Canada’s investment industry is hungry for competition in the business of educating and accrediting financial advisors. The hope is that having new players in this field will lead to lower costs, more choice and better courses.

The Investment Industry Regulatory Organization of Canada (IIROC) launched a public consultation in July regarding how advisors and other industry personnel should be educated and licensed. Currently, the Toronto-based Canadian Securities Institute (CSI) has an exclusive deal to provide industry education to IIROC firms, but that deal is set to expire in January 2016.

The consultation, which ended in mid-November, reveals a hearty appetite within the industry for competition in this area.

“We’re not advocating for any type of lowering of the standards,” says Michelle Alexander, vice president and corporate secretary with the Investment Industry Association of Canada (IIAC), noting that the industry believes greater competition is warranted because “it usually breeds innovation.”

The IIAC indicates in its submission to IIROC’s consultation that many firms believe they should be getting better value from industry education. The IIAC submission also notes that firms feel that the courses are too expensive, the course materials need to be improved and that exam questions could be better. In fact, the IIAC reports that some have found errors in both the existing course materials and exams.

Thus, the IIAC submission recommends that IIROC consider moving to a model for providing industry education that’s more like the approach the Financial Industry Regulatory Authority (FINRA) has taken in the U.S. Under that model, the regulator retains responsibility for setting the content and administering licensing exams, but there is a free market for developing course materials and delivering the content.

A concern with the FINRA model is that it may not be feasible in Canada, given the smaller population within the industry and the fact that IIROC probably would have to hire significant staff to take over the development and administration of proficiency exams.

The CFA Institute, the Charlottesville, Va.-based keeper of the chartered financial analyst (CFA) designation, suggests in its comment to IIROC that the FINRA model is not viable in Canada, given our smaller market. The submission notes that there also would be heightened demands on firms to get involved with industry committees to help keep exam questions and course content outlines up to date. All of this could place a “substantial burden” on the industry.

As an alternative, the CFA Institute says, the model used by the Financial Conduct Authority (FCA) in the U.K. would work better in Canada, as that model requires much less regulatory involvement. The FCA simply sets a minimum standard for exams and accredits educational providers that meet those standards.

The IIAC acknowledges that the FINRA model may be too much for Canada’s securities industry to support, and thus proposes a “hybrid” model that would see IIROC outsource the exam process to an outside firm (possibly CSI) and open up the market for providing the education for the exams.

The submission from Smarten Up Institute, a Vancouver-based industry education firm, suggests a fourth alternative, pointing to Australia, which was not discussed in IIROC’s consultation paper, as a possible model for Canada.

In Australia, regulators set minimum proficiency standards for advisors and require firms to ensure their reps meet those standards; the courses offered to meet those standards must be accredited.

Although the authorities in Australia are considering reforming their industry education, Smarten Up’s submission points out that the existing Australian approach provides advisor education at one-third the cost incurred in Canada despite the fact Australia has significantly less scale – the advisory force in Australia is only about two-thirds the size of Canada’s. There’s also much greater competition among education providers in Australia, with more than 100 firms involved with training and education.

This approach also appeals to the IIAC, Alexander says: “If Australia can do it, why can’t Canada?”

At this point, there’s no clear consensus on which model IIROC should follow, but there does appear to be broad support for change. The one voice that hasn’t been heard from is the CSI itself. It didn’t provide a submission to the consultation.

“At this time, we do not feel that it is appropriate to comment on the process,” says Amy Umpleby, assistant director of marketing with the CSI. “[But ] we are confident that the outcome will be in the best interest of the financial services industry and its professionals, and [will] protect the interests of Canadian investors.”

IIROC will “publish a response and next steps once we’ve completed our analysis,” says Paul Riccardi, IIROC’s senior vice president, member regulation.

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