Defining financial planning a top task

By Mark Noble | October 5, 2009 | Last updated on October 5, 2009
4 min read

Setting out a vision statement for the next 10 years, the largest financial planning standards body in Canada held a symposium in Toronto on Monday, where the topic of regulating and defining what it means to be a financial planner was front and centre.

Outside of Quebec, anybody can call themselves a financial planner, and the lack of clarity on what it is to be a financial planner is troubling for the Financial Planning Standards Council (FPSC), which administers the Certified Financial Planning (CFP) designation in Canada. Credentialed advisors are lumped in with unlicensed and alleged Ponzi-schemer Earl Jones, who billed himself as a financial planner.

In fact, a recent poll of advisors conducted on behalf of Advisor Group found that 54.2% of respondents referred to themselves as a financial planner.

In light of Jones — who was invoked numerous times on Monday but never mentioned by name — and other well-known advisor misconduct, the perception of financial planners is likely at an all-time low. To combat this, Cary List, the president and CEO of the FPSC, put forward a number of goals that his organization will try to achieve by 2020. These goals are designed to enhance the credibility and quality of financial planning in Canada.

The goals the FPSC has set out for 2020 include:

• Every high-school graduate has experienced some introductory financial planning curriculum by the time he or she graduates. • There is a regulatory environment that restricts who can call themselves a financial planner to those who are qualified through a recognized professional designation that has enforceable standards of ethics, practice and competence. • The industry responsibly promotes financial planning and clearly distinguishes and values financial planning as more than just product advice. • Canadians understand the distinction between investment product advice and financial planning, and “recognize the value and appropriate place for each.”

The regulatory issue is arguably the most controversial and complex challenge. Without a regulatory definition of what it is to be a financial planner, the profession has diminished credibility with consumers.

“If financial planning is to become truly valued by Canadians for what is, a way of helping people manage their financial affairs to meet their life goals, the regulatory environment must also recognize that financial planning is separate and distinct from, yet complementary to, product-based advice,” List said. “In most provinces, anyone can call themselves a financial planner. We would like to see a regulatory environment that prohibits advisors from holding themselves out as financial planners unless they’ve demonstrated their competence and ethical commitment to serving their clients’ interest first, so that those most vulnerable are not at the mercy of unqualified, self-proclaimed financial experts.”

Gerry Matier, executive director of the Insurance Council of British Columbia, gave a talk at the symposium that outlined both the essential need for and difficulty of defining financial planning from a regulatory perspective.

According to Matier, in the last 25 years there have been two major initiatives at a national level to regulate financial planning separately. Both have failed. Inevitably, such proposals get a lot of pushback from the industry, which tends to argue that higher standards are costly and stunt recruitment efforts.

Matier said that in 2002, his organization put out a white paper suggesting that its members not hold themselves out as planners unless they carried one of a number of recognized designations, such as the CLU, CFP or R.F.P., among others.

There’s no enforceable standard that he commented is strange because most of the registered members of his association have one of the accredited designations.

“It’s surprising that the industry does not want to go down this route,” he said. “I think in the life insurance industry we have more people with designations such as the CLU, CFP, Ch.FP, than any other part of the financial services sector.”

Clients don’t care

Education about financial planning to the broader public would go a long way in recognizing that it should work with credentialed and licensed advisors. Matier says in the nearly 20 years he’s been working as a regulator, it’s been almost impossible to implement tangible client education that works.

He says clients are disengaged in educating themselves about the industry and tend to care only when they fall victim to financial misconduct. The Insurance Council has tried numerous methods to use the fines it levies to promote consumer education, but Matier says that those who show up to the seminars and conference are always “informed consumers.”

“Whenever scandals break, it’s always considered to be a failure of the regulators. It’s never considered to be a problem with consumers,” he says. “Consumer education…in the 19 years I’ve been doing this, I’ve yet to find a good method of providing financial planning education to clients.”

He adds, “The people who turned up were informed consumers. They were people [who already knew a lot] and were looking for one or two extra tidbits of information.

Matier argued that financial planning education needs to occur at the high-school level because older clients just don’t seem to care about educating themselves about financial literacy.

“The problem is, the average consumer doesn’t look for help until they’re already into the [trouble],” he says. “If you haven’t learned at this stage, you probably won’t. Likely, the only way you will is if something [unfortunate] happens to you.”


Mark Noble