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.

Financial planners and advisors need to take note of this new proposed rule when deciding on what financial planning designation to earn

By Keith Costello |

The Mutual Fund Dealers Association of Canada (MFDA) has recently released MFDA Rule 1.2.5 (Misleading Business Titles Prohibited) for comment. Despite the name, the rule is all about restricting the use of the "financial planner" title among approved MFDA-licensed representatives unless they have one of the specified financial planning designations and meet its ongoing requirements.

Financial planners and financial advisors need to understand and follow this proposed rule's development for several reasons:

  • It may affect how you use your current financial planning designation or what designation that you may choose to earn in the future, if you are an MFDA-licensed rep.
  • It will either bring clarity or confusion to the public when you hold out as a financial planner.
  • It may be a blueprint for securities and insurance regulators, and/or governments, to restrict the use of the "financial planner" title.
     

The rule attempts to set minimum proficiency requirements for the use of the "financial planner" title by requiring:

  • educational requirements focused on comprehensive financial planning;
  • examinations that demonstrate competency in financial planning;
  • adherence to a Code of Ethics, Standards of Practice or Standards of Professional Responsibility;
  • completion of financial planning continuing education; and
  • a process whereby the designation's granting body can remove the designation in appropriate circumstances.
     

The rule is proposing the following designations as meeting the minimum proficiency requirements for the use of the "financial planner" title:

  • Certified financial planner (CFP)
  • Certified international wealth manager
  • Chartered life underwriter
  • Financial planner
  • Personal financial planner (PFP)
  • Registered financial planner
     

The proposed rule also allows for a mechanism for MFDA staff to approve additional or future financial planning-oriented designations if they meet the core criteria outlined above.

So, how does this proposed rule measure up to the three issues for financial planners and advisors noted earlier?

First, how will this rule affect how financial planners and advisors use their existing designations, or what designations they'll seek to obtain in the future? It's clear that standards are going up for designations centred on financial planning. If your current designation doesn't meet these new criteria the MFDA has set, then prepare to upgrade yourself. Furthermore, these new criteria should be used in selecting any future designations that financial planners and advisors may seek to achieve.

Second, will the rule bring clarity or confusion when a financial planner holds out to the public? There are two points of view on whether it will clarify who delivers financial planning to the public: One is that the MFDA should only approve a few standard comprehensive financial planning titles, such the CFP or the PFP, as the public will still be confused with the number of titles that the MFDA has approved. In fact, upon review, some of the titles approved may be more specialties or what are called "modular" financial planning designations. The other point of view is that multiple titles are fine, and as long as the MFDA sets some rigorous criteria for approval of such titles, then the public will be protected.

I believe this to be a moot argument as, ultimately, the best solution is that a professional order similar to the accounting and legal professions should be setup nationally to self-regulate financial planners and work with bodies such as the MFDA.

Finally, is this MFDA's new proposed rule an indicator of an industry-wide movement in which insurance and securities sectors would also regulate financial planning oriented titles? The MFDA has had dialogue with the Ontario government's expert committee  exploring more tailored regulation of financial advice and financial planning alternatives and believes the proposed rule is aligned and complementary to the committee's work. The MFDA's proposed rule is the first national tangible action to begin regulating financial planning in Canada. It may be a quick win for securities and insurance regulators to follow the MFDA's lead and harmonize financial planning title restrictions.

MFDA Rule 1.2.5 (Misleading Business Titles Prohibited) may mark the start of the regulation of financial planning in Canada. Thus, financial planners and advisors should follow the rule's development and prepare for its potential effects on their holding out of financial planning title.

See: MFDA wants to regulate "financial planner" title