In the years that I have defended broker-dealers and registered representatives, many of those cases have dealt with investment planning for seniors. With the aging baby-boomers, cases involving the elderly will only increase. These cases demonstrate that financial advisors must be particularly wary when working for seniors because the risk of loss for a senior may be more meaningful than for that of a younger generation. FINRA has frequently offered cautionary guidance when it comes to dealing with seniors. Notice to Members 11-52 is the latest such guidance, this time addressing senior designations that advisors carry next to their names.
Although FINRA does not bar such designations, it has reminded firms that they must have supervisory procedures in place reasonably designed to prevent the use of such designations in an unethical or misleading manner. If a firm allows a representative to use a designation where such an expertise does not exist (i.e., non-existent or self-conferred degrees or designations), that firm may have violated the anti-fraud provisions of the securities laws and FINRA rules.
FINRA suggested that firms should prohibit the use of senior designations unless those designations can only be earned through: a rigorous curriculum; an emphasis on ethics; continuing education requirements; a method for determining the representatives’ status regarding the designations; and a public disciplinary process. Another worthy consideration for a firm is whether the designation is actually recognized by a reputable or accredited organization and whether the issuing organization had a code of ethics that must be followed. FINRA also suggested that business cards and letterhead be centrally created to avoid “self-conferred” or misleading designations
Another tool that FINRA suggested when servicing seniors is to ensure that your registered representatives had adequate training on how to work with seniors. Finally, firms should consider periodic attestations of designations in use, making sure that none are self-conferred.
In the end, the best way to avoid issues with senior designations is to prohibit the use of them altogether. If a firm is going to allow such designations, the firm should require pre-approval. As important, the firm much be certain that the designation is legitimate and not self-conferred. Moreover, the firm needs to assure itself that such a designation must be earned through some educational and exam protocol, including continuing education and ethics training. By taking this rigorous approach toward senior designations, firms and representative can better defend themselves when faced with claims by an ever growing segment of our society.