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Canadians desperately need to improve their ‘hiring literacy’ when selecting a financial planner, according to the Financial Planning Standards Council (FPSC). It would help if all advisors would clearly define their professional standing.

Recently, the FPSC found that an alarming number of Canadians operate on blind trust when choosing assistance.

It also found that far too many Canadians are grossly misinformed about the required qualifications and ethical obligations of their planners and advisors.

Quebec is the only province that actually regulates the provision of financial advice, but 70% of Canadians believe all individuals must be licensed to call themselves a “financial planner”. Almost half (42%) believe that strict regulations exist in all provinces regarding who can hold themselves out as a financial planner.

So, how should advisors react to the hiring illiteracy of their clientele?

Cary List, president and CEO of FPSC, outlines the growing need for Canadian consumers and investors to do their research.

“We strongly encourage Canadians to hire smart,” List says. “Unfortunately, we operate in an industry where the clients must do their part—regulation can only go so far. Individuals must always check credentials [because] poor ‘hiring literacy’ can put you at risk of engaging individuals who may misrepresent their qualifications.”

As a result, List points to the fact that advisors and planners who put themselves out there as industry professionals should possibly consider the benefits of actually getting proper credentials.

In the face of a generation that will hopefully improve their hiring literacy and be more careful about choosing planners, credentials may help advisors stand out from the crowd.

“There are expectations that go with the title,” List stresses. “In the context of being a [certified] professional, you are not simply selling but are required to provide equal [and excellent] services all around.”

He also has reservations about how planners and advisors are defining themselves independently. Since product sales are regulated, salespersons must abide by certain rules. But pure advice is unregulated, creating a grey area between advice and product sales.

In his opinion, he “would rather see the term ‘financial advisor’ disappear” in favour of more transparent titles. In List’s ideal world, those who do not hold professional credentials should simply be referred to as financial products salespersons.  Those with the CFP designation could call themselves “planners” whether they sold product or not.

List believes this arrangement would “remove a layer of risk for clients” and clarify the positions, services and limits of different financial professionals.  Having uniform standards against which professional can be measured should make it easier for the consumer to compare prospective service providers.

The survey also found that 54% of Canadians believe all financial advisors are accountable to an oversight body when, in reality, financial advice is largely unregulated in Canada.

List said there are at least two or three non-certified planners for each of the 17,500 CFP professionals in Canada. And while you don’t need credentials to give good advice, the consumer needs to know which standards apply to their advisor.

For example, CFP professionals follow clear, “aspirational guidelines” and are required to adopt the Golden Rule by putting clients’ needs first, according to List, citing the CFP Standards of Professional Responsibility.

Non-certified advisors, on the other hand, are subject to no particular governing body or mandatory professional oversight, besides that of product regulation and fraud statutes.

“There are many professionals [both certified and uncertified] who offer highly competent and ethical service, but Canadians must protect themselves in the absence of common national standards. It’s critical they know what the red flags are,” says List.

Originally published on Advisor.ca

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