Investment industry calls for changes, greater clarity to proposed title rules – The Globe and Mail

Although the investment industry is in favour of an Ontario government proposal to tighten the rules around who can use the titles “financial planner” or “financial advisor,” it’s seeking clarity and some changes before they’re finalized.

The Financial Services Regulatory Authority of Ontario (FSRA) recently announced new minimum standards for the two titles, saying it will give investors more confidence in the quality of advice they get from these professionals. The proposal comes amid long-standing concerns from consumers and industry groups about the wide range of people who can use the title today to sell investment services.

In general, the proposed rules say people who use the financial planner or advisor titles will need to have their credentials verified by an FSRA-approved credentialing body, including demonstrating their licences or designations align with the educational requirements in the proposed rule.

People who currently use either title also won’t be grandfathered from the Financial Professionals Title Protection Rule, FSRA says. The regulator adds that some existing designations may not meet its new standards.

The proposal is now going through a 90-day public consultation period and it is expected to be finalized next year. It would then need a final blessing from Ontario’s finance minister.

Some industry groups and consumer advocates are using the consultation process to push for a few more changes to the proposed rules and seeking clarification around how they will work and be enforced.

Michelle Alexander, vice-president and corporate secretary at the Investment Industry Association of Canada (IIAC), says the organization is looking to ensure there’s no duplication in credentialing oversight.

For example, she says an advisor licensed by the Investment Industry Regulatory Organization of Canada is already overseen by a regulatory body and shouldn’t have to go through a second credentialing process through FSRA.

“We were hoping for some kind of exemption for registrants who are already overseen by a [self-regulatory organization], and that’s not there,” Ms. Alexander says. “Our members are some of the most highly regulated in the industry. To throw in another regulatory body they have to deal with makes no sense – especially in a time when we’re trying to reduce [regulatory] burdens.”

She says the IIAC is also concerned that the timeline to put the new credential requirements in place is too long. FSRA says people will have three years from when the new rule is implemented to update any credential or educational requirements needed to use the title “financial advisor,” and five years for individuals who want to use the title “financial planner.”

“I’m not concerned for our members, because what they do now will meet the standards,” she says, “but more so those who are outside of it that can still use the title and offer advice for three or five years. That’s not necessarily best for investors or consumer confidence.”

There’s also a lack of clarity around what fees will be paid for credentialing and who will collect them, Ms. Alexander says.

“It’s a step in the right direction,” she says of the proposed rules in general, “but we still have a lot of unanswered questions.”

Ms. Alexander says the IIAC plans to bring these and other issues up during the consultation period, after consulting first with its members.

Ken Kivenko, chair of the advisory committee of the Small Investor Protection Association, says he’s pleased with the consultation period so far, in particular since FSRA reached out to his group proactively for input on the proposed rules.

As for his feedback, Mr. Kivenko prefers the term “designation” instead of “title” for financial planners and advisors, similar to what they use in engineering, which was his profession before becoming an investor advocate.

He also believes the proficiency table for an advisor in the report is “wishy-washy,” but expects it will be cleared up in the consultations.

Mr. Kivenko also wants to see FSRA confirm the penalties for people who use the titles without the proper credentials.

“What can [FSRA] do? What powers does it actually have?” asks Mr. Kivenko, who is also president of Kenmar Associates in Toronto. “If it has no enforcement powers, the whole thing is kind of pointless.”

He plans to bring up the subject of penalties in his meetings with FSRA to ensure they’re tough enough to discourage people from breaking the rules.

“We wouldn’t ever agree unless we knew how title usage will be enforced and how people will be disciplined,” he says. “If there’s no penalty, who cares?”

Cary List, president and chief executive officer of FP Canada, the professional body behind the certified financial planner (CFP) designation, says he’s happy with many of the proposals, but has some lingering concerns around the minimum standards criteria not being high enough.

“What’s the process going to be for determining what actually is a legitimate financial planning credential? I think there’s still a lot of grey in there and potential for room for interpretation. If the net is cast too broadly, and the interpretation is generous enough to include credentials we wouldn’t consider it sufficient,” he says.

“For the rules to really protect consumers in the way that they’re intended to, and to reduce and mitigate consumer confusion, there needs to be real clarity as to what constitutes a legitimate credentialing body. A credential is only as good as the organization behind it.”

Greg Pollock, CEO of Advocis, the Financial Advisors Association of Canada, is “pleased” with the proposal and hopes it will help clarify for consumers what financial planners and advisors do, making the industry more accountable.

“I really think that, if we implement the principles and the parameters and the regulator oversees the kind of detail that it purports to be planning, then this will meet the needs of the advisor community [and] the investor community,” he says.

Mr. Pollock also hopes other provinces will adopt similar rules as Ontario. Saskatchewan recently passed similar legislation following consultations led by the Financial and Consumer Affairs Authority of Saskatchewan.

“We can’t have different rules in different provinces,” he says. “That’s going to make it very clunky, very cumbersome and would not be a good thing.”

With files from Clare O’Hara

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