Investors should be wary of the designations often used by financial professionals to set themselves off from their competition, warns the Securities and Exchange Commission’s Office of Investor Education and Advocacy.
The office issued an investor bulletin Friday to educate individual investors about the professional awards, rankings and designations that financial professionals often use to market themselves to prospective clients. The designations are used to imply an expertise that others in the profession do not have, the bulletin said.
“While in some cases this type of information may help an investor make an informed decision in choosing a financial professional, in some cases it can be misleading—some professional awards, rankings and designations provide little or no basis on which to judge the skill or abilities of the financial professional,” the office warns.
The bulletin warns investors to be cautious in evaluating a financial professional based on professional awards and designations they may hold. The SEC does not endorse any professional award, ranking or designation. Investors should always look beyond these designations to determine whether the advisor can provide the type of financial services or products needed, the bulletin says.
The bulletin includes the following warnings:
In some cases, the criteria to receive the award or designation were so minimal that essentially any person who submitted an application would receive it, or the financial professional or firm may have paid a fee to receive an award or designation.
The professional may have been required to be a member of an organization to receive the designation.
At times, professionals misrepresent the rank by using a generic statement claiming they are the top financial professionals on the list where the members are not ranked at all, or the professional may leave out the fact that the award was given in a small regional area.