Protecting aging clients from financial abuse ranked top ethical concern among financial advisors

Protecting aging clients from financial abuse ranked top ethical concern among financial advisors

The American College research finds majority of advisors fear lack of financial education among clients and advisors as the leading cause of financial harm

BRYN MAWR, PA, March 28, 2016 – A survey of retirement income planning professionals found that over 80 percent of respondents are concerned about protecting their clients from financial elder abuse. In fact, out of all the ethical concerns facing retirement advisors, protecting clients from financial elder abuse was the top ranked ethical concern. However, the respondents did not see elder abuse as a common occurrence among their own clients.

Additionally, roughly two-thirds of the retirement income planning professionals surveyed thought the ethical nature of the retirement planning industry was in good hands. However, there was a severe concern about the lack of company training and education among both clients and financial advisors.

These findings are part of the new Ethical Issues in Retirement Income Planning Survey, from The American College of Financial Services, which sought to identify financial services professionals’ primary ethical concerns in retirement income planning, gauge how financial professionals view the industry’s current ethical challenges and understand how ethical practices can be improved in retirement income planning.

“Retirement income planning is extraordinarily challenging,” said Jamie Hopkins, Retirement Income Program Co-Director at The American College. “Retirement income professionals are expected to manage a variety of client risks, legal changes and ethical issues when developing a comprehensive plan. The survey responses show that advisors are well aware of the challenges but worry that the industry as a whole lacks the proper training and education required to effectively serve aging clients.”

Overall Industry Views

Overall, retirement income professionals believed the industry was acting ethically and that advisors were not commonly lying to their clients.

  • 64 percent believed the overall ethical climate of the industry was in good hands.
  • Only 6 percent believed that outright lying occurred by advisors.
  • Only 27 percent believed that instances of overcharging clients were common.

Elder Abuse Fears

Respondents showed that protecting clients from elder abuse was the number one ethical worry for retirement income professionals, with 82 percent of those surveyed affirming their concern.

Conversely, advisors’ heightened concern about elder abuse was countered by a belief that it is not a widespread problem in the industry. Only 28 percent believed that financial elder abuse was a common occurrence.

Education and Training Shortfalls

The majority of surveyed advisors also showed widespread concern about the knowledge level of both consumers and advisors across a variety of subject areas.

  • 88 percent were concerned about their clients’ ability to properly understand their retirement income plans.
  • 85 percent were concerned that clients do not understand the products and services they are offered.
  • 64 percent were worried that retirement income advisors in general were unable to perform their jobs because of inadequate training.
  • 68 percent were concerned that retirement income advisors in general are not keeping up with legal changes that impact their clients’ retirement income plans.

Most survey participants agreed that a good retirement planner should understand Social Security, while 71 percent worried that other financial services professionals lacked the knowledge to properly utilize Social Security claiming strategies for their clients. Additionally, a mere 2 percent thought that financial service professionals overall were extremely knowledgable with regards to Medicare.

“A primary ethical obligation of any professional is to maintain their competence,” said Julie Ragatz, Director of the Center for Ethics in Financial Services at The American College. “Respondents were troubled that, in the increasingly complicated field of retirement income planning, practitioners lacked the comprehensive knowledge to offer expert advice. The bottom line is that practitioners are concerned that harm will be caused not through deliberate malfeasance, but through lack of education.”

Knowledge is Power

Despite the varied concerns on the minds of advisors today, respondents felt that the industry is generally on good ethical footing. However, there are some fundamental improvements that should be made to ease the concerns of financial advisors and clients today.

  • Education is key to reducing ethical violations in retirement planning; therefore, companies should get more involved in making sure their retirement planners have the right education and skill set.
  • RICP® provides comprehensive retirement income planning knowledge in the primary areas of concern – including Social Security.
  • Clients should take advantage of the educational resources available to them.
  •  Clients should also research their advisor before engaging in a relationship. Get referrals and do a search online to ensure they are aware of any ethical violations on the part of their advisors.

Methodology

This study consisted of two related research phases. First, the College conducted an online survey that asked respondents to answer a series of rank-choice questions related to ethical concerns in retirement income planning. Then, volunteers were solicited at the end of the survey to participate in telephone-based interviews. These interviews asked for more specific clarification on a number of ethical questions. A total of 244 individuals returned complete surveys, and of that total, 31 individuals were interviewed. All survey data was analyzed for difference in means of ranked scores. All interview data were coded using NVIVO 10 qualitative coding software.

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About The American College of Financial Services

The American College is the nation’s largest non-profit educational institution devoted to financial services. Holding the highest level of academic accreditation, The College has served as a valued business partner to banks, brokerage firms, insurance companies and others since 1927. The American College’s faculty represents some of the financial services industry’s foremost thought leaders. For more information, visit TheAmericanCollege.edu.

About the New York Life Center for Retirement Income at The American College

The New York Life Center for Retirement Income at The American College serves to elevate the knowledge of financial service professionals in order to improve retirement security for Americans. It provides a website for advisors and supports the Retirement Income Certified Professional® (RICP®) designation, which educates financial advisors to help prepare the 76 million Baby Boomers and millions of older retirees who are concerned about the safety of their retirement income plans. To learn more about the New York Life Center for Retirement Income, go to retirement.theamericancollege.edu.

About the Cary M. Maguire Center for Ethics in Financial Services

As the only ethics center within an academic institution focusing exclusively on the financial services industry, The American College Cary M. Maguire Center for Ethics in Financial Services promotes ethical behavior by offering programs that go beyond the rules of market conduct to help executives and producers be more sensitive to ethical issues and think more critically about ethical solutions. The Center's interactive continuing education courses, forums, and workshops help practitioners think critically and behave ethically, even in the absence of clear direction. For more information, visit ethics.theamericancollege.edu/.