New Survey of CFP® Professionals Shows Senior Americans Are Especially Vulnerable to Financial Abuse, Few Report It
To help prevent the use of misleading, fraudulent and deceptive designations and certifications to promote financial services to older Americans, Certified Financial Planner Board of Standards, Inc. (CFP Board) recommended in a comment letter delivered yesterday to the Consumer Financial Protection Bureau (CFPB) that the agency create a ratings system for financial certifications and designations.
In support of this and other recommendations to address senior financial exploitations outlined in its comment letter, CFP Board included its Senior Americans Financial Exploitation Survey. The survey found that more than half of the CERTIFIED FINANCIAL PLANNER™ professionals who participated have worked with an older client who has been subject to unfair, deceptive or abusive practices in the delivery of financial advice or the sale of financial products.
“Older Americans have already given many years of hard work and dedication – raising families, serving in the military, building businesses – all to become one of our most financially secure generations,” said CFP Board CEO Kevin Keller. “This survey reveals the pervasive financial abuse victimizing America’s seniors. CFP Board applauds the Consumer Financial Protection Bureau for its focus on this problem and urges the Bureau to take prompt action to reduce the use of misleading certifications and designations and to work with other federal and state regulators on legislative and regulatory policies to protect older Americans.”
In its letter, CFP Board noted that with more than 140 designations currently in use in the delivery of financial services, “senior investors are particularly vulnerable to confusion about professional designations and certifications.” As CFP Board highlighted, financial designations vary significantly and investors have no meaningful way of comparing their legitimacy, value or authenticity. With no federal or consistent state regulation or oversight of certifications and designations, Americans – especially seniors – are left on their own to sort through the alphabet soup of letters at the end of a financial professional’s name.
CFP Board urged the CFPB to take practical steps to reduce the misleading use of certifications and designations. Specifically, CFP Board recommended that the CFPB:
- Establish a rating system for professional certifications and designations by identifying qualitative and quantitative standards (based on best practices for certifications) against which certifications and designations can be evaluated. The rating system would rank designations from the highest tier to those that are so deficient that their use in marketing is presumptively misleading or deceptive.
- Communicate the rating system through an educational campaign to educate older Americans on how to use the system to evaluate the financial designations.
CFP Board suggested that CFPB could use the standards upon which the CFP® certification is based – an accredited certification program that requires substantial education and experience, a fair, valid and reliable exam that measures competencies for the standard of practice, continuing education required to maintain competencies, high professional and ethical standards, and a rigorous enforcement process that includes revocation of the certification, evidence that revocation is implemented, and public notice of disciplinary actions – as the model for the types of criteria that should be used to evaluate financial service designations.
CFP Board also urged the CFPB to support legislative and regulatory reforms to protect older Americans, including to:
- Encourage policies that support the delivery of financial advice to older Americans under a fiduciary standard of care;
- Encourage reforms – on a state or federal level – that would require those who work with seniors to meet baseline competency and ethical standards; and
- Address the use of misleading titles, e.g., financial professionals who hold themselves out as financial planners without meeting competency or ethical requirements, by encouraging the implementation of the Government Accountability Office recommendations to gather additional data on this consumer protection issue that affects older Americans.
“As the Bureau takes much-needed steps toward addressing deceptive and fraudulent financial practices targeting American seniors, CFP Board and its nearly 67,000 CERTIFIED FINANCIAL PLANNER™ professionals hope to serve as valuable partners in the identification and prevention of such abuse,” said Keller. “We look forward to working with the CFPB and like-minded organizations to raise awareness of these risks and ensure Americans of all ages receive financial advice from an advisor they can trust.”
The statistically significant survey was conducted by APCO Insight and includes responses from more than 2,600 CERTIFIED FINANCIAL PLANNER™ professionals regarding their work with older clients who have been targeted for financial fraud and abuse at the hands of a financial advisor. In addition, in-depth interviews were conducted with select CFP® professionals to further explore older clients’ experiences with questionable financial practices.
- More than half of CFP® professionals (56%) personally have worked with an older client who has been subject to unfair, deceptive or abusive practices in the delivery of financial advice or the sale of financial products. Another 32% personally knows of an older non-client who has been subject to such practices.
- Although the vast majority of CFP® professionals always or often encouraged older victims of financial abuse to report abuse to the authorities, the median estimate of the CFP® professionals was that only 5% of those victims actually did report abuse.
- CFP® professionals were aware of a variety of abusive practices in the delivery of financial advice or the sale of financial products:
- Nearly three-quarters (73%) were aware of older investors who have been invited to “free meal” seminars that are actually sales pitches;
- 58% were aware of older investors who have received unsolicited pitches for financial products or services;
- Half (50%) were aware of older investors who have been offered high-yielding investments described as no-risk or low-risk;
- More than a third (34%) were aware of older investors who have been pitched for prize-winning scams; and
- 20% were aware of older investors who have been subject to power of attorney or guardian abuse, among many other types of misleading or fraudulent practices.
- The majority of those surveyed found older Americans are subject to a variety of practices that could violate federal and state laws and regulations:
- Nearly three-quarters (74%) of CFP® professionals were aware of older investors who have been offered unsuitable financial products;
- 58% were aware of older investors who have been subject to omission of material facts about financial products;
- Nearly half (48%) were aware of older investors who have been subject to misrepresentations about financial products; and
- 46% were aware of older investors who have been subject to negligence or lack of follow-up in connection with financial products.
- The financial products involved in unfair, deceptive or abusive practice witnessed by CFP® professionals most often involved equity indexed or variable annuities (76%), variable life insurance (32%), mutual funds (29%), and universal or whole life insurance (28%).
About the Survey Methodology
CFP Board developed the survey of U.S.-based CERTIFIED FINANCIAL PLANNER™ professionals with APCO Insight, which administered the online survey from July 24 through August 7, 2012 and 2,649 CFP® professionals participated. The statistically significant survey has a margin of error of 1.9% with a confidence level of 95%. In addition to the quantitative portion of the study, APCO Insight conducted in-depth interviews with CFP® professionals about their experiences with older Americans who have been subject to deceptive, fraudulent or misleading financial practices. A synopsis of these interviews is included in the report.
About CFP Board: The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board's mission, acts on behalf of the public, CFP® certificants and other stakeholders. CFP Board owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. CFP Board currently authorizes more than 66,000 individuals to use these marks in the United States.