A recent Investment Executive commentary suggests that the next economic crisis could be driven by “bad advice” from unqualified financial advisors, and points to Ontario’s new title protection regime as a model solution. While Ontario’s efforts to regulate the use of the financial advisor title mark a positive step forward, it’s important to consider whether the current framework truly addresses the underlying risks to consumers.
In particular, the broad definition of financial advisor in Ontario may still leave investors vulnerable to over-reliance on professionals whose primary role is sales, rather than comprehensive advice.
Ontario’s Financial Services Regulatory Authority (FSRA) has implemented rules requiring anyone using the titles financial advisor or financial planner to hold a credential from an approved body. This initiative is designed to ensure a minimum standard of education and ethical conduct. However, the standard for financial advisor is set in a way that allows many individuals registered as mutual fund or securities representatives to use the title, even if their main function is selling financial products.
This broad approach means that many professionals who are primarily product salespeople can now present themselves as financial advisors. While these individuals are certainly knowledgeable about the products they offer, their expertise may not extend to the full range of financial planning topics — such as tax strategies, retirement planning or debt management — that consumers often expect from someone with the advisor title.
The salesperson challenge
Many investors assume that a financial advisor will provide holistic, client-focused advice. However, the reality is that some professionals using this title are primarily compensated through commissions on product sales. This can create a potential conflict of interest, where recommendations may be influenced by compensation structures rather than what is best for the client.
This is not to say that all sales-based advisors provide poor advice. Many are dedicated professionals who act in their clients’ best interests. The concern is that the title alone does not clearly signal to consumers the scope or nature of the services being offered. This can lead to confusion and, in some cases, disappointment if clients discover that their advisor is unable to address broader financial planning needs.
FSRA’s regime establishes minimum educational and ethical standards for title users, which is a positive development. However, some investor advocates and industry observers have noted that these standards may not go far enough to distinguish between comprehensive financial planners and those whose primary role is sales.
The risk is that consumers may place undue trust in the title, believing it guarantees a higher level of expertise or a fiduciary standard that may not actually apply.
The importance of clear distinctions
Other jurisdictions, such as Quebec, have taken a different approach by tightly regulating the financial planner title and ensuring that product sales representatives are clearly identified as such. This helps consumers better understand what to expect from each professional and make more informed choices about who to trust with their financial future.
Ontario’s model, while a step in the right direction, could benefit from clearer distinctions between those who provide comprehensive, client-focused advice and those whose primary responsibility is product sales. This would help align consumer expectations with the actual services provided and reduce the risk of over-reliance on advice that may not be fully tailored to their needs.
Ontario’s title protection regime represents meaningful progress in raising standards and accountability in the financial advice sector. However, it is important for both regulators and the industry to continue refining the framework to ensure that titles accurately reflect the qualifications and responsibilities of those who use them. Consumers should be empowered to make informed decisions and understand the nature of the advice they are receiving.
As we look to prevent the next crisis of “bad advice,” it is essential to recognize that regulatory solutions must go beyond titles. They should also address the underlying incentives and qualifications that shape the advice consumers receive. Only then can we ensure that the promise of better protection truly matches the reality.