The diverse regulatory and licensing requirements facing financial advisors who sell both securities and life insurance result in a complex system that fails to effectively protect consumers, a panel of industry experts said on Thursday.

Speaking at an Advocis Symposium in Toronto, four panelists spoke about the challenges facing advisors involved in the sale of both securities and life insurance. The speakers agreed that there are problems with the system that is currently in place.

“We have collectively failed, and everybody has responsibility in this,” said Robert Fleischaker, president of Stonehaven Financial Group, an independent financial advisory firm in Markham, Ont. “The system that’s in place has not achieved the desired results.”

Dave Velanoff, president and CEO of MGI Financial, agreed: “I don’t think it’s serving the public adequately.”

Another panelist was Jim Hall, the Saskatchewan Superintendent of Insurance and chair of the Joint Forum of Financial Market Regulators’ Intermediary Regulation Committee. The committee held consultations earlier this year with industry stakeholders to determine whether there were conflicts or regulatory burdens facing financial advisors who are dual-licensed.

He said given that securities and insurance products are very different in nature, different regulatory regimes are necessary to a certain extent.

“There are justifications for differences in regulatory structures,” said Hall.

But he said the regulatory regimes should be based around the same common standards that seek to protect consumers, and he admitted that the diverse rules had potential to result in undue regulatory burden for advisors.

“Inevitably, advisors that choose to be dually licensed will face more requirements,” said Hall.

Some advisors appear to be narrowing the scope of their business to avoid this regulatory burden. Hall admitted that the committee heard anecdotal evidence that some dual-licensed advisors were dropping their mutual fund licenses, and others were dropping their insurance licenses. But he said the evidence did not add up to a clear trend.

During its consultations, the committee found that advisors did not, in fact, face any substantial conflicts or regulatory burden around the different licensing and continuing education requirements for insurance and securities.

“There’s doesn’t appear to be any conflicts between the regulatory requirements, and an undue burden does not appear to have been a significant issue,” Hall said. He said the committee’s full report would be released in 2010.

But the other panelists argued that there was significant room for improvement with the current system. Harold Geller, a partner with Milton, Geller LLP with expertise on issues concerning financial advisors, said the fragmented regulatory system fails to adequately protect consumers.

“The system is broke,” he said. “We can’t have multi regulators with different rules and lack of clarity to you, the advisor, to pass on to the consumer. How can that work?”

With multiple licenses and no clear set of standards for financial advisors, Geller said the system creates confusion for consumers, since they have no way of knowing how to select a trusted financial advisor. He calls for a single set of principles and standards guiding all financial planers.

“Let’s get away from dual-licensing, and arbitrage, and frankly I think, misleading representation,” Geller said.

Velanoff agreed that advisors should establish a single set of standards. In particular, he said education for industry players must become more coordinated. He suggested that the industry work together with post-secondary institutions to establish a specific course that would become mandatory for all new advisors, in order to build credibility in the industry.

“I think this industry has to take a stand on what the future of the business is going to be from an educational standpoint,” he said.

IE