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Serving seniors

Making core changes to your practice; working with elderly clients' families; dealing with mental capacity; seniors and technology; and more from the Mid-February 2015 issue of Investment Executive newspaper.

Clients focus on designations and certifications

By Fiona Collie | Mid-February 2015

Both regulators and financial services sector groups are keeping a close eye on the issue of so-called "senior designations" and have singled them out for special consideration when reviewing the expertise of financial advisors who advertise skills tailored for older clients.

The 2014-15 Annual Consolidated Compliance Report released in January by the Toronto-based Investment Industry Regulatory Organization of Canada (IIROC) says that the self-regulatory organization's (SRO) examiners will be reviewing IIROC's policies and procedures regarding the use of business titles and designations.

Seniors-related designations, in particular, were highlighted in the report, which notes that IIROC intends to focus on titles and designations that "convey an expertise in seniors-related issues or retirement planning." (This statement follows a March 2014 guidance note from IIROC stating that approved persons cannot hold themselves out to the public through a business title or designation that deceives or misleads a client regarding the titled person's approval with IIROC, their proficiency or qualifications.)

And in a statement emailed to Investment Executive, the Toronto-based Mutual Fund Dealers Association of Canada (MFDA) says it will "advise members to pay particular attention to senior designations/titles and advertising and marketing directed towards seniors to ensure they are not misleading" in that SRO's soon to be released 2015 statement of priorities.

The MFDA email also notes that although complaints from all sources have been trending downward, "as a matter of screening, the MFDA has revised its screening guidelines to open more cases involving seniors from events that [its members report.] As a result, the percentage of MFDA cases involving seniors has increased."

Positive initiative

Greg Pollock, president and CEO of the Financial Advisors Association of Canada (a.k.a. Advocis), says the increasing regulatory focus on titles and designations in general is a positive initiative for the sector. "It's important that regulators, the public and advisors themselves have a common understanding of what these designations mean, what these titles mean," he says.

Regulators have focused on seniors-related issues in recent years, in part because of the growing number of seniors. According to Statistics Canada, 15.7% of Canada's population is aged 65 and older as of July 1, 2014. Thirty years ago, that percentage was 10%. The trend will continue, even when the baby-boomer bulge ceases to be a factor; by 2063, StatsCan estimates, 24%-28% of the population will be 65 or older.

And complaints by and on behalf of seniors are soaking up large chunks of regulators' resources. About 30% of formal disciplinary hearings commenced by the MFDA between July 2013 and June 2014 involved seniors and other vulnerable groups, according to the MFDA 2014 Annual Report.

Things are no better for IIROC-regulated firms. According to IIROC's 2013 Annual Enforcement Report, that SRO's most recent, 37% of complaints reviewed by the regulator involved seniors. And 40% of IIROC's prosecutions dealt with misconduct involving seniors. (Both SROs define a "senior" as someone who is 60 years of age or older.)

Paul Riccardi, IIROC's senior vice president, member regulation, says that issues with titles and designations are not specifically driving seniors-related complaints: "It's certainly not the case that we have significant numbers of client complaints relating to the use of titles [and designations]."

Also in an email, the MFDA noted it "has not received a material number of client complaints regarding business titles from either seniors or clients in general." Like IIROC, MFDA staff investigate complaints relating to titles and designations as they arise.

Clients influenced

It appears that clients definitely are influenced by designations. That point came through clearly when IIROC ran focus groups involving investors of all ages. "[Focus group subjects] tended not to focus on the title of the individual they were dealing with," says Riccardi. "What they did tend to focus on was designations and certifications - and that really was an important piece of learning for us."

In general, firms are responsible for ensuring that designations are up to standard and appropriate for the services being offered by their advisors. IIROC's guidance note on titles and designations specifically outlines four criteria for deciding the use of titles and designations. These include: considering the role and function the advisor is approved to undertake; the services and products that the advisor is approved to sell or advise on; the qualifications of the advisor, including his or her education and experience; and the actual role, function and office held by the advisor within the firm, whether or not that requires IIROC approval.

Riccardi notes that the question of appropriate titles and designations is only one part of IIROC's standard audit process. In cases in which an auditor is familiar with a specific designation - such as the elder planning counsellor or the certified professional consultant on aging - it's simply a matter of ensuring that an advisor has fulfilled all course requirements. Should IIROC auditors find an unknown group of letters after an advisor's name, the auditors are likely to conduct some research into the requirements of the underlying designation.

Riccardi anticipates that IIROC auditors mostly will be offering dealers and their advisors suggestions to bolster their current policies and procedures rather than frequently finding titles or designations that truly are misleading or inappropriate. Should auditors make such a discovery, however, that could lead to enforcement action, including sanctions and fines.

Kathleen Black, executive director of the Association of Canadian Compliance Professionals, says that avoiding such an outcome requires that firms have the right policies and procedures in place. For example, dealers could have a list of titles to choose from or a list of criteria regarding specialties - such as working with seniors - for advisors to consult when selecting a title or designation

Also, Black says, dealers will want to ensure they have a robust approval and monitoring system: "Monitor [the titles and designations] for everything that they're advertising, their correspondence - everything -because [advisors] tend to forget about their titles after a while."

For more on advising seniors, see the Building Your Business pullout.

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