This fall has been something of a nightmare for many in the industry. A single New York Times article painting the senior advisor market in a dubious light helped prompt a hearing before the Senate's Special Committee on Aging. Many top producers have found themselves, their practices, credentials and ethics in the spotlight.
Senior Market Advisor begins a series on suitability and credentials which will appear in various 2008 issues of the magazine. The series will look at this recent round of self-examination in the senior market and offer some positives on what you can do to avoid the pitfalls, strengthen your own practice and prepare for the future – and provide insight on what carriers and regulators are up to.
Negotiating the jungle of credentials: CSA's route
Despite what the mainstream media might have you believe, most professional credentials are not found at the bottom of a Cracker Jack box – nor can they be downloaded off a Web site, or ordered from the back of a magazine. The veracity and intensity of time required to obtain a credential may vary, but the cloud of controversy that has come over those organizations which administrate a variety of professional credentials is, itself, cause for concern.
"There's an element of presupposition that we need to change something because there's something wrong. And I don't believe there is," says Dan Danbom, director of communications for the Society of Certified Senior Advisors, which oversees the CSA designation. "All we can do to have a good product is to follow all the laws and regulations. And that's what we said when we testified before congress: There should be a national standard for designations that's consistent across all states. That said, the burden of proof is for regulators to show that such a standard will reduce fraud against seniors. I don't think there's any evidence of that."
Among the many acronyms filling advisors' business cards, the CSA designation has received extra scrutiny due to its emphasis on marketing and senior psychology, but Danbom says he feels all the uproar is something of a ruse.
"Talk about credentials is a red herring. I think this entire crisis is really about equity indexed annuities and, maybe, an underlying belief that it's unfair to market anything to seniors in any way – like they should be set aside in a bubble and not approached at all. And maybe it's all a blessing in disguise. If a regulator can say to us, ?this is the standard by which credentials will be set,' that's all we want … the clear rules of the road. But being vague and subjective about it is just not fair and makes no sense."
Furthermore, Danbom, who was quoted in the New York Times article which precipitated recent senate hearings, notes that neither FINRA, the SEC nor state regulators have made public the credentials held by those they have charged with infractions.
Carriers getting proactive
Industry giant Allianz has learned from experience that making a concerted effort to carefully and appropriately sell its products and make sure its representatives always do the right thing … well, that's just good business.
The company recently took the unusual effort of appointing a Chief Suitability Officer to help oversee the appropriateness of sales of its products, part of a group of actions Allianz has spearheaded to enhance consumer confidence in its offerings and its reps.
"We've been ahead of the curve in implementing changes, even if you look back six years," says Allianz spokes-person Hubertus Kuelps. "We made mandatory that the customer sign our ?Statement of Understanding,' a point-of-sale disclosure document which clarifies the product that's being sold in easy-to-understand language."
The suitability officer will be calling every client over the age of 75 to make sure that they got what they wanted.
Allianz's other measures include a rigorous suitability process which sees the financial information of every customer on every application run through a computerized "rules engine," which determines the product's financial suitability for the consumer.
"Our complaint rate is very low, but if even one customer complains, that's not satisfactory," says Gary Bhojwani, Allianz CEO and president.
Bhojwani was the only industry head to speak at the Senate's Sept. 5 Special Committee on Aging hearing, explaining Allianz's efforts and putting them in perspective for Senator Herb Kohl (D-WI), the committee chairman. U.S. Securities and Exchange Chairman Christopher Cox also testified.
A week after the hearing, Old Mutual Financial Network announced its own policy changes. The company will now only permit its independent producers to use a specific list of designations, saying that it "opposed the use of designations obtained from credentials programs with only limited coursework or abbreviated instruction." Allianz, ING and Aviva have followed suit with their own lists of recommended credentials.
To RIA or not to RIA
There comes a time in many advisors' practices when clients' needs beg an extremely dangerous question: How do I sell annuities if I'm not licensed to do so, or can I use money from a 401(k) or a money market to do so?
