Why advisors should push for title accuracy

Recent survey of investors highlights how ambiguous titles can alienate clients

Why advisors should push for title accuracy

Investors value advisor titles. Investors are also confused about advisor titles. Those were the core takeaway of an investor survey published by FAIR Canada earlier this month. The survey is part of an effort on the part of the investor advocacy organization to conduct and publish more investor-centric research. A longstanding advocate on issues around title protection, FAIR Canada found near-universal agreement among investors that advisor titles and qualifications should be standardized.

95% of survey respondents supported the establishment of a common standard and regulatory framework for anybody using the title of financial advisor. 91% agreed that governments should ensure financial advisors meet high standards before they can provide financial advice. 92% agreed that individuals using the title of financial advisor should be proficient in all core areas of personal finance and 72% agreed that if an individual’s primary responsibility is to sell financial products, “salesperson” should be required in their title.

JP Bureaud believes that the industry needs to hear investor concerns around titles and adapt their practices accordingly. The executive director and CEO of FAIR Canada outlined his key takeaways from the survey results. He explained what advisors can do to help meet this demand for greater title clarity and argued why he believes it is in advisors best interest to clarify their titles for clients.

“They want truth in advertising,” Bureaud says. “Investors appreciate honesty in the long term. Misrepresenting what you actually do to your client is not a great way to start a relationship. I think people will appreciate the honesty and the clarity and it can help advisors ensure there’s a good fit between the services they offer and the services clients need.”

Bureaud noted a mystery shopping exercise conducted by securities regulators a few years ago. In the 88 shops the shoppers walked into, they found 48 different titles used by advisors. Some of that ambiguity comes down to regulatory fragmentation and the different bodies an advisor is subject to based on what they sell. Some of it, too, is a product of ‘title inflation,’ adding terms like “senior” or “VP” to a title to convey gravitas. What that has created, in Bureaud’s view, is a situation where investors are confused about what their advisor is trained on and what they are qualified to provide.

Through their own investor research FAIR Canada found that many investors don’t understand the various distinctions between different advisor titles in the industry. He notes the common example of a client speaking with a portfolio manager about budgeting and tax planning questions, which might be better answered by a financial planner.

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“It's not very clear what a financial advisor is, there's no common understanding of what makes somebody qualified to be a financial advisor,” Bureaud says. “For the average investor, I think they rightly assume that is somebody that can provide them with comprehensive advice about their financial situation. But they may not appreciate when they're dealing with somebody, for example, in the securities industry, they're actually only getting investment related advice. They're not necessarily getting advice about how to manage their debt, or whether paying off their mortgage would be a better investment of their hard-earned savings.”    

Bureaud believes that change needs to come from a wide range of stakeholders on this issue. Regulators need to strive to protect investors from ‘worst-case-scenario’ situations. Governments need to thoughtfully enact and standardize their title protection frameworks to move away from a provincial patchwork that may only create more confusion. Industry, too, needs to lead. Bureau believes that a shift in the use of titles needs to begin with the industry itself and that choosing to do so will result in better outcomes for clients and advisors in the long-term.

“I think it's very important for advisors to have a conversation with their clients. And they should not assume the client understands necessarily, who they're dealing with,” Bureaud says. “It's really important that you actually have that conversation. Be very clear about what services you can offer, what products you can provide advice about, equally, what you're not qualified to do and work towards trying to ensure there's a good fit between the services you provide and want to provide and the services the client needs.”