by Paul Lucas
IT may be designed to offer clients clarity about whether their advisors are up to standard or not – but plans to introduce new regulation on the title ‘financial planner’ have been criticised as being likely to “increase confusion” by one industry expert.
Greg Pollock, president and CEO of Advocis, the Financial Advisors Association of Canada, has questioned plans by the Mutual Fund Dealers Association (MFDA) to introduce standardisation of the financial planner term among mutual fund members, believing they don’t go far enough.
“We believe that solely focusing on regulating the term ‘financial planner’ and not considering the term ‘financial advisor’ does not do the industry or consumers any good,” he said. “We must cast the net wider and work to diffuse public confusion about the roles of advisors and planners.”
It was during the autumn last year that the MFDA first issued a consultation paper examining the issue of whether there should be regulatory standards in place to examine how the term ‘financial planner’ is used. According to Karen McGuinness, the senior vice-president of member regulation and compliance at the MFDA, the current regulatory rules “didn’t really make sense” and it was time to address concerns raised by both the industry in general and by the public.
During a consultation period there was majority support from commentators on the introduction of a certified financial planning designation (CFP). It was also noted in numerous responses that designations should include a code of ethics, practice standards and include both examination and educational requirements.
However, in the view of Greg Pollock, the MFDA’s proposals are not far-reaching enough to make a difference – and in fact, they could even add to existing confusion.
“What the MFDA is suggesting will only apply to people who hold a MFDA license and will increase red tape, cost, and confusion for consumers and advisors,” he said.
“There is a misconception that only those with a CFP designation are qualified to do financial planning. In fact, all financial advisors in Canada are required by existing rules and regulations, which come from many different regulators (OSC, IIROC, FSCO, and the MFDA), to do financial planning as part of their advisory services.
“Advocis is proposing a model that will ensure all financial advisors are properly regulated, and we emphasized this point in our submission to the Ontario government’s Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives
“The expert committee appointed by the Ontario government is reviewing the ‘financial advisory’ profession—not just financial planning. As an industry we have a responsibility to increase professional standards for everyone, not just a select few.”