The Ontario government recently released its long-awaited consultation on its proposed framework for the regulation of financial planners in the province. As anticipated, the proposed framework focuses on restricting the use of the title “financial planner,” but also proposes extending that restriction to similar titles that may further confuse, or even deceive, the public.
Although financial planning should, in the interest of consumers, eventually be recognized as its own distinct profession in statute — along with accounting, law, engineering, medicine and the like — baby steps are needed to get there. The proposed framework set out in the Ontario government’s consultation paper is a step in the right direction. In fact, with a few enhancements — and if implemented effectively — the proposed regulation could be a giant leap forward for consumer protection in the province of Ontario.
To understand why these proposals are so important, you must first cut through the noise to understand the real issue: consumers are confused and, as a result, they’re not getting the help they need from the right people. The 75,000 or more “financial advisors” (120,000 according to some accounts) in this country do not all have the same education, knowledge or proficiencies, and offer very different services. Yet, to the average Canadian, “financial advisors” are all the same. The only way to alleviate this consumer confusion is through government intervention, by defining advisory titles based on education and the corresponding scope of services that specific groups of advisors are competent and qualified to provide.
So, did the Ontario government identify this problem correctly? Based on the proposed framework, the answer is, “mostly.” Here’s a look at what’s right about the most recent proposals:
- The government has taken the right first step to clear things up for consumers by recognizing that one category of “financial advisors” — financial planners — is already well defined and critical to the financial health of Canadians.
- The solution lies in restricting the use of the financial planner title, not in expanding regulation of all so-called financial planning activities for all licensed advisors.
- The current proposals recognize expressly that quality standards for financial planning, and for assessment of competence of financial planners, already exist.
- The government proposes leveraging existing standards by recognizing quality third-party certification as the basis for eligibility to use the financial planner title.
- The government has proposed strict quality standards for what makes an acceptable financial planning certification, including a financial planning curriculum, examination assessment and a code of ethics and corresponding discipline program and process.
- The government goes one step further in proposing to restrict “similar” titles. Without this stipulation, it would be too easy to work around the regulation, further perpetuating consumer confusion.
Although these proposals will go a long way toward demystifying the financial title landscape and helping consumers make informed choices about those they trust for financial advice, and what type of advice to seek out, several concerns remain with the proposed legislation. Here are some suggestions on how the legislation can be enhanced:
- The government refers to certifications that “focus” on financial planning, but there is no definition of how “financial planning” is defined. The Financial Planning Standards Council and the Institut québécois de planification financière have created a widely accepted definition of financial planning. In fact, this definition is accepted universally throughout the industry, and the Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives adopted a similar definition in its final report. To alleviate consumer confusion through title restrictions effectively, it’s critical to adopt a universally accepted definition of the terms “financial planning” and “financial planner.”
- The focus on existing certification is positive, but the government is silent on the subject of the organization(s) behind the certification. That is, there are no proposed standards or assessment criteria for the certification body itself. Imposing robust standards on any organization that wishes to have its certification recognized — such as requiring a public interest mandate through a robust governance structure; assessing the organization’s expertise in financial planning and in assessing competence; ensuring transparency and independence of its disciplinary review process; and ultimately ensuring the organization has the necessary resources and infrastructure to offer an appropriate quality certification — is the missing piece in the regulatory puzzle.
- Broadening the list of restricted titles will mitigate the opportunity for abuse and further reduce consumer confusion.
There’s no magic bullet to resolve the challenges of regulating the financial planning profession fully. The Ontario government’s most recent consultations are not perfect, but they’re the closest we’ve come anywhere in Canada outside of Quebec to a well-considered solution that can be accepted by industry, advisors and consumers alike — as well as set the stage for ultimately recognizing financial planning as a bona fide profession.