Regulators may finally address what ‘advisor’ means

Ontario Securities Commission may decide on what exactly it means to be an "advisor" or "planner." There's growing consensus that something must be done; but a pathway to reform may be difficult.

Regulators may finally address what ‘advisor’ means

The Ontario Securities Commission may decide on what exactly it means to be an "advisor" or "planner." There's growing consensus that something must be done – among the industry and among investors – but a pathway to reform may be difficult.

“I want to make sure that regulators condone that everyone in the business has continuing education,” said Frank Tooton, an advisor in Nova Scotia who is also licensed in Newfoundland and Labrador, New Brunswick, Ontario, Alberta and BC. “Some provinces don’t require CE [continuing education] credits to be licensed and I think it’s important that everyone that’s out there have some continuing education.”

OSC said it has decided to address issues of accreditation and titles in its review of a best interest standard; which may make the titles of “advisor” and "planner"  more exclusive. “As part of our analysis of the best interest standard we will consider the impact that adviser titles and proficiency standards have on investor protection,” it said in its latest Office of the Investor newsletter.

One challenge is that industry hasn’t established a consensus – with different standards among different industry bodies and associations. Also, there is a lack of a unified vision among the 13 different provincial and territorial regulators.

The OSC had not previously indicated that it would be addressing titles, and the addition comes after consultation with the public and industry groups. Unlike the contentious issues of trailing commissions and whether a universal fiduciary standard is needed, there seems to be a degree of consensus that it is far too easy for an individual to call him or herself an “advisor.”

For instance, at a late-July roundtable on the proposed best interest standard, there was consensus among investor advocates and industry representatives that the alphabet soup of different accreditation standards confuses clients.

“Here [in Ontario], anyone can take the correspondence course from CSI [Canadian Securities Institute], write the multiple-choice exam – and you only need 60% or more to pass,” Ken Kivenko chairman of Canada's Advisory Committee for the Small Investor Protection Association told Wealth Professional. “And then you can sell mutual funds and ‘advise’ – and I say that with quotation marks – I shudder to think that anyone who took that course is actually going to take a 75 year old’s portfolio and do anything good with it.”

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Industry association Advocis – who’s president & CEO Greg Pollock has often debated Kivenko on matters such as commissions – has been lobbying for stricter guidelines on titles.  “Consumers should be able to count on professionalism and accountability from their advisors,” it says. “Unfortunately, they can't. The reality is that almost anyone can hold themselves out to the public as a financial advisor or planner.”

Major differences, however, exist on whether accreditation and use of titles such as “advisor” and “planner” should be regulated by government or by industry.

Advocis advocates a professions model, under which all financial advisors must become members of an accredited professional association, must meet initial and ongoing proficiency standards and satisfy strict continuing education requirements.

Kivenko, however, believes that the Quebec model – where the financial planner (F.Pl.) accreditation is tightly regulated – should be exported to the rest of Canada.

“A financial planner will have to evolve and it will have to be regulated somehow,“ Kivenko said. “I think Quebec is there now, they have a standard of their own – they don’t use Certified Financial Planners, per say, but they have a standard, they have to pass it, and you can’t use a title of a planner unless you really are one.“

The self-regulatory Investment Industry Regulatory Organization of Canada (IIROC) has also noted concerns about business titles and financial designations.

“Some financial designations, including professional designations like the Chartered Accountant designation, require a specified number of years of work or hours of classroom study, passing an examination, and continuing education,” IIROC said in a January call for comments on the issue. “The requirements for others are much less rigorous; in fact, some financial designations may be obtained after a weekend seminar or through online self-study, with a self-administered examination.”

Who do you think should be responsible for advisor designations? Leave a comment below or participate in our poll.