Older Americans rely more heavily than younger investors on the advice of financial professionals, a trend that underscores the importance of a trusted advisor in supporting vulnerable seniors through life’s transitions.
Americans nearing or entering retirement put great stock in financial professionals, who they identify as the most important factor in making investment decisions, according to a survey of 1,150 investors conducted by Millionaire Corner in February. About 65 percent of investors age 60 or older consult with a financial professional, as do 60 percent of investors in their 50s. In comparison, 51 percent of investors age 40 and under use a financial advisor.
Older Americans also conduct a great deal of independent research, such as looking at company reports and reading fund prospectuses, but they rank professional advice as the most important factor in their investment decisions. More than 40 percent of investors age 51 and older say their advisor is the most influential source of information. The share is 31 percent for investors age 40 and younger. Younger investors place a higher premium on their own research and also relying heavily on the advice of friends and family members.
The tendency of older Americans to rely on financial professionals makes them more vulnerable to fraud and individuals exploiting the vulnerabilities of the elderly – a growing public policy issue, according to Hubert H. Humphrey III, assistant director of the Office for Older Americans at the fledgling Consumer Financial Protection Bureau.
The office, formed through the Dodd-Frank Wall Street Reform and Consumer Protection Act, is charged with increasing the financial literacy of older Americans, and with monitoring the certifications and designations used by financial advisors. The office also works with the Women’s Institute for a Secure Retirement, which address the retirement funding shortfall facing nearly half of American women over the age of 62. According to Humphrey, women are also more victims of financial abuse and exploitation than men.
Older Americans seeking financial advice for such issues as retirement planning, long-term care coverage, estate planning and other concerns can turn to a wide variety of professionals, including insurance agents, attorneys, financial planners and financial advisors. Many financial professionals have earned additional designations associated with elderly investors, but the credentialing process differs from program to program and denotes varying levels of expertise.
The Society of Certified Senior Advisors, for example, offers a course educating advisors on the health, social and financial issues facing older Americans. Course topics include Medicare, Social Security, caregiving in America and how to communicate with seniors. Advisors bearing the CSA designation have passed an exam containing 150 multiple choice questions.
The CSA certification is just one of a number of programs for advisors interested in working with the elderly. The College for Financial Planning awards the Chartered Retirement Planning Counselor, or CRPC, designation, while the Society of Certified Retirement Financial Advisors offers the Certified Retirement Financial Advisor, or CRFA, designation. Older Americans may also encounter financial professionals with certifications such as the Chartered Trust and Estate Planner designation, or CTEP, the Certified Estate Advisor, or CEA, Chartered Advisor for Senior Living, or CASL, and the Chartered Retirement Plans Specialist, CRPS.
The U.S. Securities and Exchange Commission, working in conjunction with other state and federal regulators and the self-regulating Financial Industry Regulatory Authority, or FINRA, has published model rules for these certification programs. According to the SEC, the rules address the concern that the designations “may be used to imply expertise or credentials, which may be inaccurate or misleading.”
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