Meyer Wilson

Recovering Losses Caused By Investment Misconduct

Investors Should Be Wary of Professional Designations Used by Securities Salespeople

By Chad M. Kohler

Brokerage firms figured out a long time ago that the term "stockbroker" had developed a negative connotation among a large swath of potential customers. A salesperson working for a brokerage firm today is likely instead to refer to themselves as a "financial advisor" or "wealth manager." These alternative monikers are designed to conjure up a more positive, professional image than that of, say, a boiler room operator pushing penny stocks on elderly widows. While the job title may be different, the job itself remains the same: to sell securities.

Financial Advisor

To add more cachet and further differentiate themselves from the pack, many in the industry have taken to emphasizing various professional designations that they've obtained. It's not uncommon nowadays for a financial advisor's business card to advertise a veritable alphabet soup of designations after the advisor's name and job title.

To be sure, certain professional designations (such as the "CFP" for Certified Financial Planners issued by the Certified Financial Planner Board of Standards, Inc.) are well regarded in the industry and require extensive testing, experience, and ongoing continuing education.

Many other designations, however, are little more than marketing gimmicks. In some cases a test doesn't even need to be taken; the designation is "awarded" simply upon submitting an application and paying a nominal fee.

If a salesperson is touting a professional designation, don't be afraid to ask for more information. The Securities & Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) have issued a joint Investor Bulletin recommending that investors ask the following questions:

  • Who awarded your title?
  • What are the training, ethical, and other requirements to receive the title?
  • Did you have to take a course and pass a test?
  • Does the designation require a certain level of work experience or education?
  • To maintain the designation, are you required to take refresher courses?
  • How can I verify your standing with this organization?

You can also do some homework on your own. The Financial Industry Regulatory Authority (FINRA) maintains a comprehensive database on professional designations. By simply typing in the professional designation or acronym, you can quickly find all the basic information you need to know, including if the designation has any prerequisites, is granted upon passing an examination, and if there are any continuing education requirements.

Categories: Investment Fraud

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