FI­NAN­CIAL PLAN­NING

Investment Executive - - CONTENTS - BY JAMES L ANGTON

The On­tario gov­ern­ment’s pro­posal to re­strict the “fi­nan­cial plan­ner” ti­tle is gain­ing sup­port.

THE ON­TARIO PROVIN­CIAL gov­ern­ment’s pro­posal to re­strict the use of the “fi­nan­cial plan­ner” ti­tle has wide sup­port from the fi­nan­cial ser­vices sec­tor and in­vestor ad­vo­cates. How­ever, many peo­ple in each camp want to see bolder pol­icy ac­tion, from tougher con­duct stan­dards to scrap­ping the term “fi­nan­cial ad­vi­sor” as well.

In the past few years, the On­tario gov­ern­ment has been wrestling with the lack of reg­u­la­tion for fi­nan­cial plan­ners. Last year, the gov­ern­ment de­clared that it’s fi­nally ready to move ahead on this mat­ter by set­ting pro­fi­ciency stan­dards for fi­nan­cial

plan­ners and curb­ing con­fu­sion among con­sumers about the vast ar­ray of busi­ness ti­tles that are used in the sec­tor.

In March, the gov­ern­ment re­leased a con­sul­ta­tion pa­per set­ting out its ini­tial plans. The pa­per pro­poses re­strict­ing the use of the “fi­nan­cial plan­ner” ti­tle to in­di­vid­u­als who meet cer­tain qual­i­fi­ca­tions; ban­ning ti­tles that sug­gest an in­di­vid­ual of­fers fi­nan­cial plan­ning ser­vices; and cre­at­ing a pub­lic data­base of qual­i­fied fi­nan­cial plan­ners.

Those ba­sic ideas have gar­nered ap­proval from in­dus­try groups and in­vestor ad­vo­cates. In­deed, any mea­sures to ad­dress the long­stand­ing lack of stan­dards and vast po­ten­tial for con­sumer con­fu­sion re­gard­ing the ti­tle ap­pear to be wel­come at this point.

Af­ter all, the prob­lem with the lack of reg­u­la­tion for fi­nan­cial plan­ning is not sim­ply that the ti­tle cre­ates con­fu­sion in the mar­ket­place; rather, the ti­tle af­fects the whole con­cept of pay­ing for fi­nan­cial and re­lated ad­vice.

“Con­sumers are di­rectly im­pacted by im­proper ad­vice from ad­vi­sors [who] may lack ap­pro­pri­ate train­ing and ed­u­ca­tion and, se­condly, pub­lic con­fi­dence in fi­nan­cial ad­vice is un­der­mined,” notes the CFA So­ci­eties Canada’s com­ment on the On­tario gov­ern­ment’s pro­pos­als.

Tar­get­ing the in­dis­crim­i­nate use of the “fi­nan­cial plan­ner” ti­tle is ex­pected to help ad­dress these is­sues.

The In­sti­tute of Ad­vanced Fi­nan­cial Plan­ners’ (IAFP) sub­mis­sion to the con­sul­ta­tion states that this re­stric­tion will force many fi­nan­cial ad­vi­sors to be more up­front with con­sumers about the na­ture of their ser­vices and to change their of­fer­ings: “Many in­di­vid­u­als em­ployed in the fi­nan­cial ser­vices sec­tor will need to stop hold­ing them­selves out as fi­nan­cial plan­ners.”

The IAFP’s sub­mis­sion adds that those who qual­ify to use the fi­nan­cial plan­ner ti­tle un­der the pro­posed regime “will likely be­come less prod­uct-ori­ented and less spe­cial­ized” and pro­vide clients with com­pre­hen­sive fi­nan­cial plan­ning ser­vices while ad­her­ing to higher eth­i­cal stan­dards.

All of this change should be good for con­sumers. But while any ef­fort to ad­dress this fun­da­men­tal gap in reg­u­la­tion is wel­come, there also are calls for pol­icy-mak­ers to do much more than they’re propos­ing.

For ex­am­ple, the sub­mis­sion from In­vestor Ad­vi­sory Panel (IAP), an in­de­pen­dent in­vestor ad­vo­cacy group cre­ated by the On­tario Se­cu­ri­ties Com­mis­sion, points out that the gov­ern­ment’s pro­pos­als don’t es­tab­lish who or what or­ga­ni­za­tion would over­see fi­nan­cial plan­ners or fi­nan­cial plan­ning.

Be­fore any reg­u­la­tory regime can be adopted, the IAP’s sub­mis­sion adds, the On­tario gov­ern­ment must set out where reg­u­la­tory au­thor­ity will lie. The sub­mis­sion ad­vises against cre­at­ing a new body or self-reg­u­la­tory or­ga­ni­za­tion (SRO) to over­see fi­nan­cial plan­ning.

The sub­mis­sions from both the IAP and the Cana­dian Foun­da­tion for the Ad­vance­ment of In­vestor Rights (a.k.a. FAIR Canada) rec­om­mend that the gov­ern­ment adopt ro­bust con­duct stan­dards as part of the ef­fort to in­tro­duce reg­u­la­tion in the fi­nan­cial plan­ning arena.

FAIR Canada’s sub­mis­sion states that if the gov­ern­ment re­ally wants to ad­dress the pol­icy con­cerns that have been iden­ti­fied re­gard­ing lack of reg­u­la­tion of ti­tles used within the fi­nan­cial ser­vices sec­tor, more than pro­fi­ciency stan­dards and reg­u­lated ti­tles must be in­tro­duced: “You must in­sti­tute a statu­tory best in­ter­est stan­dard.”

FAIR Canada’s sub­mis­sion not only calls on the gov­ern­ment to in­tro­duce a “best in­ter­est” stan­dard, but also rec­om­mends that reg­u­la­tory au­thor­i­ties be pro­vided with the re­sources re­quired to en­force that stan­dard.

The IAP and FAIR Canada have long called for se­cu­ri­ties reg­u­la­tors to adopt a best in­ter­est stan­dard in their arena, and this also was the rec­om­men­da­tion of the Ex­pert Com­mit­tee to Con­sider Fi­nan­cial Ad­vi­sory and Fi­nan­cial Plan­ning Pol­icy Al­ter­na­tives, which was charged with re­view­ing fi­nan­cial plan­ning reg­u­la­tion and pro­vid­ing the On­tario gov­ern­ment with ad­vice on re­form.

The com­mit­tee’s fi­nal re­port, pub­lished in March 2017, con­cluded: “The plethora of mis­lead­ing ti­tles used in the fi­nan­cial ser­vices in­dus­try com­bined with the lack of a clearly ar­tic­u­lated duty to act in the best in­ter­est of the con­sumer leaves On­tar­i­ans vul­ner­a­ble.”

The com­mit­tee’s re­port called for three-part re­form: har­mo­nized stan­dards for ad­vice and plan­ning; reg­u­lat­ing cre­den­tials and ti­tles; and the in­tro­duc­tion of a “univer­sal statu­tory best in­ter­est duty.” The gov­ern­ment has adopted only one of those three rec­om­men­da­tions — and, ar­guably, the eas­i­est one to ac­com­plish.

For re­form to work, the IAFP’s sub­mis­sion sug­gests, the gov­ern­ment will have to take a hard line on out­law­ing the terms “fi­nan­cial ad­vi­sor/ad­viser” as well.

Fur­ther­more, the IAFP’s sub­mis­sion warns that if these ti­tles are not pro­hib­ited, the gov­ern­ment’s at­tempt at en­hanc­ing con­sumer pro­tec­tion will be un­der­mined: “Con­sumers would need to be able to dif­fer­en­ti­ate be­tween fi­nan­cial plan­ning/ plan­ners and fi­nan­cial ad­vice/ ad­vi­sors, and we worry about spe­cial in­ter­ests work­ing against that abil­ity.”

An­other fun­da­men­tal con­cern

Lim­it­ing the use of the fi­nan­cial plan­ner ti­tle will ad­dress key is­sues

for some in the fi­nan­cial ser­vices sec­tor is the lack of har­mo­nized na­tional stan­dards for fi­nan­cial plan­ners that would per­sist even if the On­tario gov­ern­ment goes ahead with its pro­pos­als.

The In­vest­ment In­dus­try As­so­ci­a­tion of Canada’s (IIAC) sub­mis­sion states that any reg­u­la­tory frame­work for fi­nan­cial plan­ners must take a har­mo­nized, na­tional ap­proach: “This is the only way that con­sumers can ex­pect to re­ceive uni­form stan­dards of ser­vice when they en­gage a fi­nan­cial plan­ner. A patch­work ap­proach to reg­u­la­tion, where dif­fer­ent re­quire­ments ex­ist in dif­fer­ent ju­ris­dic­tions, fails to pro­vide the nec­es­sary level of pro­tec­tion that all Cana­dian con­sumers de­serve.”

The sub­mis­sion from the Port­fo­lio Man­age­ment As­so­ci­a­tion of Canada (PMAC) also calls for a na­tional ap­proach to reg­u­lat­ing fi­nan­cial plan­ners: “While we com­mend On­tario for lead­ing by ex­am­ple, we be­lieve that it is also of the ut­most im­por­tance to work to­ward na­tional har­mo­niza­tion i n the near-term, where at all pos­si­ble.”

PMAC’s sub­mis­sion calls on the On­tario gov­ern­ment to work with other prov­inces, reg­u­la­tors and SROs to de­velop har­mo­nized stan­dards for fi­nan­cial plan­ners through­out Canada: “We un­der­stand that this process will be a lo­gis­ti­cally and, per­haps, po­lit­i­cally chal­leng­ing one, but we be­lieve that the value of a na­tional so­lu­tion can­not be un­der­es­ti­mated.”

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