At long last, the Ontario government is regulating who can use the titles of financial planner and financial advisor in the province.
The Financial Professionals Title Protection Act was passed earlier this month and the Ontario government is now working on regulations for implementing the law.
It’s hard to believe, but anyone can call themselves a financial planner or advisor and take clients in every province, except Quebec. There’s no need for any special education, training or qualifications to give potentially life-altering financial advice.
Often, the people using the title financial planner, or some other similar title, are actually investment salespeople, as is explained in a report by the Public Interest Advocacy Centre (PIAC).
“For most Canadians, their experience with the financial planning industry does not involve actual financial planning at all. What it does include is a meeting with an individual who has a title that leads consumers to believe they are receiving financial planning advice. However, in reality consumers are dealing with financial salesperson who is employed by organizations to solicit a specific product or series of products.”
The Ontario law will be enforced by the newly created Financial Services Regulatory Authority (FSRA), but the actual awarding of financial planner and financial advisor credentials will be done by professional organizations approved by the FSRA.
Ontario has yet to say which credentials will be recognized or what organizations will be involved in granting them.
While investor advocate Ken Kivenko acknowledges the law is better than no regulation, he was cautious about declaring it a win for investor protection.
“This is potentially a step in the right direction. Let’s wait and see.”
Kivenko says he wants to know who the credential-granting organizations will be, and what standards they will maintain in issuing and overseeing credentials.
He notes industry organizations have a poor record when it comes to supervising the conduct of their own members. And he asks whether the government is really ready to take on the banks and insurance companies over the titles they use for their legions of investment salespeople.
For a better regulatory model, you need look no further than the system in Quebec, where financial planners are regulated by the independent Institut québecois de planification financière (IQPF).
To be certified as a financial planner, individuals must meet high education standards set by the IQPF and follow continuing professional development courses. They are subject to disciplinary penalties for misconduct, must declare conflicts of interest and are prohibited from most self-dealing, according to the PIAC report.
The Quebec system also prohibits the use of a long list of titles, including financial advisor and wealth advisor.
It’s certainly positive that Ontario has moved to regulate the use of financial planning and financial advisor titles. But it remains to be seen how effective the new law will be in protecting investors.
The province needs to ensure the highest standards are maintained throughout the system—from granting credentials, to ongoing professional development to enforcement.
Hopefully, other provinces will soon follow suit. Ideally, there would be just one national regime, and it would be based on the Quebec model. In the real world of Canada’s patchwork of provincial regulators, I’ll settle for a system that actually delivers the quality of advice and protection that investors need and deserve.