Focus on Financial Planning

Cary List

Cary List is president and CEO of the Financial Planning Standards Council (FPSC), a not-for-profit organization based in Toronto that develops, promotes and enforces professional standards for financial planning in Canada through the certified financial planner (CFP) designation.

There’s much to commend in the Ontario government’s Expert Committee’s preliminary recommendations, but also some areas that need to be revisited

By Cary List |

The Ontario government-appointed Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives (Expert Committee) weighed in with its recommendations on April 5 after much anticipation. Included in this draft are eight preliminary policy recommendations on which the Expert Committee is seeking public input prior to delivering its final recommendations to the Ontario government this autumn. Although there is much to support within the Expert Committee's recommendations, they also miss the mark in some key areas.

In developing the eight relatively simple, straightforward recommendations, the Expert Committee established several core principles that act as a beacon for the ultimate recommendations, all of which are laudable.

The first of these core principles is at the crux of the issue: any solution must be seen through the lens of the consumer, thereby ensuring that opportunities for turf protection will have no place within the final recommendations. The Expert Committee also recognized that any recommendations must give due consideration to the importance of the financial services industry and its participants to Ontario's economy.

The Expert Committee also commented that any solution must avoid unnecessary complexity and duplication. These principles are critical to ensure the financial services industry can continue to thrive, and to provide consumers with every opportunity to access quality professional financial planning.

Finally, tackling the enhancement of regulatory cohesion and consistency, while a holy grail in this country, is laudable.

Within the recommendations, there's much to commend, including:

  • Harmonization of standards for education, training, credentialing and licensing of financial planners, if properly implemented, can go a long way toward enhancing consumer confidence in financial planners and reducing confusion about the qualifications and competencies of individuals dealing with their financial matters.
     
  • Introducing a best interest duty is worthy and consistent with the expectations of every other recognized profession in Canada. To this end, consumers seeking professional financial planning guidance and advice will have greater confidence that they can trust their financial planner if he or she is unequivocally obligated to always put their client's interest first.
     
  • One of the greatest sources of consumer confusion is the myriad titles and credentials used throughout the financial services industry to describe or suggest any number of skills or competencies. Without any statutory restrictions or regulatory rules to ensure the title is descriptive of the service provided and that the credentials floated are genuinely meaningful and indicate legitimate demonstration of the appropriate knowledge, skills and abilities that the client should be able to expect, consumers will continue to be confused. Thus, the Expert Committee recommends restricting titles — particularly that of "financial planner" — to those who are qualified and duly certified. Eliminating the use of other titles that serve only to confuse or mislead would be a big step forward, going a long way toward reducing consumer confusion.
     
  • Although most regulators, professional bodies and associations maintain registries in which consumers can search for licensed, registered or certified individuals, the establishment and promotion of a "one-stop shop"  in the form of a central registry, coupled with plain language titles, can reduce the burden on the consumer to search for the "right advisor."
     
  • Supporting and encouraging the financial literacy of Ontarians is a recommendation only Scrooge would oppose.
     

Despite these commendable goals, the Expert Committee's attempt to simplify a very complex and longstanding issue has created more questions than answers, and in some instances, has missed the mark when it comes to some of its own principles. Specifically:

  • The Expert Committee recommends that financial planning in Ontario should be regulated. Although regulating or restricting the title, or holding out, of "financial planners" is straightforward and provides additional protection for consumers, the Expert Committee has chosen to extend its recommendation to regulating all "financial planning activity."

    The definition used to describe "financial planning" is reasonable, but it remains unclear what regulation of this activity would actually mean in practice and how that might differ from activities that the self-regulatory organizations (SROs) already regulate. It's also unclear how regulatory cohesion would be achieved by tasking not less than four regulatory or self-regulatory bodies with the regulation of all financial planning activity of their members.
     
  • The Expert Committee's recommendation that individuals who currently "perform financial planning activities outside the current regulatory framework" have their activities regulated by the new FSRA creates an undue, unnecessary and impractical regulatory burden on the myriad individuals who have been trained to provide some specific form of financial planning activity as part of public or other services. This includes, for example, credit counselling or community services, tax preparers and even lawyers. Any attempts to regulate "financial planning" activity broadly will lead to untenable regulatory burden and confusion as well as more problems in practice than it will solve in furthering the public interest.
     
  • Although harmonization of standards is appropriate, this recommendation offers no insight or guidance as to how this will be achieved. "Working co-operatively" is always a good thing, but any attempts to date to address this issue have been less than successful. It remains unclear what this proposal does to change that, and there is no reference to well-accepted National standards already in existence.
     
  • The recommendation that addresses financial titles and holding out, while laudable in its intent, creates more questions than it does answers. Once again, it is recommended that "regulators work together to develop a circumscribed list of approved titles." Although that's a laudable aspirational statement, it's far from clear how it can be achieved — particularly given the failed history of past regulatory harmonization efforts.
     

The Expert Committee's recommendations raise many unanswered questions, but they provide several necessary elements for a strong foundation to move ahead. By building policy solutions based on the Expert Committee's stated principles, a practical, sustainable policy solution may be within grasp.

However, this can only be achieved by unprecedented co-operation among governments, regulators, professional bodies and industry associations to address the many outstanding issues and ultimate implementation challenges that lie ahead.

Will the Ontario Expert Committee's policy recommendations succeed?

Much support for Ontario expert panel's recommendations

Expert committee calls for regulation of financial planning, statutory duty