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October, 2016 InFRE Update: An Explanation of the Changes Made to the July, 2016 CRC® Exam

An Explanation of the Changes Made to the July, 2016 CRC® Exam

Accredited certifications such as the CRC^® are required to update every three to five years the practice analysis used that provides guidelines for the structure, content and rigor of their professional exams.

The International Foundation for Retirement Education (InFRE) contracted with Professional Examination Service (ProExam) to conduct a practice analysis of Certified Retirement Counselors^® (CRCs). The CRC certification examination is designed to ensure that CRCs possess all the knowledge and skills necessary to competently fulfill their responsibilities as retirement counseling professionals serving the public. The purposes of the practice analysis study were to:

• update the CRC content outline to reflect current professional practice
• ensure the validity and defensibility of the CRC examination
• derive empirical guidance to inform decision making regarding updated test specifications for the CRC examination
• provide empirical support for the accreditation of InFRE’s credentialing program including the CRC examination
• provide guidance to InFRE for the development of future training and continuing education

ProExam worked with an eight-member Steering Committee (SC) comprised of retirement counselors who had been active in InFRE volunteers activities, and who represented the range of types of employers, areas of expertise, roles, experience levels, and geographic location. The SC served in a consulting and advisory capacity over the course of the study, providing conceptual guidance to ProExam and the Task Force, reviewing and making recommendations regarding proposed and completed activities. The SC met two times via web-based meetings during the course of the study.

ProExam also conducted a series of interviews with five thought leaders in the field of retirement counseling in advance of the first task force meeting. These interviews were focused on changes in the profession since the last practice analysis was conducted, how those changes might affect the tasks and knowledge included in the test content outline, and any trends or changes that might impact future directions in practice. Members of the telephone interview panel represented different perspectives, roles, employment sectors, and geographic locations.

The Practice Analysis Task Force (PATF) was comprised of nine subject-matter experts. They represented the range of types of employers, areas of expertise, roles, experience levels, and geographic location. The PATF met numerous times over the course of the study via web-based meetings to update the CRC test content outline to ensure it was current, comprehensive, and reflective of retirement counselors working across the range of professional settings and roles.

A Description of the Changes Made to the CRC Exam

As a result of the work of the Steering Committee, the Thought Leaders, and Practice Analysis Task Force, and the results of a validation survey answered by 28% of current CRCs, the following trends and changes in retirement counseling were considered for incorporation into the new, July 2016 exam form:

• The movement away from defined benefits – redesigning – at state level, to share more risk between employee and employer
• The increasing role of defined contribution plans and coordination with defined benefits to maximize retirement security
• More guaranteed retirement income vehicles (modern version of annuitizing)
• More focus on helping people create lifetime income
• New products for retirement counselors to use on an individual basis
• Advanced life deferred annuities
• Combination long term care and life insurance
• Combination long term care and annuities
• Purchase units in a 401k plan for future lifetime income upon retirement
• Reverse mortgages
• Mobility of benefits from one employer to another
• Health care issues in retirement planning (Obamacare) – Medicare and prescription drugs
• Process of retirement income management – hot item in industry and academia
• withdrawal rates – how much expertise practitioner should provide
• what vehicle to use – many options – what formula
• asset allocation and product allocation
• risk tolerance and rate of return
• annuities – different variations
• contract annuities
• distribution of benefits, understanding fees attached
• longevity insurance [i.e., single premium deferred annuity]within qualified plans)
• Senior fraud abuse.
• Need to recognize the impact of lower interest rates, lower returns on stocks, more challenges to find vehicles of growth
• Customers don’t want to take risks – playing it safe in low-risk assets like money-market funds – don’t even keep up with cost of living
• More recommendation for investments with guaranteed returns such as annuities
• Need to counsel clients about projected deficit unless some risk is taken
• Options for annuities and other products –not a lot of uniformity of agreement in strategies, methodologies, processes – and how to communicate to clients so they can make informed decisions
• Monitoring and recognition of fees – as more fiduciary responsibility is placed on employers, and recognition of impact of fees over the lifetime of the investment and the worker, much more focus will be put on fees paid
• The industry needs to work more cost-effectively
• What is the most efficient way to gather information to build a financial plan?
• How can you process a lot of customers efficiently?
• Fiduciary issues and standards for advisors v. non-fiduciary standards; who is going to be subject to which standards; fiduciary liability; political issues around topic
• Transparency regulation
• Integration of all the defined contribution plans, and advising clients to include all retirement accounts, both employer and individual
• How to serialize the distribution of those various accounts
• How work factors into income flow process
• Sequestration of distribution of accounts
• Mechanics – including distribution calculations
• Social Security – more emphasis on importance of how and when to take benefits; strategies that can be used to maximize benefits
• Accumulation: TDAs changing to individual contracts; automatic increases and enrollment – used a lot in the private sector and 401(k)s, not so much in 457 world
• Tax law changes – need to keep up with legislative changes – mistakes are made because advisors aren’t knowledgeable about these changes
• how much one can contribute and retain in account
• avoiding ―tax hits‖ (e.g., taking distribution from IRA – must return in certain time frame or lose tax-deferred status)
• exceptions to early distribution penalties
• Legislation at the federal level encouraging people to annuitize part of their assets upon retirement
• Increase in roll-over activity due to
• taking retirement assets from old jobs
• shopping around for different service, lower fees, level of comfort with advisors
• Helping employees across the retirement lifespan (early-career employees all the way to port-retirement life stage)
• Focus on automatic contributions to defined contribution plans – not just minimal contribution – need to be meaningful contributions
• Software doesn’t keep up with the needs to service clients (e.g., no software to do comparative analysis of returns across different retirement income products offered by different companies) – advisors need to figure out how to do this
• Passive v. active investment and management
• Impact of retirement savings deficit will be a huge issue
• Healthcare costs continue to increase – impacts having enough to make it through retirement
• Challenges – municipal budgets and fear of bankruptcy of municipalities – part of counselor’s job is education in reality of situation
• Beyond retirement counseling – some are becoming ―life coaches‖
• Counseling on what they are retiring to – helping clients plan for fulfilling retirement

The new exam form now tests to the following test specifications:

We appreciate your support during the upgrading of this new exam form to incorporate the above important changes to reflect the current state of the retirement industry today.