The Investment Funds Institute of Canada (IFIC) and the Investment Industry Association of Canada (IIAC) have teamed up to call on Ontario's provincial government to introduce a requirement that all financial planners be regulated and that a new regulator be created to oversee the financial planners who don't already belong to a self-regulatory organization.
IFIC and the IIAC recommend in a joint submission to Ontario's consultation on possible regulatory reform for financial planners that the provincial government: develop standards for financial planners; that it create a new regulator to oversee financial planners who aren't already regulated, while the existing regulators expand their oversight to financial planning; and that financial planners be required to join the Ombudsman for Banking Services and Investments to deal with client complaints.
Specifically, the two trade groups say that a legal framework for financial planners should be developed by the province's Ministry of Finance along with the Ontario Securities Commission, the Financial Services Commission of Ontario and the new regulator that they envision to oversee the financial planners who aren't currently regulated, which they would call the Financial Planning Authority (FPA).
The proposed framework, which would apply to people calling themselves "financial planners" and those providing financial plans to clients, would set out clear standards for financial planners and financial plans.
The framework would also establish criteria for approving organizations that provide proficiency accreditations to financial planners; however, overseeing these designations would be the limit of their authority, IFIC and IIAC suggest. Accreditation organizations would not have further supervisory authority under the model that these organizations have proposed.
Instead, that authority would remain with the existing regulators for firms that already belong to the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA), along with the newly-created FPA, which would develop rules for financial planners that currently sit outside of the existing regulatory framework. The FPA would oversee their registration, compliance, and enforcement. In turn, the MFDA and IIROC would have to develop their own harmonized rules for the financial planning activity going on within their members.
IFIC's and IIAC's joint submission also stresses that compensation and pricing should not be regulated; but that regulators may require disclosure of the charges to clients in an "easy to understand" format before engaging their services, similar to what's required under the client relationship model reforms.
The big caveat to all of this, the trade groups say, is that Ontario's provincial government should ensure that a similar approach will be adopted throughout the rest of Canada before it's introduced in Ontario.
"IFIC members fully support providing investors with enhanced protection and the comfort of knowing that the financial planning service providers and advisors they work with are subject to similar levels of registration, oversight and enforcement," says Jon Cockerline, director of research for IFIC, in a statement.
"Securities and insurance advisory services and planning that are ancillary to product recommendations are already well-regulated in Ontario, but there are gaps in non-product-related financial planning that need to be addressed for the benefit of investors," adds Michelle Alexander, vice president of the IIAC, in the statement.