If figuring out advisor titles was a mystery novel, the book would be called “The Curious Case of the Misplaced Vowel” — and the protagonist would be a world-weary retail investor trying to sleuth her way out of a byzantine regulatory maze.

Back in March, CBC ran a story based on a report called “Advisor Title Trickery: Your Financial Advisor is a Commission Sales Person.” The report was published in October 2016 by the Small Investor Protection Association (SIPA).

The story claimed reps were calling themselves “advisors” to mislead customers into thinking they are “advisers.” In the SIPA report, “advisers” are defined as people with “a true fiduciary professional responsibility [that] is legally required.” Since other registrants only have a suitability responsibility, they are salespeople.

The SIPA report highlighted that most advisors must only meet a suitability standard, and that of the more than 120,000 Canadian registrants, only 3% are in the “advising representative” category as of Sept. 2016. Advising representatives are defined on the Canadian Securities Administrators’ (CSA) website as “a person who provides advice on securities to clients. They can manage your investment portfolio according to your instructions. They can also make decisions and trade securities on your behalf.”

CSA, the national group of provincial securities administrators, confirmed in an email that “adviser” is a legal term used in securities legislation and that it refers to “a category of registration for those that are in the business of advising in securities.” Conversely, the term “advisor,” says CSA, “is a colloquial term that captures a broad range of firms and individuals that would cover both advisers and dealers registered under securities legislation, but is also often used in the context of others that provide financial advice.”

CSA adds: “Some of these individuals and firms may be licensed or regulated in another area (such as insurance, mortgage or banking), or they may not be regulated in any formal way (stand-alone financial planners, for example).”

The distinction between the terms seems clear. But since “advisor” is used by such a broad range of professionals, it’s no wonder clients are confused.

“A lot of people think I’m against advisors and that is not the case,” Stan Buell, president of SIPA, tells Advisor.ca. “We feel it’s the regulatory system that’s the problem. People are being deceived by the financial industry and how it’s organized.” Buell was told by CSA via a 2014 letter that use of the “advisor” title “is not generally prohibited.” (It’s one of the reasons CSA has proposed titles reform.)

To Buell, the framework’s current lack of limitations means “that title is absolutely worthless for a qualifying title.”

“There’s no industry quite like the securities industry when it comes to title inflation,” says Prema Thiele, securities lawyer at BLG. “We’ve got people calling themselves things that — I would agree with the regulators — [are] misleading.”

But is that inflation as basic as the adviser/advisor distinction? Reading the CBC piece, you’d think our novel’s villain is a nefarious “advisor” who uses an “O” with the same gusto as a replica purse maker that uses “Hermez” instead of “Hermès.” To help solve the mystery, our heroic sleuth just needs to find an “adviser.” Give her a magnifying glass and a search engine, and she’s set.

It’s more complicated than that.

Both advisors and investors are confused

First off, in the National Registration database, provincially registered people with a fiduciary duty are called “advising representatives” – making it impossible to tell whether the word “advising” is derived from “advisor” or “adviser.”

Even then, “advising representative” is outmoded. Says lawyer Thiele: “Nobody, except for people like me, calls them advising representatives.”

Not even the reps themselves use that terminology. “Most portfolio managers describe themselves as such, or we use ‘investment counsellors,’ the old term,” adds Melissa Ghislanzoni, legal counsel at the Portfolio Management Association of Canada. Indeed, Advisor.ca checked the websites of 20 people registered as advising reps; all called themselves “portfolio manager” or “investment counsellor.”

Secondly, the vowel distinction is not well-known even among financial professionals. When asked, some industry players thought the difference was British versus American spelling. Others (including portfolio managers) said they’d never heard of “adviser,” except under American legislation. Some thought “advisor” was the legally correct term.

That confusion shows up in practice. Advisor.ca searched LinkedIn for Canadian users in the financial services industry who called themselves some form of financial “adviser.” Of the first 26 people in the search results (representing the first three pages of results), 24 objectively used the term “adviser” inappropriately – seven weren’t in the CSA database (despite purporting to work at known financial firms), six were MFDA, six were formerly registered (not as advising reps) and five were IIROC non-discretionary.

Of the 24 who used the term incorrectly, few called themselves “advisers” outside LinkedIn (one person used several titles across their different online accounts), creating further confusion.

Buell blames lack of direction on how to use titles, and a focus on products and commissions over client service, for this type of misuse. While there are rogues in the industry, he notes, that lack of direction means “some [advisors] are just hapless pawns in the game the industry is playing.”

And if advisors themselves are confused, where does that leave clients? Buell says many investors “don’t know if their advisors have fiduciary duties—and most don’t think they need to know, because they trust their advisors.”

So, who’s really an adviser?

The SIPA report equated the term “adviser” with “advising representative,” even though, as CSA reminds us, “There is no ‘adviser’ or ‘advisor’ category in NI 31-103.”

CSA validates SIPA’s interpretation, saying, “If [an] individual is registered in the category of ‘advising representative’ or ‘associate advising representative,’ then they are an adviser.”

Yet this isn’t stated in CSA’s explainer document about registration categories, nor clearly on CSA’s website. Quite the opposite: the site has a section called “Working with Advisers” (with an “E”) that’s stocked with documents referring broadly to advisors of all registrations, not just those with a fiduciary duty. In fact, a fiduciary duty isn’t mentioned in the documents, which state that “an individual’s title won’t tell you if they’re registered or in what category, so ask and be sure.”

Seems clients need to be super-sleuths to find out what “adviser” really means.

IIROC portfolio managers appear as salespeople

In Advisor.ca’s analysis of the 26 LinkedIn users, one was an advising rep, and the other was an IIROC-registered portfolio manager.

Was the IIROC PM correct? Not according to CSA.

Unless you’re provincially registered by one of Canada’s 13 securities commissions, you’ll appear in the national registration database as a dealing representative—a mere salesperson.

To find the status of an IIROC-registered discretionary manager, users must then go to IIROC’s AdvisorReport (helpfully linked on the CSA database page) to check background, qualifications and discipline history. Only there does the portfolio manager approval category show up for individuals. (Why not go to the IIROC database first? The client would have to be certain that the person is IIROC-registered; non-IIROC people, including provincially registered managers, won’t show up in that database.)

That’s a lot to ask of an average investor. As of May 15, 2017, there are 3,521 portfolio managers registered with IIROC.

Further adding to the confusion is that IIROC portfolio managers are also fiduciaries. As IIROC tells Advisor.ca, “Under Canadian common law, given the nature of their relationship with clients (i.e., provid[ing] discretionary management), [IIROC-registered] portfolio managers will generally be found to owe a fiduciary duty to their clients.”

Knowing this, should CSA ask provincially registered PMs to use “advising representative”—or at least “adviser”—to denote their special status and alleviate confusion? Not according to CSA’s own releases.

CSA has suggested “advisor” for fiduciaries

In Consultation Paper 33-404, CSA suggested using the title “securities advisor – portfolio management,” or plain old “advisor,” as a title for discretionary managers.

Why not “adviser,” we asked CSA, given its legal status? Its response was that the titles in 33-404 were “provided for consultation purposes only.” It added that the “or” titles “would apply to broader ranges, whereas ‘er’ would still remain a specific registration. […] We recognize that the number and variety of business titles used in the investment industry is confusing for investors.”

CSA says it’s considering all feedback on titles. Thiele says that’s a good thing: “A lot of folks don’t like the chosen words for the [new] titles that were proposed,” she says.

This dissent was evident in a 33-404 update that CSA released on May 11. While non-industry commenters “support limiting the use of specific client-facing titles,” says CSA, the industry is concerned about CSA’s “prescriptive” and “over-broad” proposals that commenters say fail to reflect the differences in registration categories.

Read: Battle over CSA reforms reveals industry cracks

As a result, CSA may officially propose different titles. Over the next fiscal year, it will consider “changes to refine or eliminate a number of the prescriptive elements from the targeted reforms,” and has noted that proposed proficiency reforms will be addressed in a separate project. The process will end in rule proposals that will be published for comment.

None of this matters for insurance reps

As Advisor.ca has highlighted before, insurance licensees do not fall under CSA jurisdiction, so they won’t be subject to any titles reform. They can call themselves “advisor,” “adviser” or anything at all.

And even if titles are restricted at the national level by CSA, it’s unclear how the rules will be enforced or how investors and even advisors will be educated about the definitions. Given the existing misuse of the term “adviser,” the regulators have a big job ahead of them.

So what’s the real issue?

The advisor/adviser debate makes good headlines (and novel titles). But it misses the larger point.

First, titles confusion is caused by more than misuse of “adviser.” In its communications, CSA has repeatedly highlighted a 2015 mystery shopping report that revealed the use of nearly 50 different business titles with clients.

The use of so many titles — and advisors’ habit of using multiple titles — is what “creates confusion concerning proficiency, and representatives’ status and responsibilities within their firms,” says CSA.

CSA’s letter to Buell noted that the use of titles like “vice-president” is growing, and said that “while an officer of a firm may be designated to be a VP, the use of the title is not reserved to actual officers of a corporation.”

Ontario’s new proficiency proposals aim to regulate anyone offering financial advice and products in the province, regardless of registration or licence, and that includes mandating specific titles. But in the rest of Canada, insurance-only and non-regulated folks would still remain outside the regulators’ grasp.

Based on that issue as well as likely fragmented adoption of CSA’s proposals, Buell says current regulatory initiatives are only “muddying the waters because the regulators can’t even get together. Unless you get the fundamentals right, the rest really doesn’t matter. The industry isn’t set up to provide financial advice [and prioritize clients’ interests], but to sell financial products,” he notes.

As such, says Buell, “I think people have to be better qualified [to enter the industry], but also that there should be a legislated fiduciary duty for anyone who’s providing advice or selling product.”

The main message

“At the end of the day, an investor is not going to necessarily appreciate the difference or importance [of] an ‘E,’” says Ghislanzoni of PMAC. “This is about the underlying policy issue, which is when an investor is dealing with a person, what does their title connote about their duty and their qualifications and proficiency?”

To that end, plain-language titles are key, says Thiele of BLG. “One of the titles [CSA suggested] was ‘securities salesperson – proprietary firm.’ I’m not sure an educated citizen would know what you mean by proprietary firm; that’s not how people talk. What I don’t want is to have a title that requires yet another disclosure obligation.

“We need titles that […] we’re all going to understand.”

What do you think? Comment below or email us.

Also read:

Opinion: How to reform a rotting banking advice system

Struggling with CRM2? You’re not alone

Ontario wants to close advisor proficiency gaps in ‘coming year’