Lobbying on the Ontario government’s pledge to reform financial planning titles is expected to continue through the fall as a government working group reviews the options.
The Finance Department says it is working closely with the OSC, the Financial Services Commission of Ontario, MFDA, IIROC and the Registered Insurance Brokers of Ontario to review a suite of proposals made by an expert committee.
That committee, appointed by the government last year, recommended titles and proficiency reforms for financial advisors and planners, as well as a “universal statutory best interest duty.”
Industry groups are watching Ontario closely as a potential first mover on titles reforms, which have come into sharper focus after the Ontario budget failed to commit to a duty to act in the client’s interest and the Canadian Securities Administrators said its members cannot reach agreement a new best interest standard.
Cary List, head of the Financial Planning Standards Council, speculates there are three ways forward for the Ontario government on titles reforms.
One option, he says, would be to remove financial advisor as a title. Titles like “investment advisor,” “mutual fund advisor,” “insurance advisor” and “financial planner” could be used under their respective self-regulatory organizations, but financial advisor as a registered title wouldn’t be permitted.
“Spell out any other titles that are meaningful to the consumer—investment advisor, mutual fund representative, whatever they are—and put [in] specific proficiency requirements, and potentially certification, if appropriate or necessary,” he says.
Another possible option, he says, would be to merge financial planner and financial advisor certifications, so that representatives who want to call themselves a financial advisor would have to receive a higher-level certification. “So, they combine the two but they bring the advisor up to the level of planner,” List says.
A third option, he says, would be to carve out the financial advisor title, restricting it to securities dealer SROs and creating a distinction between financial planner and financial advisor, with clearer definitions and higher proficiency requirements. But, for the government, the challenge with keeping both titles would be continued confusion for consumers.
The Ontario budget only committed to closing proficiency gaps for “financial planners” and restricting the use of titles “related to financial planning” — leaving questions about whether the new regulations will affect the “financial advisor” title.
IIROC and MFDA are “working closely” with the government on the issue, Jessica Martin, spokesperson for the Finance minister, says by email. List says IIROC, MFDA and OSC are “at the table” for Ontario’s titling regime discussions.
CSA has also proposed titles reform, and in a September 2016 position paper for CSA, IIAC, the advocacy group for IIROC member firms, said CSA’s proposed alternatives for titles were overly prescriptive.
IIAC said in the paper it would be willing to support tiles such as “mutual fund advisor” or “scholarship plan advisor” so that clients “would be aware of what product the advisor is ‘restricted’ to.” IIAC also called for use of the word “senior” in regulated titles to reflect experience and expertise—and presumably to allow for titles such as senior investment advisor.
When asked if IIROC has a position on dropping “financial advisor” as a title, spokesperson Evelyn Yallen said in an emailed statement: “We really don’t distinguish between these titles. They are either registered with IIROC or they aren’t.”
Martin says top government objectives for the policy file are to:
- close the gap that “allows financial planners to perform their valuable work without regulatory oversight or specified proficiency requirements”;
- “take steps to curb consumer confusion by restricting the use of titles related to financial planning”;
- develop a central registry of people providing financial planning and advice;
- consider the expert committee’s recommendation for restrictions on referral arrangements; and
- “examine the feasibility of a universal statutory best interest duty in Ontario.”
Martin suggests a best interest duty would be in line with the consumer protection objective. “The government welcomes the [expert committee] report’s support for a universal statutory best interest duty. The report adds to a growing number of voices, in Ontario and across Canada, who argue that an elevated standard could improve consumer protection,” she says.
List says the way forward for a best interest duty or standard for financial service professionals is now unclear, given CSA’s position. But, better titling rules could be the first phase toward best interest, he says.
“When the only requirement to call yourself an advisor […] is just a mutual fund licensing course, at the lowest end, how can you impose a best interest standard and think that’s actually going to solve anything?” List says. “I think that when we get the titles straightened out, it may make best interest clearer.”
The working group is expected to study the issue through the summer, with the possibility of further consultation in the fall. Finance Minister Charles Sousa has said he would like to see Ontario’s suite of financial industry reforms, under the new Financial Services Regulatory Authority, completed before the next provincial election.