It would be fair to say 2020 has been a year of change and challenge. Some changes were thrust upon us, while we have long looked forward to others.
A long overdue and welcome change is the Financial Services Regulatory Authority of Ontario’s (FSRA) recent publication of its proposed rule on regulating the use of the “financial planner” and “financial advisor” titles. The rule, which is currently out for a public consultation period, fleshes out critical details of the Financial Professionals Title Protection Act and promises to usher in a new era of protection and clarity for Ontarians who rely on financial planners or financial advisors for critical support and counsel.
It is hard to overstate the potential significance of FSRA’s proposed rule in helping eliminate longstanding consumer confusion around who is qualified to provide what form of financial advice in the market. A thoughtful approach to the development and implementation of the new rules and regulations will not only safeguard public interest, but also become a model for other Canadian provinces to follow. (Saskatchewan, which passed similar title regulation legislation in 2019, has already signalled its desire to harmonize with Ontario’s regulations, which is very welcome news.)
By all accounts, this has been a difficult year. As we went into a lockdown, unemployment soared to record highs, throwing many household finances into disarray. While the economy is slowly on the mend, it will be a long road to full recovery. When consumers are seeking out financial professionals, they will need to be confident that those they engage with are qualified to offer them sound, sage advice and help them navigate the ongoing uncertainty.
This challenging economic environment has only heightened longstanding concerns about the lack of restrictions on the use of titles within the financial services industry. For too long, consumers have had to navigate a myriad of vastly different qualifications, licences and professional obligations of people calling themselves financial advisors or financial planners.
If clarity around industry titles was important in the past, it is now critical.
Given the current climate of uncertainty, the implementation of a strong titling regime is vital to serve the interests of consumers. While FSRA’s proposed rule is an excellent start, there are still opportunities to enhance it. For example, there is a proposed requirement for approved financial planning credentials to have a minimum duty of care to their clients, which is positive. But there should be absolute clarity that such a duty would require all financial planners to put the best interests of their clients first and above all others. This would not only eliminate any doubt in the minds of the consumers, it would also reflect current accepted standards of the financial planning profession.
Another key determinant of the new framework’s success will be consumer education. For the framework to be effective, articulating the purpose of title regulation will be vital to building consumer support and confidence in the long run. In this context, FSRA’s consultation takes the right approach in seeking collaboration between government, regulators, credentialing bodies, industry and other stakeholders to create consumer education campaigns. Stakeholders must work collaboratively to ensure the new framework has the intended impact and that consumers clearly understand the differences in the knowledge, skills and abilities of financial planners and financial advisors.
For public policy initiatives of this magnitude, the implementation strategy and the time allowed for a smooth transition make all the difference. It will be important to take a principled approach that minimizes transition challenges for the industry and, more critically, serves the best interests of consumers. While allowing adequate time for a transition is important, we must not lose sight of the fact that allowing more time than necessary and delaying implementation at a time of heightened economic uncertainty may not best serve consumers.
The framework is a significant change, one that has been years in the making. It marks the dawn of a new era for the financial planning profession in Ontario. Implemented effectively, it will also serve as a model for other Canadian provinces and go a long way in contributing to a harmonized national approach to regulations.