You're looking for someone to help manage your life savings in retirement. Surely an adviser with a "senior" designation, like a registered super-duper senior consultant, must be up to the job, right?
Not really. There are all sorts of designations cropping up. Many of them have the word "senior" in them, implying that the person has expertise in the needs of older investors.
But too often these designations are meaningless marketing tools used to earn the trust of older investors who are then pitched high-cost, unsuitable investments.
Regulators may have a solution. The North American Securities Administrators Association, which represents state securities commissioners, recently developed a model rule that states can adopt to rein in the use of pumped-up designations.
The rule would prohibit the use of a "senior" or "retiree" designation by those selling securities or offering investment advice unless it is a bona fide credential.
One way to qualify as bona fide is if the organization dispensing the credential is accredited, says Melanie Senter Lubin, Maryland securities commissioner and head of the task force that created the rule.
"If you are using a designation to convey that you have an expertise to advise seniors or retirees ... you have to earn that expertise," Lubin says. "You either have it, or don't say you do. That's really what this is."
States don't have to adopt the proposed rule. But they may get an incentive to do so.
Legislation recently introduced in the U.S. Senate would provide grants to states adopting the rule or something similar. The money could be used, say, to educate older investors, hire staff members to prosecute cases of fraudulent marketing to seniors and train prosecutors to identify advisers using misleading credentials.
Each state could receive up to $500,000 a year. To get the maximum, a state would have to adopt rules on designations for investment advice and the sale of securities and insurance. That means securities and insurance regulators in the state must be on board.
The National Association of Insurance Commissioners says that it is not working on a model rule on designations, but it is aware of the problems. It plans to shortly release alerts to consumers and state insurance regulators about senior designations.
At least one group offering a senior designation, the Society of Certified Senior Advisors, says it favors the new rule.
"It sets a standard that everybody understands and can comply with," says President Ed Pittock.
He says his group is in the process of getting accredited. More than 10,000 people, from financial advisers, Realtors and lawyers to clergy, accountants and funeral directors, carry the CSA designation.
This focus on senior designations stems from the fact that older investors are most commonly victimized by unscrupulous sales people.
"We have senior victims in the vast majority of our cases. I can almost say all," Lubin says. "You have to think about who has the money."
North American securities regulators report that 44 percent of all investor complaints in 2005 and 2006 came from older investors and nearly a quarter of enforcement actions entail the financial exploitation of seniors.
The number of victims is only expected to grow as large numbers of baby boomers enter retirement.
"At this stage in life, if they end up being exposed to unsuitable investments and end up being victimized by fraud, this can have devastating consequences," says Karen Tyler, president of the North American securities group and North Dakota's securities commissioner. "You don't have time to rebuild."
Maryland could have the designation rule on its books by year-end, Lubin says.
Remember, though, that by the time regulators get involved in a situation, your money can be lost. Your best protection is to make sure you hire a trustworthy adviser in the first place.
It will take homework. But remember what's at stake: your nest egg.
"This is arguably the most important investment decision people will ever make - who they will rely on," says Barbara Roper, director of investor protection for the Consumer Federation of America. "Most of us, once we choose an adviser, will do exactly what we are told and not research the recommendations."
There are professional designations that require much training and continuing education. You can check dozens of designations and what it takes to earn them at www.finra.org. But just because a credential is legitimate does not guarantee that the person is a good adviser - or the right adviser for you.
Call your state securities regulator to check an adviser's record. Marylanders can call 410-576- 7048.
Interview at least three advisers. Find out if they have clients whose situation is similar to yours. You do not need a tax adviser to billionaires to help pick mutual funds for your $25,000 IRA.
Educate yourself on finances, even if you hire a professional. Read up on the topic or take a class. You will have a better understanding of what an adviser tells you and will be more likely to recognize bad advice if you get it.
And if a stranger sends you an invitation for a free lunch and educational seminar, throw it away.
"The free-lunch seminars and use of senior specialist designations often go hand and hand," Tyler says.
When regulators examined 110 "free-lunch" seminars in 2006 and 2007, every one turned out to be a sales presentation, and half of them made exaggerated or misleading claims.