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Ontario seeks industry feedback on moves to tighten financial-planner regulations

CARP, the association for retired persons, has been vocal in calling for regulators to enforce more uniformity in qualifications and titles of financial planners.

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Ontario's provincial government is reaching out to Canada's wealth-management industry for feedback on implementing tighter regulations for financial planners in the province that would include stricter enforcement around misleading or confusing titles used by advisers.

In a consultation paper released last week, the Ontario Ministry of Finance is taking a closer look at those who use the term "financial planner," as well as a proposal to create a public database of all financial planners in Ontario.

Currently, throughout most of Canada, no general legal framework exists to regulate the activities of individuals who offer financial planning, advice and services. That means that in every province (excluding Quebec) any individual can call himself a financial planner – regardless of certification, designation or educational background.

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During a mystery shopping exercise conducted by regulators in Ontario, it was found that 48 different titles are used across various industry platforms. The absence of a legal framework has raised questions within the industry about proficiency, quality standards and potential conflicts of interest.

Now, after appointing an independent expert committee to review the issue in 2015 and evaluating the committee's recommendations in 2017, the Ontario government has released a consultation paper in the next step to developing legislation that would legally regulate financial planners in Ontario.

The paper proposes to restrict the use of the title "financial planner" in the industry. Currently, with the exception of the mortgage-brokering sector, there are no uniform standards for the use of titles in the financial-services sector.

"This creates a lack of consistency which allows individuals to use the title 'Financial Planner' without necessarily having the expertise to provide financial planning services," the expert committee noted in the report. "Titles and credentials are intended to give an impression of expertise and instill consumer trust. When these titles or credentials are not backed up by real expertise, this trust may be misplaced."

The use of the title financial planner would be restricted to individuals holding a recognized financial planning credential; and credentials would be required to meet strict criteria. One of the most commonly known credentials is the Certified Financial Planner (CFP) designation administered by the Financial Planning Standards Council (FPSC). In Canada there are more than 25,000 CFP holders (including those certified in the province of Quebec).

"This lack of clarity around what type of advice is out there and who is qualified to do what is extremely concerning to us," said Cary List, chief executive officer of the FPSC. "The biggest problem for the average consumer is that they know they need some form of help, but they can't necessarily pinpoint what they are looking for. They also can't pinpoint what the difference is among all the types of advisers working within the financial industry."

At the same time, the government is contemplating restrictions on the use of similar titles under the proposed framework including titles such as money planner, investment planner, wealth planner, asset planner, insurance planner and retirement planner. The paper is also soliciting feedback on its concerns related to the unregulated use of "financial adviser/advisor" and how this title should be treated under the proposed framework.

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The use of other titles that could lead a consumer into reasonably believing that an individual is a financial planner would be prohibited.

Investor advocacy group FAIR Canada are also looking for change in the use of industry titles. In a 2016 report, the organization asked regulators and both provincial and federal governments to consider working together to address a number of concerns surrounding senior investors. Included was the suggestion that regulatory bodies restrict the use of titles to three categories such as "investment adviser" or "financial adviser" for those complying with the statutory best-interest duty; portfolio manager for those exercising discretionary authority and salesperson for those not able to comply with a best-interest duty.

Frank Allen, executive director of FAIR Canada, is pleased to see that title restrictions and the creation of a central database for financial planners are key topics for the province, but believes it's an area that should go beyond just financial planners.

"FAIR Canada believes strongly that the use of titles and creation of a central database demand broader governmental and regulatory action which should encompass the proliferation of titles in the securities industry generally and the absence of any centralized registration database for financial services registrants," Mr. Allen said in an interview. "Neither the multitude of existing registrant titles nor the current need for Ontarians to search up to six financial services databases for registration information is conducive to effective consumer protection."

Editor's note: Third last paragraph was updated after FAIR Canada clarified their statement.

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