A new report recommends fundamental reform to the way financial planning and advice are provided in Ontario. The big question is whether the government is prepared to act on the proposals.

In mid-March, the Ontario government quietly released the final report from a committee that studied the regulation of financial planning and financial advice. The province had assigned the committee the task of tackling the issue in April 2015. The committee published its preliminary report last spring, then finalized its proposals after another round of consultations over the summer.

At the heart of the report are calls for standards in the way financial planners and financial advisors present themselves to the public and a requirement that advisors act in the best interest of their clients.

However, the final document was released with little fanfare – or comment – by the government regarding whether it plans to adopt the report’s recommendations.

Scott Blodgett, senior media relations advisor with the Ontario Ministry of Finance, says the government is reviewing the report’s recommendations and “will have more to say in the coming weeks.”

The Canadian Foundation for Advancement of Investor Rights (FAIR Canada) broadly supports the report’s proposals, and calls on the government to endorse the recommendations. Marian Passmore, director of policy and COO at FAIR Canada, is “optimistic that the recommendations will be pursued.”

Among other things, the report recommends that individuals who present themselves as financial advisors or financial planners should be subject to regulation that includes minimum proficiency standards and restrictions on their use of those titles – and be required to adhere to a statutory best interests duty (SBID) toward clients.

To make this happen, the committee’s report calls for new legislation that would broaden the mandates of the existing provincial regulators to cover financial advice and planning specifically.

The report also calls for the regulators to develop harmonized requirements that would apply to everyone offering those services, including individuals who are not currently regulated, such as fee-only planners.

The Financial Planning Standards Council also welcomes the report’s proposals. The council has stated that it is pleased to see the report recommend that the use of the title “financial planner” be restricted to qualified individuals and pledges to work with the government to implement reform.

Yet, as the report makes clear, the biggest challenge to reform isn’t determining what needs to be done; it’s how to make it happen.

“Many of our recommendations are not novel,” the report states. “Looking back on previous efforts, we believe the challenge is not in identifying areas of improvement, but rather in implementation.”

Previous efforts to regulate financial planning have failed for various reasons. The regulatory landscape is fragmented along both geographical and industry lines. And some planners aren’t regulated at all.

This fragmentation makes adopting reforms that both cover all purported planners and protect all prospective clients difficult.

With that reality in mind, the report proposes reforms that can be accomplished without radically changing the existing regulatory framework. The report recommends relying on existing provincial regulators – the Ontario Securities Commission (OSC) and the Financial Services Regulatory Authority (FSRA) – to oversee financial planning and advice. The FSRA is a new agency that will replace the Financial Services Commission of Ontario, as announced by the provincial government last November.

“By leveraging the current regulatory framework, our approach avoids the risk of further regulatory fragmentation,” the report notes, rejecting other models that were proposed during the consultation process.

The regulators then would be expected to develop a common set of standards to establish proficiency requirements, limit business titles and impose an SBID on advisors. The committee’s report states that this approach “will allow consumers to know clearly for the first time that their financial planner or financial advisor is well qualified, well regulated and has an obligation to act in their best interest.”

The proposal to introduce an SBID for advisors comes at a time when most members of the Canadian Securities Administrators (CSA) also are considering whether to introduce their own SBID. These overlapping efforts highlight the implementation challenge facing reform in this realm.

The committee’s report acknowledges the CSA’s efforts and supports that initiative. Yet, the report also maintains that for securities regulators alone to adopt this sort of standard would not be good enough, as it “risks regulatory arbitrage and undermines consumer protection.”

Instead, the report insists that a universal SBID should apply to all firms and individuals that provide planning or financial advice, or sell financial products, regardless of industry.

“Ontario should not wait for members of the CSA to act,” the report states. “Ontario should take the lead and enact a universal SBID in the interests of consumers across the province.”

A spokeswoman for the OSC notes that the report’s recommendations in favour of a SBID appear to align with the commission’s position on the issue: “We look forward to the government’s decision on the recommendations.”

The OSC isn’t alone. Financial services firms, investor advocates and others await word from the provincial government on this issue, as well.

With Ontario’s next budget expected this month, a prime opportunity to stake out a policy position should come fairly soon. And, although the report was released publicly only in March, the government has had it for several months now. (It was delivered on Nov. 1 of last year.) So, the government has had time to digest the recommendations and possibly develop a policy approach in time for the upcoming budget.

The handling of this report also is consistent with the way in which the Ontario government dealt with another major consultation on the financial services sector last year.

In that case, the committee reviewing the mandates of the existing provincial regulators for insurance, pensions, credit unions and mortgage brokers delivered a final report to the government at the end of March 2016, which was publicly released three months later. The government offered no comment regarding that report – until November, when plans to create the FSRA were announced.

So, the provincial government’s initial silence doesn’t mean that this report is destined to be ignored.

“The government is committed to bolstering consumer protection to help everyone build their prosperity,” Blodgett says. “That’s why we took the proactive approach of putting together an expert committee to review industry practices and provide recommendations. “

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