It started with a state compliance review of a single business card that referred to an LPL Financial planner as a "Retirement Income Planning Specialist" -- and lead to a $250,000 fine.
LPL agreed to pay the penalty after informing state regulators in Massachusetts that at least ten more of its advisors were breaking the state's rules against use of "senior designations," which regulators there consider "bogus."
"It is vital that the financial services industry not employ titles that suggest an expertise in advising senior citizens when none exists, William Francis Galvin, secretary of the Commonwealth of Massachusetts, says in a release regarding the fine.
However, the practice continues elsewhere in the country among LPL advisors who market themselves as "Retirement Specialists" and by similar descriptors. Critics say average investors confuse the terms with official certifications. Many advisors use the terms without holding any corresponding designations, or by holding those that require a de minimus amount of study.
FIRST STATE BAN
Massachusetts implemented its ban, the first in the nation, on the use of misleading "senior designations" in 2007. It allows only those designations it has approved. No similar ban exists at the national level, say experts, who could not name other states that have followed suit.
"It's not as if the people of Massachusetts are uniquely financially unsophisticated about these designations. It's just that they had a state regulator who went and did something about it," says Joe Peiffer, president of the Public Investors Arbitration Bar Association or PIABA.
Peiffer called for the adoption of a similar national prohibition, while adding that passage of a uniform fiduciary rule, like the one currently proposed by the Department of Labor, would have an even greater impact on staunching abuse of senior investors.
For years, dozens of organizations like PIABA and the AARP have urged regulators to rein in advisors who use marketing terms that mislead clients into thinking they possess special abilities to serve the needs of seniors.
"Misleading use of designations has been associated with so-called 'free-lunch seminars' and other questionable tactics to market unsuitable financial products to older investors and retirees," the 38 million-member strong AARP wrote in an advisory.
Sometimes these advisors lure lifelong middle-class savers into rolling their pensions into variable annuities that generate $75,000 or more in commissions, Peiffer says.
The order in the Massachusetts case against LPL cites an alert that the B-D itself sent out in 2007 to its advisors in that state -- following regulators' guidelines -- prohibiting them from using the terms "senior," "retirement" and "elder" combined with words like "certified," "chartered," "advisor" and "specialist."
"Clearly," the order says, many years later, "LPL did not have procedures in place to monitor the use of titles."
In consenting to the fine, LPL admitted no guilt and said the Massachusetts problem resulted from a "gap" in its oversight of planners there.
"We have taken steps to address the titles we determined were inconsistent with the Massachusetts senior designation regulations," LPL spokesman Brett Weinberg said. He added, "LPL is currently reviewing our procedures in regards to this issue to ensure we are in compliance with regulations in all states."
LAKE OSWEGO'S 'RETIREMENT SPECIALIST'
Two LPL-affiliated planners who market themselves as retirement specialists elsewhere in the country illustrate some of the challenges in instituting such a ban nationwide.
Craig Childress, a CFP in Oregon, calls his practice, "The Retirement Specialist in Lake Oswego."
"I don't have any of those fancy designations that say I'm schooled in retirement," he says. "My practice and all my marketing has been on retirement for people from 55 to 65. I'm very experienced in that area."
As a CFP, he says, he adheres to the voluntary ethical requirements of that designation. While he thinks the Massachusetts regulation is well-intended, he fears it could harm advisors who need to market their practices around legitimate areas of specialization.
B-Ds could do more to stop bad actors, he thinks, than regulations like the Massachusetts one.
"If someone is selling only annuities to somebody, where is the regulator, where is the B-D reining in that behavior?" Childress asks. "The B-D knows [when that is happening]. They are required by regulation to keep track of all the investments we have. Why aren't they going to individuals and saying, 'This is inappropriate'?"
A national ban on senior designations would "penalize the majority of us who are doing a good job and not stop the people who aren't."
"I appreciate," he adds, "that it's a very difficult situation and that the regulators are doing the very best they can."
Katie Gilbert, a planner with Cornerstone Financial Partners in Charlotte, N.C., calls herself a "Retirement Plan Specialist."
"I work with all the plan sponsors on plan design, investment management for their investment options and fiduciary responsibilities, making sure the plan sponsor knows what kind of role they play," she says.
CORRECTING OTHERS' ERRORS
Since her focus is retirement plans, mixed in with some team planning with retirees, Gilbert feels her marketing language is accurate. Moreover, she says she often finds herself correcting errors made by her clients' previous advisors who claimed they were experienced in serving the retirement market when, clearly, they were not.
In order to "prove my specialization," she says, she is sorting through long list of potential retirement designations she may work to obtain.
"I'm trying to dig through and determine which ones are solely trying to capture your money and which ones are worth having," she says.
Like Childress, she also thinks B-Ds should police their advisors to make sure that those claiming retirement specializations, or any others, actually have them.
As capable and well-intentioned as some of these advisors may be, Peiffer still thinks they should not be allowed to use terms that sound like actual designations.
"I think that CFP is a real designation that requires real training. The same is not true for 'Retirement Specialist,'" he says. "I get that they may focus on retirement funds, but I still don't think they should be using this term because it's essentially meaningless at best and [could be] misleading at worst."
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