Regulations for planners

Regulation of planners may be in the works

March 24, 2017

As a regular reader of this column, you will recall that there is no regulation of financial planning in Canada, except in Quebec.

That means that anyone can use the terms “financial planner” or “financial planning”, just as anyone can use the term “financial advisor” and a variety of other similar terms. This is not the fault of real financial planners.

On the contrary, the two professional bodies that are committed to enforcing financial planning standards and practices have been trying literally for 30 years to convince the securities commissions across the country to allow them to restrict the use of “financial planning” to practitioners with the proper education, qualifications and designations, along with written commitments to ethics. Approved planners would also agree to subject themselves to the enforcement of professional standards.

Sounds sensible, does it not?

Good news is that there was some encouragement from Ontario this week that the regulatory bodies might finally start to move in that direction.

The “Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives” submitted its final report March 16, 2017.

The report calls for titles that would be “absolutely clear” about the services and products being provided to the consumer by those whose title includes the word “advisor”. There seems to be a clear recognition that special rules are required for those who purport to provide advice, versus those who only provide products or services.

There would be significant restrictions on those who may hold themselves out as financial planners, including naming a credentialing entity or entities, to require and force the standards outlined in the third paragraph above.

Hallelujah. The obvious entities would be the two that actually understand financial planning as a separate professional activity from product sales - the Financial Planning Standards Council (FPSC) and the Institute of Advanced Financial Planners (IAFP). The designations they grant are CFPR (Certified Financial PlannerR) and R.F.P.R (Registered Financial PlannerR) respectively.

Those organizations have long advocated for regulatory standards for people who hold themselves out as financial planners. They have always required a duty of care to clients and the requirement in their codes of ethics that the client’s interests are always put first.

This puts them out in front of another recommendation of the Expert Committee, that advice givers be required by statute to keep the client’s best interests ahead of their own.

It seems to me that only organizations with such a commitment, and no vested interest in product sales, profits or conflicted mandates, can be the organization that grants credentials to financial planners.

The Expert Committee described its recommendations as a “tripartite approach.” The main pillars including a new harmonized regulatory framework, the duty to act in the best interests of clients, and the simplified titles and credentials for advisors, based on strengthened proficiency requirements.

The report recommends the creation of the Financial Service Regulatory Authority to assist the Ontario Securities Commission in the regulation of advice-giving financial professionals. Those two bodies would be given new powers to regulate financial planning, the provision of financial advice and those individuals who sell financial products. (We expect that the ultimate regime would be duplicated in other provinces.)

Advice givers who also sell regulated financial products and insurance would continue to be supervised by their current regulators, but with new powers. Importantly, the report encourages the regulators to formally recognize organizations that have the sole authority to grant credentials to financial planners.

Carrying out that recommendation would make me a happy man.

                                                                      * * *

Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.Please consult legal, tax, insurance and investment experts for advice on your unique situation.

                                                                      * * *

David Christianson, BA, CFP, R.F.P., TEP, CIM is a Certified Financial Planner and senior advisor with Christianson Wealth Advisors, a Vice President with National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.