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Financial professionals—life, health, and P&C agents and registered investment advisors—must promote themselves in order to grow their firms. That means selling their capabilities using multiple promotional methods. One of these is seeking professional awards and designations they can use to enhance their credibility and differentiate themselves from their peers. But doing this can be a slippery slope, leading to mistakes that attract regulator attention. A new SEC investor bulletin explains why.

According to the report, “Financial Professionals Use of Professional Honors: Awards, Rankings, and Designations,” advisors using these techniques often imply they have a higher degree of sophistication, knowledge, or success than their competitors. “While in some cases this type of information may help an investor make an informed decision in choosing a financial professional,” writes the SEC, “in some cases it can be misleading (since) some professional awards, rankings, and designations provide little or no basis on which to judge the skill or abilities of the (advisor).”

The SEC’s problem is that many awards, rankings, or designations provide no way for consumers to determine just how meaningful they are or even if they’re meaningful at all. That’s because:

  • The standards for receiving the honors are so minimal just about any advisor off the street could apply—and qualify—for them.
  • Many advisors simply pay a fee to receive the award, ranking, or designation.
  • Or all they have to do is join the organization that sponsors the honor.
  • Sometimes advisors claim they are among the top winners of the honor when in fact there is no ranking method in place.
  • Many also misrepresent local or regional honors for national ones.
  • Some apply for honors using false or misleading information, leading to awards, rankings, or designations that are unfounded.
  • And others continue to use professional designations after they lapse.

The SEC ends its alert by urging consumers to probe for what an advisor’s honors really mean. For example, what was the application process, what standards were in place, what group bestowed the honor, and what money may have exchanged to “procure” the award? It also encourages consumers to do their due diligence on advisor designations by visiting the FINRA online resource, “Understanding Investment Professional Designations.”

The SEC’s alert reinforces what the National Ethics Association has been saying for years. Insurance and financial professionals have much more to gain by playing straight with their prospects and clients than by misleading them. Exaggerating their credentials only creates false expectations that can lead to consumer disappointment, E&O insurance claims, and regulatory sanctions down the road. Don’t subject yourself to these risks. Always “sell straight” by presenting only verifiable facts about you, the products you sell, and the companies you represent. This is the best way to build a successful and sustainable financial services firm. Good luck!


For more information on ethical business practices, visit the Ethics Center at the National Ethics Association, sponsor of EOforLess. 

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