This global economic meltdown is beginning to expose great shortcomings in the fi nancial services industry. Maybe that’s a good thing, as it’ll shine the spotlight on areas that need real change.

Let’s start with the regulators. Advisors across Canada are bombarded with paper shuffl ing and disclosure work, all in the guise of protecting investors from charlatans. But a far more devastating absence of regulation is coming to light: The complete lack of oversight of things such as leveraged credit default swaps and ABCP. This has cost consumers far more than anything one advisor could do by failing to complete a form.

But who rates the investments, equity and debt given to advisors to distribute to the public? And who holds the regulators accountable?

A prolonged downturn will also expose the dismal fund performance of some managers. Sure, managers can blame the markets, yet others operating in the same markets have made money. So when do we realize some of these managers shouldn’t be handling the public’s money, and when do dealers take those funds off the shelf? When do advisors stop recommending them? And when do fund companies stop merging a bad manager’s funds with better ones to paper over poor performance?

This downturn could be the fi – nal push that sends clients fl eeing to the banks. But that comes with other risks, since it’s a bad time to sell equity investments. Yet the biggest redemptions are those of the large bank funds. Why? I’d venture to guess it’s because the investors losing the most are either managing their own accounts at a bank discount brokerage or dealing with some salaried order taker. Independent fi nancial advisors at least have some skin in the game.

Not that all advisors should be let off the hook. Too many of them masquerade as holistic fi nancial planners, while doing nothing but gathering assets to build large books. Financial plans are written documents outlining client goals, and the strategy to get there. They also include discussions about the client’s safety and security, true risk tolerance, life and health insurance needs, saving and lifestyle goals, and consultations with other specialists to assist in areas such as tax and estate planning.

Studies consistently show consumers who go through the planning process are better off in the short, medium and long terms. They know why they’re buying certain products, the strategies that surround them, and how they help them reach their goals. They’re also far more likely to hang in when things get tough.

If planning is done correctly, almost by default the advisor will also be successful. The sad part is very few advisors take the time. For example, getting an insurance licence only became fashionable with the asset-gathering crowd after segregated funds became an in-vogue product. But how could someone ill-prepared to discuss something as fundamental as life and health insurance call himself or herself a fi nancial planner? Or, to put it in more current context, why is it that annuities are rarely talked about with a client who needs a safe, secure, and ongoing retirement income? Advisors need to look in the mirror, and dealers need to look at the business practices of their advisors and really question if what they are doing is correct and in the public’s best interest.

Change is upon us, and for the good of the industry and consumer it can’t come soon enough.