Providing consumers with clarity over titles and designations within the wealth industry is an ongoing challenge for regulators but overall proficiency standards among advisors continue to rise.
Two senior directors from the Canadian Securities Institute sat down with WP to assess the current state of the industry heading into 2019 and the role it plays in preparing advisors for regulatory changes.
Marc Flynn, Regulatory Relations and Credentialing, and Marshall Beyer, Credentialing and Licensing Strategy, gave their thoughts on the biggest changes for advisors, the pressures of maintaining standards, working closely with the regulators and what makes a good money manager in 2019.
One perennial issue that often vexes many within the profession is the lack of clarity around financial planning designations and titles.
Flynn said the topic has been mulled over by regulators for years, more recently by the Ontario Minister of Finance and the Mutual Fund Dealers Association.
He believes more clarity is needed for consumers to understand better where an advisor’s expertise lies but questioned how best to do that, with “financial planner" just one of many titles used in the industry.
Flynn added that there are two ways of looking at it: what an advisor holds him or herself out to be and how the designations tally with the changing role of a money manager.
He said: “From the regulators’ perceptive, their priority is consumer protection. If somebody is calling themselves a financial planner without any particular expertise or designation, regulators might consider that confusing for the client.
“The traditional stockbroker who focused on stock picking and transactions, that was the role 25 years ago. Now an advisor is still trying to grow the money but is also having to deal with other issues like budgeting to making a will and anything in between.”
The IIROC 30-month post-registration requirement, fulfilled by completing the CSI's Wealth Management Essentials course, contains a lot of financial planning elements in it and Flynn believes a regular IA these days has a rounded expertise around broader advice. Further designations are available for advisors looking to take it one step further and go more deeply into financial planning or high-net-worth wealth management.
He said: “Are regulators looking at this to lift the bar in terms of proficiency and use labels that are correct? I think they are. We would consider financial planning just one of the roles. It’s more visible and well-known.
“You could have wealth manager or financial advisor but there is a movement to simplify the titles to make it easier for the consumer to understand what some people call the alphabet soup.”
CSI is at the forefront of changes in the industry, given its mandate with IIROC to keep the courses up-to-date, run the exams for them and provide student relationship and support. It has 19 IIROC-sponsored courses, whether that be for advisory, discretionary or branch manager, and mandates with other regulators, such as the securities commission.
So what makes a good modern-day advisor? Beyer said times have changed.
“If you would have asked that question many years ago I would have said one that makes the client money largely through stock picking,” he said. “If they made money for the client, they were a good advisor and if they lost money, they were a lousy advisor!
“It’s probably still true to some extent but the business has changed from a transaction-based business to more of an advice business. And it’s that personal relationship … that’s what a lot of clients would say drives the relationship and how they view their advisor.
“That advisor is the person they come to for all sorts of personal financial matters and if the advisor doesn’t have the answer, he or she works on behalf of a team of experts that might be able to provide the solution. I think it’s really changed.”
Beyer believes that in his 35 years in the industry, the proficiency standards have consistently moved up, with the introduction of the post-registration and continuing education requirements meaning advisors go beyond that initial licensing level.
Pushing those standards higher – or even maintaining them – while accommodating for regulatory changes, is a responsibility not to be taken lightly. Flynn, however, insists that is simply what the CSI does, with subject matter experts tracking their area and its regulatory changes.
He said: “”Ultimately, the standard is set by the regulator such as IIROC but because we focus on the education and proficiency every day, we work closely with them and are very involved in fleshing out the curriculum of the courses.
“We realise that new entrants, but also professionals, have other things to do than take courses so there’s a balance there between raising the bar and making it too onorous or too costly. That balance is the main thing.”
A good example of how the CSI adapts is the recent changes to the mutual fund regulations that came into effect on January 3, paving the way for retail investors to have access to alternative products previously available only to private and institutional investors. These are formally known as alternative mutual funds but commonly referred to as liquid alts.
The CSI has set up a course to help advisors and financial institutions meet their KYP requirements before they sell products to clients.
Beyer said: “It’s a fairly significant development in the Canadian industry and a lot of the banks are all lined up and ready to go, but they have to make sure their advisors are knowledgeable enough to sell these investments.”
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