Designation "Hitters"?

Financial advisers come to the retirement plan business from a wide variety of experiences. Whether that background is in insurance, selling investments, serving as a third-party administrator (TPA), working as a wholesaler, or even moving from a role as a plan sponsor, they frequently have accumulated not only years of experience but also an assortment of professional designations.

Now, as with most “accumulations,” some designations say more about where you have been than where you are going. However, this is a growing and challenging field—and keeping up with the latest developments in plan design, investments, regulations, and participant trends is imperative to succeed in it—and designations are one way to demonstrate a certain proficiency in those areas.

Typically, plan sponsors interview advisers the same way they might interview job candidates. They check references, look for demonstrated expertise in an interview, do a “gut check” based on personal interaction during the interview, and evaluate professional and academic credentials. Unfortunately, there are no “required” credentials for advisers seeking to serve retirement plans (some licenses may be required by various state and federal laws for activities that relate to retirement plan servicing), but there is no shortage of advisory designations, and a growing number for those advisers specializing in the retirement plan space (see “Popularity Contest,” below).

At a time when advisers are seeking programs that will help them build their businesses and demonstrate expertise, there is a growing concern among state and federal regulators about the misleading use of advisory designations with the investing public, particularly older investors. Even advisers who focus exclusively on workplace retirement programs are getting tangled up in the renewed scrutiny.

Bay “Watch”

Leading the new focus was Massachusetts, which in 2007 put in place regulations that prohibited advisers from using designations that imply “an investment adviser representative has special certification or training in advising or servicing senior investors” (those 65 years and older) unless the credential is approved by an accreditation organization recognized by the Secretary of the Commonwealth. The regulations take issue with such words as “senior,” “retirement,” “elder,” or the like when combined with words such as “certified,” “chartered,” “adviser,” or “specialist” to imply a special knowledge as it relates to senior investors (see PLANADVISER, “Target Market,” Fall 2007). At present, Massachusetts requires that all designations be accredited by either the American National Standards Institute or the National Commission for Certifying Agencies.

Next up was Nebraska, which has developed its own regulations and is reviewing designations on a case-by-case basis. Nebraska expressed concern “that the use of designations conveys a certain expertise, in matters dealing with seniors, that may not exist,” and requested that firms prohibit the use of “all professional designations that state or imply a specialized knowledge of the needs of senior investors by their agents and investment adviser representatives registered in Nebraska,” including all “mass mailings, advertising, business cards, and letterhead of the agent or representative.”

In March 20008, the North American Securities Administrators Association (NASAA), working with the Securities and Exchange Commission (SEC), adopted a Model Rule on the Use of Senior-Specific Certifications and Professional Designations. Although the rule follows the Massachusetts regulations up to a point, it does not absolutely require accreditation; however, accreditation does guarantee approval by NASAA. In October 2008, California adopted the NASAA model rule; Alabama followed suit in November 2008, joining New Hampshire, Virginia, Washington, and Wisconsin. There are 10 more states that are considering adopting the NASAA rule this year.

FINRA has, of course, published guidelines on the use of senior designations, though they are not as specific or as stringent as NASAA. (The FINRA list of designations is online at http://apps.finra.org/DataDirectory/1/prodesignations.aspx.)

What does all this mean for advisers? Well, even if you do not conduct any business in the affected states, if you work for a firm that does, you may find compliance getting a bit fussier about what you put on your business card (though, let’s face it, compliance has always been “fussy” about such matters). Even if you do not, in a post-Madoff environment, regulators almost certainly are going to be even more inclined to err on the side of caution.

What is most important for retirement plan advisers, of course, is that, regardless of whether or not you can stick a few extra letters on your business card, you continue to obtain and maintain the knowledge and expertise you need to survive in this complicated and constantly changing environment.

Popularity Contest

Some of the most common designations for financial advisers who specialize in retirement plans are:

• Accredited Investment Fiduciary (AIF), sponsored by the Center for Fiduciary Studies
• Certified Employee Benefit Specialist (CEBS), sponsored by the International Foundation for Employee Benefits
• Certified Pension Consultant (CPC), sponsored by ASPPA
• Certified Retirement Administrator (CRA), sponsored by the International Foundation for Retirement Education
• Chartered Retirement Plans Specialist (CRPS), sponsored by the College for Financial Planning
• Professional Plan Consultant (PPC), sponsored by Financial Service Standards, LLC
• PLANSPONSOR Retirement Professional (PRP), sponsored by PLANSPONSOR Institute
• Qualified Plan Financial Consultant (QPFC), sponsored by ASPPA
• Qualified Pension Administrator (QPA), sponsored by ASPPA
• Qualified 401(k) Administrator (QKA), sponsored by ASPPA
• Retirement Plans Associate (RPA), sponsored by the International Foundation for Employee Benefits

Illustration by Marc Rosenthal