LICENSED TO SELL… AND STAY COMPLIANT! PART II

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MESSAGE FROM THE PRESIDENT

In the last issue, we mentioned there were a number of significant developments in state actions against sellers of annuities. Those state actions provided insight about what regulators and prosecutors are watching. Over the course of the last two months, we continued travelling to many of our members’ meetings and spoke to annuity professionals. It won’t surprise you that the most frequently asked questions remained the same:

  1. What licenses should I get?
  2. What designations may I use?
  3. How can I be sure my seminars, website and marketing materials are compliant?

Since we focused on the types of licenses that may benefit an annuity practice and the types of activities each of those licenses permit and those they prohibit in the last issue, let’s continue with professional designations.

Professional Designations

NAFA is a strong proponent of all efforts to improve the education and training for those licensed to sell fixed annuities in any areas relating to insurance, insurance products, consumer financial needs and planning, taxation and any other matters impacting their function as sellers and servicers of insurance products. This may include financial professional designations earned through testing, professional continuing education or producer continuing education. Core principles of designation use are as follows:

  • A designation used in advertising should be current and verifiable.
  • A designation should represent some significant achievement of knowledge that could be relevant to the advertised insurance and will benefit the advertising recipient.
  • A designation should be awarded by a reputable, accredited organization within the insurance and financial industry.

As a result of this principle, some designations may be eschewed entirely by insurers or regulators either because they are deemed to be insufficient in rigor, scope or applicability to the sale of insurance or are identified as lacking any significant benefit to the advertising recipient. Therefore, they could easily mislead a consumer.

NAIC Model 278 Overview

The National Association of Insurance Commissioners (NAIC) set forth the framework in establishing these guidelines with Model 278. The purpose of this regulation is to set forth standards to protect consumers from misleading and fraudulent marketing practices with respect to the use of senior-specific certifications and professional designations in the solicitation, sale or purchase, or advice made in connection with a life insurance or annuity product.

It is an unfair and deceptive act or practice for an insurance producer to use a senior-specific certification or professional designation that implies or indicates that said producer has special certification or training in advising or servicing seniors in connection with the solicitation, sale or purchase of a life insurance or annuity product; in the provision of advice regarding the value or advisability of purchasing or selling a life insurance or annuity product, either directly or indirectly through publications or writings; or by issuing or promulgating analyses or reports related to life insurance or annuity products in such a way as to mislead a buyer or prospective buyer.

Best Practices

In addition to the items described below, an agent should confer with his state’s department of insurance, the carrier, any applicable broker dealer and specific agency rules to ensure they are meeting all appropriate standards. Recommendations include:

  • Secure appropriate training or credentials to validate your designation.
  • Maintain your right to use and display your approved credential by performing CE tasks or re-certification as required by the issuer.
  • Choose to pursue those designations and credentials that provide a robust curriculum and credentialing process, including examinations.

Avoid the Following Practices:

  • Do not use acronyms intentionally similar to other accredited designations that further obscure your qualifications.
  • Do not use designations without any meaningful credentialing or testing process that can be earned simply by paying a membership fee.
  • Do not use a designation that you have not earned or maintained (i.e., kept current).
  • Do not use “nonexistent” or “self-conferred” designations.
  • Do not use credentials you have not actually earned through school, training or specific experience.
  • Do not use designations offered by certifying organizations when:
  1. Minimal oversight exists to affirm that the candidate has competently completed the training and certification program
  2. Measures for monitoring and disciplining designees are nonexistent
  3. Lack of or minimal emphasis on ethics
  4. Inadequate overall curriculum

Remaining Compliant and Transparent

In communicating with the public, and specifically with seniors, a producer needs to be very careful and very deliberate. Remember:

  • Crucial pieces of information that should be immediately acknowledged if your intent is potentially to sell a fixed annuity product is that you are an insurance agent, that you believe in the product, and a further acknowledgement that like all financial products, there is no single silver bullet to retirement planning.
  • Some designations require more rigorous training than others, and it goes without saying that experience is not uniform. If you are replacing the consumer’s former advisor, make sure to document the reasons that your new client chose you. Holding your designations or experience as superior is not sufficient to encourage the consumer to work with you. Indeed, this kind of approach has resulted in administrative action at many levels.
  • Documenting everything is also very important, and as NAFA has discussed before, keeping these records organized and accessible can help protect producers.
  • Involving the potential heirs in the planning process in some capacity can be extremely beneficial.

Advertising in General: Case Law Application

Many cases have been cited publicly as contributing to both NAIC and Securities and Exchange Commission (SEC) guidance. In most cases, they involve not only the designations themselves, but also the realm of unethical advertising.

In Massachusetts, a case concerning the use of “Certified Elder Planning Specialist” (CEPS) to conduct what in many instances were called “Senior Financial Survival Workshops” arose. The case ended in a settlement discontinuing the use of CEPS in Massachusetts.

Also in Massachusetts, the use of “Certified Senior Advisor” (CSA) has resulted in numerous consumer complaints and administrative actions. Two cases in particular drew a great deal of attention, but one involved a producer liquidating the bulk of his client’s securities assets and moving them into fixed indexed annuities. On the surface, this is not necessarily a red-flag matter on its own. Depending on the individual’s needs, liquidity and other intents, simple asset allocation alteration is often appropriate, as with age, risk tolerability typically decreases. Rather, it was the positioning, the marketing and the manner in which the producer implemented the change that caused the consumer to file her complaint. The consumer cited that her decision to leave her current advisor centered on the new advisor’s “accredited” designation and his marketing materials stating his “[training] in many issues, especially senior finances.”

In Arkansas, there was yet another case involving a producer using the CSA designation in his advertising and marketing materials that implied his unique expertise in working with seniors. The producer’s membership as a CSA had expired at the time of the sale, and he did not use the required disclosure provided by the Society of Certified Senior Advisors and adopted in March of 2007. The individual in this case also used a number of other designations and acronyms that for all intents and purposes referenced established designations that he did not, in fact, hold.

In Oregon, an agent was fined $9,000 for misleading the public about his expertise and qualifications and failing to report misdemeanor prosecutions. Similar to other cases, the agent’s designation membership had lapsed, the agent claimed to have written an authoritative booklet, and purported to be an owner/operator of an unregistered business.

Applicability to Registered Investment Advisors (NASAA and SEC)

Producers who are also Registered Representatives need to pay attention to a host of other governing bodies when deciding upon a senior designation to pursue and use:

  • NASD Rule 2210 (Now FINRA Conduct Rule 2210) and New York Stock Exchange (NYSE) 472 prohibit firms and registered persons from making false, exaggerated, unwarranted or misleading statements or claims.
  • The North American Securities Administration Association (NASAA) Model Rule on the use of senior-specific certifications and professional designations concerns what the designation implies to the investor, and if it could imply expertise or credentials that may be inaccurate or misleading.
  • Regulatory Notice 11-52 and 07-43 apply to the firm employing the advisor, although being familiar with the recommendations can help ensure that the RIA conducting business on the life/health side stays compliant and above reproach. Notice 11-52 built upon 07-43 by incorporating the results of a survey of 157 firms concerning senior designations.

Best Practices

When considering a designation to pursue, take these steps to determine if the designation is appropriate and approved:

  • Check with your insurance carrier’s or Independent Marketing Organization’s (IMO’s) compliance department.
  • Check with your State Department of Insurance if you doubt or are even remotely uncertain about the status of a designation you have been conferred. It’s wise not to use it until you have checked with the appropriate compliance personnel.

In the next issue, we will discuss compliant marketing practices.


Kim O’Brien is NAFA President & CEO. NAFA membership represents over 85% of all premium for fixed indexed, declared rate and income annuities written through the independent distribution system. Kim has over 30 years of experience in the insurance industry beginning as in 1981 as office manager for an insurance agency. In 2002 Kim developed and ran her own marketing organization and received the 2002 Entrepreneur Award from Sun Life. In between, Kim worked as a marketing executive for major insurance companies and was responsible for their annuity and term life insurance product line development, marketing, and training processes. In 1993, Kim served as interim deputy director of the Wisconsin Department of Insurance under Governor Tommy Thomson and served Governor Thompson until a permanent replacement could be found. In July 1992, Kim was the first women in Wisconsin to pass the CFP exam established in 1991 by the CFP Board as a single comprehensive examination modeled after the licensing examinations given to attorneys or Certified Public Accountants (CPAs). Kim O'Brien received her BA from Ripon College, her MFA from the University of Northern Colorado, and an MBA with an emphasis in Economics from Edgewood College, Madison, Wisconsin. In 2008, Kim was accepted into the Juris Doctorate program at the William H. Taft Law School and completed her first year and passed the preliminary California Bar as required before continuing her degree. She has recently re-instituted her studies to begin this summer after a hiatus due to her NAFA workload. As an avid musical theater fan and dancer, Kim has directed or choreographed over 60 shows in Milwaukee and Madison, Wisconsin. She lives with her husband and college sweetheart of 39 years, Kelly, in Phoenix nestled in the Thunderbird Conservatory she enjoys hiking the mountains with their Irish setters.

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