The invitation comes by mail or phone, or maybe via a poster in the community center. You're invited to a free "financial survival" seminar, run by someone who claims to specialize in retirement issues. Scrumptious lunch will be served. But what kind of expertise do these advisers actually have?
Most likely, they boast an alphabet soup of credentials — something like CEPC (for certified elder planning consultant) or perhaps CSP or ASP (chartered or accredited senior planner). Unfortunately, the vast majority of these designations are primarily marketing tools with little or no training behind them. The adviser might have purchased the title at the price of a weekend workshop. The designation might even be self-awarded. A study last year by the Consumer Financial Protection Bureau found more than 50 senior specialist titles on the market — a few requiring a year or two of hard work, the rest not much more than pieces of paper. "Alphabet soup does not necessarily make a good senior planner," says Deena Katz, cofounder of the Florida-based wealth management firm Evensky & Katz and associate professor of financial planning at Texas Tech University.
Advisers go for these titles because they project an image of knowledge and impartiality. Often, however, they mark someone peddling a high-commission product who may be misleading you about the costs and risks. Variable and fixed-indexed annuities are the "senior" investments most likely to be mis-sold, according to a 2012 survey of financial planners.
When looking for retirement advice, you don't need a "senior specialist" at all. You can get the answers you need from a certified financial planner (CFP) who trains in all aspects of financial counsel. Ideally, you want a fee-only CFP, who sells no products and charges only for advice. Another good set of initials is RIA — registered investment adviser.
A few of the senior designations do have rigorous academic work behind them, says Wade Pfau, a professor of retirement income at the American College in Bryn Mawr, Pa., which trains financial professionals. He thinks you can feel comfortable if your adviser's business card says that he or she is a certified retirement counselor (CRC), retirement income certified professional (RICP) or retirement management analyst (RMA). You're also good with a chartered advisor for senior living (CASL), whose focus includes broader issues such as health care and estate planning. The College for Financial Planning, which originated the CFP, offers the mark chartered retirement planning counselor (CRPC).
Even these titles, however, are frosting on the cake. You should be fine with a fee-only CFP. Any additional designations just deepen the knowledge that he or she has already acquired.
More than half the states have a law on the books restricting the use of self-serving or misleading senior designations. But the CFPB study found them largely ineffective. Consumers don't understand the various designations, many of which sound alike. There's no central information spot, no rating system for designations and little attention paid to the investment claims dished out with lunch.
You can find bare-bones information on many of these credentials, including the mere "paper" ones, on the website of the Financial Industry Regulatory Authority; type "professional designations" into the search box. FINRA doesn't evaluate their quality but gives you some minimal information.
Here are three things to check:
- Is the program accredited by a national or regional nonprofit agency? This isn't a guarantee of expertise but helps you make the first cut. Many "accredited" designations get their rating only from the organization that promotes them.
- Is genuine academic work required, with many hours of classwork? A designation that you can "earn" in a weekend implies a level of knowledge that the adviser simply doesn't have.
- Do the advisers have to pass a real test to get the title? That means an in-person, proctored, closed-book exam of considerable length. It doesn't count if the adviser takes the test online with reference materials at hand. Many designations require no testing at all.
You probably don't know it, but salespeople have a contemptuous name for people who attend their free lunches and fail to buy their products. They call you a "plate licker." I say, lick the plate and run. On the way out, you can award the "adviser" a designation of your own: BS.
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