Most Ontario investors hold financial advisors up to the standards of doctors, lawyers and other professionals, believing they all require accreditation to carry their titles, says an Advocis survey.
Only 24% of respondents were aware that anyone could use the financial advisor title, regardless of education or training, Advocis says in a release. Those aged 18 to 30 place the most trust in the financial advisor title, says the survey of 1,500 Ontarians conducted by Abacus Data in September and October.
“This survey proves there is a tremendous amount of misplaced trust in the market, and reinforces just how badly new regulations are needed to protect the public,” Advocis CEO and president, Greg Pollock said in the release.
The organization is calling on the Ontario government to regulate titles—a move 91% of the survey respondents would support.
While Advocis notes a licence is required to sell financial products in Canada, “there is also no single registry or database where an investor can go to verify their advisor’s credentials and disciplinary history,” the release says.
Investors can visit the CSA’s registration database to check an individual’s registration and any current disciplinary action, or visit the MFDA and IIROC websites to check disciplinary history, for example. Some designation bodies have membership lists as well to check credentials.
Yet, without “consistent continuing-education requirements, investors have little assurance that their advisor’s knowledge of financial planning and products is being kept current,” Advocis says.
In March 2018, the Ontario government released a consultation paper that included a plan to establish credentials for financial planners, as well as to regulate who can use the title of financial planner and, potentially, financial advisor. It also proposed the creation of a central database for investors. Comments on the consultation were due in April.
After the new Progressive Conservative government said in September that it wouldn’t support CSA’s embedded commissions proposals, the status of financial advisor regulation is uncertain. At that time, Finance Minister Vic Fedeli’s office declined to comment on the previous government’s work toward regulating advisor titles.
Advocis wants the new government to require all advisors to be members of a professional governing organization and “adhere to a common code of professional and ethical conduct.”
The association also wants all financial professionals to maintain liability insurance and complete continued education.
In the meantime…
The comment period for CSA’s client-focused reforms, which included title reform proposals, closed Oct. 19 and several organizations weighed in.
Advocis said in its comment letter said that all financial advisors should be “proficient in core advice competencies, up-to-date in their knowledge, and compliant with the highest standards of conduct and ethics.”
Many professionals meet these expectations, Advocis said, but “there are inevitably some who do not—and due to persistent gaps in the current regulatory framework, retail investors are unnecessarily exposed to risk.”
The solution, it said, would be to address this issue through a professional body to regulate financial advisors. Such a body would require mandatory membership, meaningful titles and designations, enhanced proficiency, a code of conduct that can be enforced, and a “consumer-facing central registry” that’s accessible, Advocis said.
Further, the CSA shouldn’t focus only on financial planners, but on “all individuals who offer financial advice to the retail public.”
The Portfolio Management Association of Canada (PMAC), in its comments, said the emphasis should be placed on the duty of care an advisor owes the client, while investor advocate FAIR Canada said the use of “advisor” can be misleading when a registrant isn’t required to act in a client’s best interest.
The Investment Funds Institute of Canada (IFIC) submitted a letter specifically on title reform that included a table of proposed titles, all based on how an advisor is registered.
In its submission, the Institute of Advanced Financial Planners said there was “confusion in the marketplace created by the many titles and designations that exist.” It said “titles should reflect the activity and competency of the title holder,” and that the title “financial planner” should only be used by those who are able to follow a planning process similar to the one used by its registered financial planner members.
CSA says, in its notice about the proposed reforms, that implementation would be phased and take several years, should the client-focused reforms be finalized.