Title protection framework isn't improving consumer protection, insists advisor
Even though Ontario’s new regulations for financial advisor and financial planner titles recently came into effect, there are still many concerns about the new title protection framework.
“There was some change in that advisors’ titles were being used according to the regulation, at least by large institutions,” Jason Pereira, a financial planner with Woodgate Financial in Toronto and president of the Financial Planning Association of Canada (FPAC), told Wealth Professional.
“But the problem is that now that the SROs are part of the framework, that effectively makes everyone who was licensed at the MFDA or IIROC a financial advisor, regardless if they have any credentials. So, effectively, the financial advisor title is now a giant whitewash rubber stamp for the entire industry.
“Now, anyone who was licensed to sell product in the country is going to be a financial advisor. It is what it is.”
The regulations were introduced under the Financial Services Regulatory Authority of Ontario (FSRA) on March 28. They leverage existing licensing and professional designation bodies, requiring that those who use the titles hold a FSRA-approved credential from a FSRA-approved credentialing body, meet minimum education standards, and abide by a code of conduct. The credentialing bodies must actively oversee the credential holders and have a disciplinary and complaints process.
The new regulations allow some transition time for title users to comply with the new rules. If they used one of the titles before January 1, 2020, but now need an approved credential, they have two years to do that to be a financial advisor and four years to be a financial planner.
If they began to use one of the titles after January 1, 2020, they must immediately get an approved credential to continue to use the title. The FSRA can issue compliance orders for those who don’t.
Pereira is also concerned about the credentialing bodies that the FSRA has approved. He said that some of the institutions that have been approved have some “massive deficiencies”, including the fact they were supposed to be in charge of enforcement, but didn’t have a mechanism to track complaints. Others had courses that were deficient in key areas, such as ethics.
“It’s one thing to say that you cover a topic area. It’s something else to do it to a level of proficiency that matters, and there’s no measure of proficiency in any of these things,” he said. “And how do you approve a body that basically does not track complaints for decades? Now we’re just going to trust them to do it going forward?”
Pereira noted that the other provinces that are proceeding in this area are New Brunswick and Saskatchewan. He said New Brunswick is aware of what happened in Ontario and Saskatchewan still says that it wants to institute a higher standard than Ontario’s. While some talk of harmonizing this across the country, he’s not holding out hope that Ontario’s situation will be improved since national harmonization tends to harmonize to the lowest, rather than highest, common denominator.
“The real question we should ask ourselves is: did they get it right? And the answer is no,” he said. “This isn’t, at its core, a consumer protection initiative. So, how does taking people who pass the licensing standard – not a proficiency standard for advice, but a licensing-to-sell products standard, those are two separate things – how does making them all financial advisors change anything from a consumer protection standpoint? The answer is: it doesn’t.”
While Pereira noted there are some initiatives underway, which he is involved in the proficiency standards, he’s not optimistic that all of the regulation’s challenges will be fixed.
“I don’t see a solution for it. The wheels have been set in motion, and typically, that just moves to fruition. So, the problem is we’re left with a less than perfect framework,” he said. “There are a lot of people who consider this mission accomplished. So, we had an opportunity to get this right the first time, but we didn’t.”