The case for certification

Lack of trust is leading Canadians to forgo much needed financial advice, writes Cary List, but there is a way for the industry to build credibility

The case for certification
There are countless reasons why Canadians need financial guidance more than ever. Personal debt levels are the highest in history, baby boomers are getting squeezed on both sides (from supporting their kids to supporting their aging parents), millennials have none of the financial and economic certainty of their parents’ generation, and the social safety net is eroding.

Yet even amidst all these challenges, too many Canadians are not getting the financial guidance they need, and there’s good reason. Many Canadians fear that anyone they turn to for professional advice will end up selling them products they don’t understand and/or need. And many leave their interactions with advisors no more confident in their financial future than when they came in.

According to an FPSC study, the number-one factor preventing Canadians from seeking the financial help they need is lack of trust. Too often, the expectation of poor advice has led Canadians to seek no advice at all, and society is paying for it. So how does an industry that has lost the trust of its clients gain it back? How do advisors rebuild the confidence that has been lost?

The financial services industry was built on products and then slowly evolved into siloed advice on investments, insurance, credit, etc., mostly all still focused on product-category solutions. This view of the world created a large number of silos among advisors. The problem is that Canadians’ lives aren’t divided into neatly packaged, mutually exclusive segments. Most people’s needs, goals and priorities overlap all aspects of their lives, and solutions can’t be found in isolation.

That’s where financial planners come in. In fact, the Certified Financial Planner designation was introduced to Canada to fill this gaping hole, creating a group of highly skilled professionals who are trained to handle the integrated holistic financial planning needs specific to Canadians. CFP professionals are the women and men who are trained to see the big picture, to see their clients’ needs in an integrated fashion, and to understand the interdependencies and implications that a financial decision will have on a client’s entire financial health.

CFP professionals have to demonstrate their competence based on the highest standard for the profession. In order to achieve the designation, they must have successfully completed a core curriculum program and approved capstone course, pass two examinations, and demonstrate that they have completed three years of qualifying work experience. Once certified, CFP professionals must also annually attest to upholding the standards, including a continuing education requirement, and agree to be held accountable to FPSC for their actions.

Sounds good, right? But there’s a catch. The title ‘financial planner’ isn’t restricted based on appropriate professional certification. Anyone, regardless of qualification, is permitted to use the title. And thousands do. Thus, instead of gaining the trust of consumers through high professional standards and clear-cut designations, we continue to have an environment where trust is diminished through lack of clear, consistent standards and title restrictions, which would ensure accountability.

The term ‘financial planning’ is too often used as a sales pitch, and the title ‘financial planner’ is used haphazardly throughout the industry. The majority of those who imply through title and/or advertising that they are financial planners are in fact licensed and qualified only to give advice relating to product recommendations or purchase. However, expertise in product advice does not equate to competence in financial planning.

So would-be clients remain confused and at risk. They expect, and have a right to expect, that anyone holding themselves out as a financial planner is qualified, competent, ethical and accountable to the public. For financial planners to be seen as true professionals, we need to ensure that the title is restricted for use exclusively by those who have earned it and who are willing to be held accountable to the standards expected of a true professional.

Governments must act to codify in law the professional certification structure, governance and oversight mechanisms that will ensure all who wish to claim financial planning as their field are made to live up to the standards, as CFP professionals do today. Only then will Canadians be assured that when they seek out the advice of a financial planner, they are in good hands.

Cary List leads the Financial Planning Standards Council as the premier standardssetter for the financial planning profession in Canada. FPSC’s purpose is to drive value and instil confidence in financial planning.