While designations often imply special training or experience, the Financial Industry Regulatory Authority (Finra) is warning investors that they can also be used as a marketing or even fraudent self-promotional hook, the agency says in a new investor alert.
The alert, published today by Finra, is designed to help investors tell the difference between your registration, licensing and professional designations and provides them with online tools to do background checks on brokers and advisors and better understand credentialing and requirements.
There is a difference between being registered or licensed and holding a professional designation, the alert says.
“The ability to provide financial advice and conduct sales activities in the securities and insurance industries requires registration with a regulatory body.
“For example, brokers must be registered with Finra, a state securities regulator or both. The Securities and Exchange Commission regulates investment advisers who manage $110 million or more in client assets, while state securities regulators have jurisdiction over advisers who manage up to $100 million. You can check out whether a broker or adviser is registered by going to FINRA BrokerCheck,” Finra explains.
All financial designations are not created equal, the advisory continues.
“Some involve fairly rigorous standards to earn and maintain the designation, allow investors to verify the status of anyone claiming to hold that designation and a few even have a formal disciplinary process. Others are relatively easy to earn and might be maintained by simply paying a yearly fee,” says Finra.
To find out what it takes to earn and maintain a financial designation, the agency directs investors to its Professional Designations Tool.
“Keep in mind that while designations often imply a degree of special training or experience of some extent, they can also be used as a marketing or self-promotional hook,” Finra warns. “Be wary of financial professionals who make too much of their designation, or try to tout their designation as the reason you should hire them. A professional designation should never be the sole reason you select an investment professional.
Designations can be faked, Finra adds.