senior investors.” That sounds simple enough to me.
With Regulatory Notice 11-52, FINRA is ultimately creating awareness of an area that is of growing concern and needs consistent attention. On the insurance side, many states have bulletins or regulations that outline what is and what is not acceptable in this area. For both registered representatives and insurance producers, the standards are now essentially the same. This is an issue that will most likely continue to remain in the regulatory consciousness and both broker-dealer firms and insurance companies can’t ignore. While many are moving toward more consistent supervisory procedures, there is still more work to be done. This notice provides us with a helpful reminder to take a look at our practices and strengthen and improve them. Constant vigilance.