Financial planning should be regulated and financial advice should be subject to a statutory fiduciary duty, recommends an expert committee examining these issues for Ontario's provincial government.
The Expert Committee to consider Financial Advisory and Financial Planning Policy Alternatives issued a report on Tuesday setting out its preliminary recommendations for overhauling the provision of financial planning in Ontario. Specifically, the committee recommends that individuals who serve as financial planners and advisors should be regulated; that licensing and proficiency standards should be harmonized and regulated; and that the provision of financial advice and product sales should be subject to a statutory duty to put clients' interests first.
The committee, which is chaired by lawyer Malcolm Heins and includes former industry executives Paul Bates and Lawrence Haber as well as law professor Anita Anand, says that its research and consultations led it to "conclude that there are gaps and inconsistencies in the regulation of financial planning and financial product sales and advice."
The committee notes that there's a lack of oversight for financial planners who aren't otherwise registered — and even then, there gaps in that oversight. In addition, there's no standard for proficiency or accreditation and a confusing array of professional titles in use.
The lack of a "best interests [duty] is detrimental both to consumers who rely on these services to achieve their financial goals and to confidence in the financial services industry," the committee found, adding that there is "a stark asymmetry" in financial knowledge between investment industry representatives and consumers.
Adopting a statutory duty, the report recommends, "would make clear the legal duty of care and significantly reduce, if not eliminate, confusion (for consumers as well as [the industry]) about whether a duty to act in the best interest of the client applies in a given situation. It would also bring regulatory requirements in line with consumer expectations."
The committee also recommends regulating financial planning titles; introducing a central registry to provide consumers with a one-stop source of information on licensing status, credentials and the disciplinary history of planners; and banning referral fees between regulated planners and unregulated individuals as well as that there be "full transparency with respect to the referral arrangement, including compensation."
The report recommends that financial planners who are already regulated by another authority, such as a securities regulator, should have their financial planning activities overseen by their existing regulator. Those who aren't currently regulated should be overseen by a proposed new Financial Services Regulatory Authority (FSRA), it suggests.
The committee also singles out a couple of issues for further consideration, including the need for simplified complaint and restitution mechanisms for consumers. It calls for a simplified approach to dealing with consumer complaints and a consumer-friendly process for recovering losses by consumers.
"In particular, we have been struck by the veritable maze of different regulators and approaches to consumer complaints," the committee says in its report. "The consumer's interest is of paramount importance, yet there is no clear line of redress when a legitimate complaint arises … the complaint process is not intuitive and is difficult to understand, let alone pursue. We believe that this fragmented regime is disadvantageous to consumers and requires further consideration."
Comments on the report are due by June 17 and a series of town hall meetings will also be held across the province to consider the recommendations. A final report is due this autumn.
"These public consultations will provide the committee with greater insight as to how our government should effectively strengthen the quality of these services while enhancing the sector's regulatory oversight in a way that benefits Ontarians," says, Ontario Finance Minister Charles Sousa in a statement.
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