Focus on Financial Planning

Keith Costello

Keith Costello is president and CEO of the Canadian Institute of Financial Planners (CIFPs) and the Canadian Institute of Financial Planning (CIFP). Over the past 15 years, Costello has led the creation of educational solutions, practitioner support services and advocacy support for financial planners.

A new document from the FPSC and the IQPF may provide a way to harmonize financial planning standards for financial planners across the industry

By Keith Costello |

The release of a document containing a unified code of ethics, a common set of practice standards as well as ethical and performance standards that clients should expect from a professional relationship with a financial planner will be an important foundation on which to base financial planning regulation compared with the easier option of restricting the use of the title "financial planner."

These standards, which were put out by the Financial Planning Standards Council (FPSC) and the Institut québécois de planification financière (IQPF) in a publication entitled Canadian Financial Planning: Definitions, Standards & Competencies on April 1, will apply only to those who hold the F.Pl. title and certified financial planner (CFP) designation. However, this blueprint can be used to harmonize the standards used industry wide.

So, why is this document so important and how will it ultimately affect financial planners? The great debate has always been: Do we restrict the title or regulate the activity of the financial planner? Further to that, how do we delineate between financial advice and financial planning?

Going back many years to when Julia Dublin, a former Ontario Securities Commission (OSC) official, attempted to regulate financial planning titles in Ontario, these arguments centred around "what is financial planning?"; "who is a financial planner?"; and "what is a financial plan?" compared with other financial services and advice. It was, at the time, the lack of clarity around these questions that contributed to the failure of the OSC's regulatory initiative.

The FPSC's and IQPF's new unifying national standards clarify what financial planning is, who is a financial planner, and what constitutes a financial plan. Moreover, these definitions and standards emphasize objectivity, confidentiality, ethics and client interests first, and a high level of competence as essential characteristics of all financial planners. Most important, these standards state that a true financial planner must be qualified appropriately and agree to be accountable to professional oversight and to putting their clients' interests first.

Now that we have clarity for these questions, we can have the conversation beyond accepting the basic title restriction solution and focus more on the acceptable activities of financial planning and who is qualified to do it by using these new national standards. However, this will be a great challenge as there has never been one common standard, as demonstrated by competing financial planning designations and firms that specialize in financial planning creating their own unique standards. In addition, due to regulatory and compliance concerns, compliance departments are attempting to oversee the financial planning activities of their employees or agents. These compliance departments cannot do this oversight in a consistent manner without a common standard to refer to.

Eventually, common standards will be adopted industry wide in one model or another. If you hold out as a financial planner or provide some form of financial planning services, you should take note of these new standards — especially if you hold the CFP designation or F. Pl. title — so that your practice model and client offerings are aligned to them as a starting point for similar future regulation requirements.

I endorse financial planning title restrictions as a first step in the regulation of financial planning, but believe we must continue and deal with the following questions eventually to create the necessary regulatory structure or professional model for financial planners:

  • What is financial planning?
  • What can a client expect from a financial planning engagement?
  • What are the necessary qualifications of a financial planner?
  • How should a financial planner conduct him- or herself?
  • What is the oversight model for financial planners?