Most investors remain unaware of coming legislation that will protect them from doing business with unqualified financial advisers and financial planners, according to a new survey from a financial sector lobby group that has spent years pressing for mandatory industry credentials.
Last May, Ontario passed the Financial Professionals Title Protection Act, which requires anyone in the province who wants to use the titles “financial adviser” or “financial planner” to obtain appropriate credentials from recognized professional bodies and remain in good standing.
The detailed rules required to implement the act are being developed by the province’s Ministry of Finance and Ontario’s financial sector regulator, and are expected to be published for comment by the end of 2020.
Meanwhile, Saskatchewan tabled similar legislation in December, and other provinces are also looking to implement new regulations.
Financial advisers typically help clients manage their investments, while financial planners help clients prepare to meet a goal such as retirement or saving for a child’s education. The coming rule changes will make qualifications and credentials mandatory for people wanting to work in the industry and refer to themselves by either title.
Despite the coming changes, 65 per cent of Ontarians are unaware of the new regulation of professional designations, according to a recent survey conducted by Advocis, a lobby group for financial advisers in Canada.
Also, just a third of Ontarians can identify a professional designation specific to financial planning.
Of those people who work with a financial planner or adviser, half of survey respondents believe their planner or adviser already holds a professional designation, while 44 per cent do not know. The remaining 6 per cent say their financial adviser does not hold a designation.
“It’s critical that investors are able to tell financial advisers apart, first to help protect themselves from fraudsters, and second to help guide them to properly qualified practitioners,” Darren Coleman, a portfolio manager with Raymond James, wrote in a recent Globe and Mail column. “... Regulating the use of financial-adviser and financial-planner titles is a simple and effective first line of defence against criminals. It’s like locking your doors and closing your windows.”
Advocis chief executive officer Greg Pollock said about three-quarters of licenced or registered advisers do not hold a professional designation of any kind. But one promising result, he said, is that more than 75 per cent of investors agreed that regulations requiring professional designations would help further protect them, and the same proportion felt that other provinces should adopt similar regulations to better protect all Canadians.
"Sound financial advice is needed now more than ever, and governments are moving forward to protect consumers with regulations that require all financial advisers to hold a valid credential,” Mr. Pollock said.
The legislative change comes at a time when industry groups have been advocating for stricter enforcement on individuals providing financial advice to Canadian investors. Canada has no legislated national standard for those who offer financial planning or advice. Outside Quebec, which has its own rules, anyone can call themselves a financial planner or adviser, regardless of certification, designation or educational background.
The Ontario government has yet to specify which credentials would be recognized, nor has it stated which professional organizations would enforce the rules. One of the most commonly known credentials is the certified financial planner designation administered by the professional body FP Canada.
But there are approximately 100,000 financial advisers in Canada, and only about 16,500 of them hold a CFP designation, according to FP Canada.
Thousands of professionals in the investment community could be left scrambling to upgrade professional credentials when the new rules come into force, which opens the door for education providers to increase participation in training programs – including Advocis’s newly launched professional financial advisor designation, which is set to begin its first class on April 1.
The PFA provides training in financial planning, taxation and investment planning, retirement income planning and practice-management skills such as sustaining client relationships and marketing.
This is the second new financial planning designation launched since the passing of legislation last summer. Last fall, FP Canada introduced the qualified associate financial planner certification, an entry-level designation that is part of its CFP program.
Clare O’Hara