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Advisors should talk to prospective clients about the importance of doing their due diligence before agreeing to work with a financial planner or advisor.kate_sept2004/iStockPhoto / Getty Images

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Ontario’s newly approved financial professionals title protection rule can and should lead to greater transparency in the financial services industry. But it’s just one of many steps needed to ensure Canadians are planning their financial futures with qualified professionals.

By restricting the use of the financial planner and financial advisor titles to those who meet the requirements set by approved credentialling bodies, the new law will translate into greater credibility for financial professionals and better protection for consumers. Several things need to take place for us to get there, though. The key one is getting the rest of the country on board.

While Saskatchewan passed similar legislation in 2020 and New Brunswick has started public consultations on its own title protection framework, to date only Quebec and Ontario have legislation in force to regulate the financial planner and advisor titles.

Saskatchewan’s proposed regime would hold financial planners and advisors to a minimum standard that includes addressing “material conflicts in the best interest of their clients” and placing the client’s interest first “when making a suitability determination,” according to a report that law firm Osler, Hoskin and Harcourt LLP published last year.

By comparison, Ontario requires only that credential holders deal with clients “competently, professionally, fairly, honestly and in good faith.”

Whether clients are in Saskatchewan, Ontario, or in any other province or territory, they should be entitled to financial advice that puts their interests first, always.

But enforcing new legislation or changing one that already exists takes time. Nevertheless, advisors need to make it a personal rule to make recommendations based, first and foremost, on what’s best for their clients.

In addition to putting clients’ interests first, several other factors need to be considered as part of this evolution toward greater professionalism.

Greater clarity is needed on expanded titles

The Financial Services Regulatory Authority of Ontario notes that restrictions under the new rules extend to the use of the protected titles in another language, an abbreviation, or a term that could “reasonably be confused” with the financial planner or financial advisor titles.

That means those thinking of playing around with their titles – for example, calling themselves a “financial wealth planner” – to get around the legislation are breaking the rules.

However, there’s confusion around what can or cannot be affixed to the financial planner or advisor titles. For instance, could someone get in trouble for calling themselves a “senior financial planner” or a “family office financial advisor?”

Regulators may want to consider creating a list of titles they’ll allow credentialled professionals to use, possibly with appendages that highlight practice specialties.

Raising awareness among consumers

Protecting the financial planner and advisor titles is, ultimately, about protecting consumers from unqualified wannabes looking to collect fees for ill-informed financial advice. But for these legislations to work, consumers need to be educated and engaged.

Advisors are well-positioned to provide clients with the information they need to make the right decisions and help them understand why all that matters.

Advisors should also talk to prospective clients about the importance of doing their due diligence before agreeing to work with a financial planner or advisor.

It’s quite likely that many have never bothered to check whether their existing advisor or the one they’re considering is registered with a credentialling body.

Push for greater financial literacy

Ontario’s new act will also bolster education standards for financial planners and advisors.

As advisors formalize and deepen their professional expertise, they must also help consumers boost their knowledge so they can be active participants in their financial futures.

There have been encouraging developments on this front. The Financial Consumer Agency of Canada’s 2019 Canadian Financial Capability Survey found that 44 per cent of Canadians had engaged in some type of financial education over the past five years.

However, more needs to be done to strengthen financial literacy.

At an individual level, taking the time to explain financial concepts and letting clients know it’s okay to bring up “stupid questions” they may be reluctant to ask is a start. At the industry level, there should be a continued push for changes such as mandatory financial education in schools, starting as early as elementary years.

Overall, the best advisors don’t need a credentialling body to marshall them towards higher standards of practice, because they’re already there.

But it’s reassuring to know the industry is finally moving toward a standard that will lead to greater consistency, transparency and accountability.

Elke Rubach is principal at Rubach Wealth Holistic Family Advisors in Toronto.

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