There has been a significant evolution within the financial services sector over the past 15 years and, as a result, there have been many excellent changes to the sector’s abilities to meet the needs of Canada’s financial consumers. However, the sector’s commitment to education has lagged behind the many other improvements.
Thus, I propose that educational improvements be the cornerstone around which any additional legislative and regulatory requirements for financial advisors and financial planners who serve the financial needs of Canadians are based upon. This is not to say that we haven’t seen great improvements in education, but if we are going to put the big issue of protecting the public on the table, then let’s get serious about education.
In fact, one of the risks of broad regulation or legislation is that requirements move to the lowest common denominator to get stakeholder buy-in. The reality is that many errors in advising clients are based on a lack of knowledge and not on corrupt behaviour.
There are multiple players that can improve the educational capabilities of the sector as a whole.
Here are some suggestions for:
- Financial services firms:
- Invest in education by either paying for or reimbursing the educational expenses of advisors and financial planners.
- For the long-term, recruit and attract the best university and college graduates to work in this business.
- Invest in financial literacy materials or support organizations that are developing financial literacy offerings to the Canadian public.
- Financial advisors and financial planners:
- Invest in lifelong learning by achieving a core and/or supplementary designation that will improve your ability to meet your client’s needs.
- If you don’t hold a first university or college degree, then pursue one as the cost, flexibility and access to educational programs has improved vastly over the past 10 years.
- Invest in the financial literacy of your clients by offering them independent information and materials that will potentially improve the balance of the fiduciary relationship between you and your clients.
- Educational providers.
Although standards and oversight of educational providers is long overdue, I’m not recommending anti-competition measures. Rather, I’m recommending a set of measures to improve the quality and standards by:
- The trade-marks branch of the Canadian Intellectual Property Office has strict requirements for educational certification marks in Canada, so let’s ensure all designations used in the financial services sector subscribe to these standards. These include: a robust core educational program of study; proper examination procedures; and continuing annual professional development, just to name a few.
- The registration of such educational providers and quality assurance that meets minimum standards should also be required.
- Let’s ensure that there is competition among high-quality educational providers and that no monopolies are proposed or maintained under the guise of protecting the public.
- Regulators and legislators.
These groups should ensure that any comprehensive rule or legislation that purports to improve the delivery of financial advice to Canadians clearly addresses educational standards and doesn’t leave them as an afterthought. They should focus on the following:
- Ensure that anyone delivering financial advice has consistent educational credentials — whether they’re dealing in insurance or securities — with increasing requirements as the advice becomes more complex.
- Ensure all regulated licensing programs — securities, insurance and mutual funds — have the same quality program of study and examination as well as annual continuing education requirements as things may have changed from the time advisors were licensed.
- If new rules or legislation are enacted for educational proficiencies, then don’t allow any grandfathering to the requirements but rather a remedial process that allows the advisor or financial planner to obtain the new higher standard as experience and education go together and neither is a substitute for the other.
- As noted, consider registering and creating minimum standards for the sector’s educational providers.
This laundry list of suggestions sounds simple and I believe it can be. If we can divert some of the money from overregulation into some areas of the business in order to improve education among advisors and consumers, then we can also improve the financial advice experience to consumers. The remaining regulatory progress can then work more efficiently in a targeted manner to prevent bad processes and actors from negatively impacting clients.