KOHL INTRODUCES BILL TO SAFEGUARD SENIOR INVESTORS FROM UNQUALIFIED ADVISORS
WASHINGTON - Last night Senator Herb Kohl (D-WI), Chairman of the U.S. Senate Special Committee on Aging, introduced a bill to offer states the resources necessary to protect seniors from unscrupulous financial advisors who prey on the retirement savings of the elderly by touting misleading or fraudulent "senior designations." The Senior Investor Protection Act of 2008 (S.2794) would create a new grant program to encourage state regulators to adopt a uniform standard for the accreditation of senior financial advisors and to assist states in their efforts to protect seniors from being duped by these misleading designations. Many seniors targeted by salesmen using these designations have lost their life savings because they were steered toward investment instruments that were unsuitable for them, given their retirement needs and life expectancy.
Last September, Chairman Kohl held a hearing to examine some of the questionable practices used by so-called senior financial investment specialists in order to gain access to the retirement savings of older Americans. An investigation conducted by the Aging Committee revealed that many of the designations that have been cropping up represent limited or no value with respect to advising seniors on financial matters, and that often these designations are obtained simply by attending a weekend seminar and passing an open-book, multiple-choice test.
"We know that an attorney must go to school for three years and pass a state bar exam. A CPA must have a college degree, an additional year of study and must pass a national exam. Neither can offer their professional services without those credentials," said Chairman Kohl. "Seniors should be able to trust the people who invest their money. They should not be worried that the title after their advisor's name is scarcely more than a marketing ploy, and that it was not earned through sufficiently rigorous financial education or training."
The bill provides states with incentives to improve their own rules regulating the use of designations by encouraging them to adopt provisions outlined in the North American Securities Administrators Association's (NASAA) new model rule on the use of senior designations, announced yesterday during the organization's national public policy conference. The Senior Investor Protection Act also calls on the National Association of Insurance Commissioners to work with NASAA to develop improved senior designation rules and suitability standards for insurance products, such as deferred variable annuities, which may be inappropriately sold to seniors.
The grants provided by the legislation are designed to give states the flexibility to use funds for a wide variety of senior investor protection efforts, including: hiring additional staff to investigate and prosecute cases; funding new technology, equipment and training for regulators, prosecutors, and law enforcement; and providing educational materials to increase awareness and understanding of designations.
The legislation has been endorsed by NASAA, The American College, and the Financial Planning Association.
"The use of senior designations that misleadingly imply expertise in the financial needs of seniors often results in unsuitable investments being sold to unsuspecting seniors by apparent 'experts' who are little more than salespersons with little or no expertise in the individual, specific needs of the senior client or understanding of the product being sold. This significant legislation would provide states with additional resources to protect seniors from being harmed by financial salespeople who place their interest in generating sales commissions ahead of the best interests of the senior investor," said Karen Tyler, North Dakota Securities Commissioner and President of NASAA.
"In an era when the public is concerned from Main Street to Wall Street, we need legislation that will help consumers understand that some 'credentials' in insurance and financial services are not worth the paper they are printed on, while other professional designations represent years of rigorous study. Those who mislead senior citizens with rogue designations do a disservice to the many hard working agents and planners who are diligently assisting seniors achieve financial security," said Larry Barton, Ph.D., President and CEO of The American College.
"It's a shame that our financial system hasn't evolved to the point where all financial services professionals must put the client's interest first," said FPA President Mark Johannessen, CFP®. "Taking advantage of seniors by misrepresenting the advisor's qualifications in particular is just wrong, if not criminal. We believe this legislation will go a long way in helping the elderly avoid a potential loss when dealing with an unethical or fraudulent advisor."
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