The financial services industry’s recent attempts to transition to a professional level of advice have been hampered in large part by a “design flaw” in the current regulatory framework, according to Cary List, president and CEO, Financial Planning Standards Council (FPSC).

Speaking at the Canadian Institute of Financial Planners (CIFPs) annual conference in Niagara Falls, Ont. on Tuesday, List said, “There is a fundamental flaw in the industry where professional service is actually being overlaid on a regulatory structure that is actually product/sales based.”

As a result, there is no proper professional standard for financial planners, which in turn has caused some confusion amongst the Canadian public. For instance, most Canadians believe there is some level of oversight or accountability for financial planners, said List, however that is not the case.

In fact, there is no legal recourse for a client who feels they received an ill-prepared financial plan, said List, because financial planning advice is not transaction based and therefore outside of the realm of securities regulators. The FPSC does hold its certified financial planners accountable to its standards, said List, but that is based on a contract not the law.

Yet rather than trying to find a solution with the regulators, List argued that the industry needs a separate structure to uphold financial planning standards.

“The last thing we would want is additional layers of regulation,” he said. “But we do need to perhaps take a long hard look at how regulation works in this country, what is being regulated and who is being regulated.”

To make sure that those who hold a financial planning designation are properly monitored and regulated, List said the industry must establish a unified definition and set of standards for financial planning, financial plans and the title of financial planner that are accepted and upheld nationally across all financial services sectors.

As well, to add clarity and credibility to the financial planning profession, List said Canada needs an independent professional body that understands the public interest and will hold practitioners accountable.

Finally, List also said the professional body must have the power to restrict people who continue to present themselves as financial planners without the proper designation.

Click here for more news from the conference.