The recommendations from the Ontario government appointed Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives to study the financial advisory and planning sectors fall short in relation to how financial planning should be regulated. In addition, Ontario Finance Minister Charles Sousa's support of the Expert Committee's recommendations concerning the regulation of financial planning is disappointing.
The Expert Committee's recommendations centre on restricting the use of financial planning titles without proper credentials. Furthermore, regulators such as the Ontario Securities Commission and the new Financial Services Regulatory Authority and/or their delegated regulators will oversee the activity of financial planning and the use of titles in conjunction with appropriate credentialing bodies.
Although these bodies are effective regulators, financial planning is unique. As most financial planners realize, according to a recent survey conducted by the Financial Planning Standards Council (FPSC), the best solution is to regulate financial planning as a profession in law — and they should not accept anything less.
The Expert Committee's recommendations have many good items, such as:
- Defining and restricting titles for financial advice without appropriate credentials.
- A best interest standard when holding out to clients.
- A central registry for consumers to check and verify the registration status, credentials, discipline history of those providing advice.
- Enhanced financial literacy and investor education of Ontarians.
Unfortunately, grouping financial planners in with all providers of financial advice will not produce the most effective and efficient model of regulation — nor provide clients with the best protection. I have always argued that the exercise of regulating between financial advice and financial planning is a matter of proper definition and delineation. This means that financial planning is comprehensive and ongoing whereas other financial advice may be specific and one-time. Providing such comprehensive and professional advice to clients will have far-reaching consequences for their lives.
As such, this advice should be given and regulated similar to lawyers and accountants under a professional model enshrined in legislation. This is the best long-term model to ensure that financial planners are qualified and ethical by being overseen by, and accountable to, an appropriate professional body for their professional conduct.
So, why should Sousa change course and enact legislation to set up a professional body for financial planners in Ontario? The nature and delivery of financial advice is evolving rapidly thanks to the emergence of financial technology that allows for automated, self-service advice for financial consumers and the increasing separation of advice from products. What will be left is financial planning in which independent, comprehensive and sophisticated advice will be needed to steer the overall financial directions of consumers.
The current recommendations from the Expert Committee as they relate to financial planning are designed for the current state of the financial services system. By enacting these recommendations, Sousa will be legislating policy for the past, not for the future.
Moreover, there was one repeated argument against the creation of a profession in law for financial planners during the various consultations: there's no desire to create another regulator. Still, the recommendations do suggest that the existing regulators should work with various credentialing bodies to set standards, so why not work with a professional body?
Most costs to run such an organization are already attributed within the current system; furthermore, the capabilities to oversee a professional model already exist, namely through the FPSC.
It's clear that we can still create a future oversight system for financial planners that will meet the evolving sophisticated advice needs of financial consumers by creating a profession in law. Financial planners should continue to lobby for it, as it's a goal with great merit.