When it comes to seniors, two recent guidance notes call on financial advisors and their firms to take a close look at the credentials they use to promote their services to elderly clients.
Provoked in part by the spike in complaints to regulators about advice given to seniors, the Investment Industry Regulatory Organization of Canada (IIROC) and the Investment Industry Association of Canada (IIAC) both released reports in March that outline the risks and issues for advisors in dealing with seniors. The reports highlight the use of titles and designations for financial services offered to seniors, including the caution that credentials indicating special expertise in this category must be used with great care, given the potential vulnerability of this age group.
IIROC’s guidance report covers all business titles and designations used by advisors. The report notes that no one that IIROC regulates should use such credentials to hold themselves out in any way that “deceives or misleads, or could reasonably be expected to deceive or mislead a client or any other person as to the IIROC approval they hold, their proficiency or qualifications.”
Seniors issues, in particular, are flagged in the IIROC report. Notes Paul Riccardi, senior vice president, member policy and regulation, with IIROC: “While we expect firms to monitor and be mindful of their titling practices generally, it is particularly important that they pay attention to the issue of senior titles or titles that would imply a particular expertise relating to dealing with senior investors.”
Roles and functions
According to the IIROC report, firms should consider four criteria when deciding which titles and designations to approve for their advisors: the role and function the advisor is approved by IIROC to undertake; the services and/or products that individual is approved by IIROC to sell and/or advise on; the qualifications of the individual, including their education and experience; and the actual role, function and office held by the individual within the firm, irrespective of whether that role or office requires individual IIROC approval.
Similarly, in terms of the designations that advisors can use, the IIROC report suggests that firms consider the following six criteria regarding whether the designation has: a rigorous curriculum and examination process; experience requirements; an emphasis on ethics; a continuing education requirement; a method for determining an individual’s current status regarding the designation; a public complaint and disciplinary process; and is issued by a reputable or accredited organization.
These criteria are not enough, however, to ensure that there is a proper fit between an advisor and senior client. The IIROC report says firms and advisors should use plain language to explain to clients exactly what a title or designation means. Precisely how firms decide to provide this disclosure will depend on the firm’s clientele and business model, says Riccardi. For example, disclosure could be made in person at an initial meeting or via a website.
IIAC’s guidance on the same issue is derived, the IIAC report says, from material published by securities regulators in the U.S., where complaints on the use of seniors-related designations have soared. IIAC also canvassed its members regarding their practices.
The resulting report, which addresses a wide range of situations and issues involving seniors, is designed to summarize “key considerations and best practices for dealing with a client base that is increasingly aging, with a focus on protecting senior investors and related supervisory, compliance and other practices when serving senior investors.”
The IIAC report is meant to be a centralized resource for member firms that work with the elderly. “This report was based on a compilation of the best practices that firms are using today,” says Michelle Alexander, vice president and corporate secretary with the IIAC. “Firms can share [these best practices] with other firms and articulate these in a way so that firms are aware of how they can address our senior investors.”
Firms should define which titles and designations may be used by its advisors and have mechanisms in place to properly review and monitor the use of such titles, the IIAC report says.
This issue also raises the question whether such designations should be used at all, says Alexander: “We don’t really support the use generally of ‘senior’ designations. Often, those titles don’t necessarily reflect the right approach to dealing with seniors.”
Whether titles are used or not, she adds, firms should adhere to the guidance of regulators like IIROC.
Firms can also refer clients to IIROC’s Glossary of Financial Certifications, launched last year, says Riccardi: “[The glossary] contains what we consider to be the most important and the most commonly used designations, so that somebody can look that up and understand exactly what that means.”
Seniors-related designations listed on the IIROC list are: the certified professional consultant on aging (a.k.a. the CPCA); the elder planning counsellor (EPC); and the certified senior advisor (CSA).
Given that there are so many designations and titles, IIROC’s guidance report suggests having a centralized review process, including random tests, to make sure approved terms are used consistently. IIROC’s report also suggests that location supervisors and compliance departments both be involved in this review process, although a more streamlined approach may be necessary for smaller shops.
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