Ontario's government is in the process of conducting a multitude of reviews of the financial services sector, with the apparent goal being wide-reaching reforms. In this light, merging the Ontario Securities Commission (OSC) with the Financial Services Commission of Ontario (FSCO) would provide the most benefits, with more tailored regulation of financial planners and financial advisors.
The Ontario government has announced its intention to create an expert panel to thoroughly consider more tailored regulation of advisors, including financial planners. Furthermore, it has just announced the members of an expert panel to review and provide recommendations on the mandates of two of its financial services sector regulatory agencies: FSCO and the Deposit Insurance Corp. of Ontario (DICO). In addition to these ambitious initiatives, Ontario is continuing to work with the federal government to create a co-operative national securities regulator.
The big question is whether Charles Sousa, Ontario's minister of finance, understands that all these potential reforms — especially FSCO's future mandate — must be linked back intrinsically to financial planning and customer protection.
In announcing the creation of the panel to review FSCO and DICO, Sousa made three main points:
- Financial services is one of the fastest-growing sectors and very important to the Ontario economy.
- There is a need for consumer protection.
- This need for consumer protection must be achieved while fostering a strong business environment.
These are important points as only through streamlined and effective regulation can financial planners and advisors give consumers cost-effective and valuable advice that allows consumers to participate in the financial services system to meet their future retirement needs.
In my view, any potential recommendations coming from these various reviews should be implemented in the following order:
- Determine what consumers need.
- Determine how the direct providers of advice — financial planners and advisors — should serve their clients.
- Determine how the regulators should ensure the system operates effectively.
Here's hoping that Sousa has someone in Ontario's Ministry of Finance do a macroeconomic analysis and that he, along with his team, create a uniform plan that capitalizes on the cross dependencies of the various reviews and delivers the optimum benefits.
Considering this approach, how could a merged FSCO and OSC help financial planners and their clients? Financial planners provide holistic advice and services to clients that encompass all areas of financial services including securities, insurance, mortgages and debt management. Furthermore, many financial planners implement their advice through licensed activities such as securities, mutual funds, insurance and mortgage products. Ultimately, FSCO and the OSC manage these activities through policy — and better integration on the policy side would be beneficial to ensure consistency.
Ontario's government has stated the following objectives for its expert panel on financial planning: "An analysis of relevant issues surrounding the profession, such as the sufficiency of regulatory frameworks; proficiency and education requirements; the use of multiple titles; consumer access to information and compliant registration; and potential conflicts of interest."
Whether directly or through delegated bodies, such as the Mutual Fund Dealers Association of Canada, the Investment Industry Regulatory Organization of Canada, or a new professional body for financial planners, a merged FSCO and OSC could better ensure the government's objectives around financial planning are achieved and evolved.
Specifically, a merged FSCO and OSC could better direct the licensed activities that financial planners perform and the compliance around them by providing:
- More harmonized regulatory policy.
- Consistent proficiency and education requirements, such as ensuring the insurance, mutual fund and securities licensing exams cover common learning objectives that are not unique to a specific class of products.
- Consistent continuing education (CE) requirements in frequency and level of difficulty. (Case in point: the mutual funds industry is now finally talking about CE for mutual fund licensed representatives.)
- Common titles recognized in both insurance and securities sectors that are backed by minimum proficiencies and code of conduct standards.
- Most important, a common and standard database for all licensed registrants and one point of contact for consumer information and complaints.
For the financial planning activities and enforcement that sits above these licensed activities, a merged FSCO and OSC would be better able to work with any legislatively formed professional body for financial planners to ensure an enforcement link between common financial planning activities and licensed activities is achieved.
So, if Sousa wishes to foster a strong financial services sector while protecting the interests of financial consumers in Ontario, then merging FSCO and the OSC and linking this initiative to his financial planning reforms is a good start. If implemented correctly through streamlined, but more effective, regulation, financial planners will be able to offer their clients advice at an affordable cost and operate their activities under a more consistent and harmonized system.