Fiduciary, please!

 In Financial Planning

Almost 3 years ago, in April 2015, the government appointed an independent Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives (Expert Committee). The Expert Committee was tasked with reviewing the regulatory framework relating to financial planning and advisory services in Ontario.

In previous columns I have shared with readers my comments to the Expert Committee at various stages in the process. I am now preparing another response and I thought I would let you see where I am going with it.

 “The Expert Committee’s final report was released in March 2017.  The Expert Committee noted that, with the exception of the mortgage brokering sector, there are currently no uniform regulatory 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… (omitted text)…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 proposed regulatory framework would restrict the use of the title ‘Financial Planner’ to individuals holding a recognized financial planning credential…(omitted text)…Financial planning credentials would be required to meet strict recognition criteria. This would ensure that all individuals using the title ‘Financial Planner’ in Ontario have the training and expertise to provide financial planning services.”1

However to make this work, there needs to be a restriction on the use of titles similar to ‘Financial Planner’.

“These concerns would be amplified if the government restricted the use of the title ‘Financial Planner’ without also restricting similar titles, as individuals might attempt to use these similar titles to avoid the credential requirement. For the individual credential requirement to improve consumer protection, it therefore must be accompanied by a restriction on similar titles.  Accordingly, the government is contemplating the following restrictions on the use of similar titles under the proposed framework. The word ‘Planner’ in combination with any of the following words, for use in titles, would be expressly prohibited: Wealth, Portfolio, Asset Management, Securities, Insurance, Money, Retirement, Asset, Investment, Mutual Fund, Mortgage, other titles that could mislead a consumer…”

So, all well and good.  The proposal is to restrict the use of Financial Planner to those who have met, primarily, an educational standard and restrict the other names so that Financial Planner is the only way to go.  As a CFP – Certified Financial Planner, I have nothing to worry about nor do the other 18,000 some CFPs in Canada.  There is already 1 of us for every 2000 Canadians.  Do we need more?  Who are the others lining up to become what they could have become years ago if they were serious about the art and craft of Financial Planning?

More so, it is worrisome that in their discussion of the restriction on other titles the proposal contains:

“The government is aware of concerns related to unregulated use of the “Financial Adviser” or “Financial Advisor” title. Accordingly, the government is soliciting stakeholder views on how this title should be treated under the proposed framework.”

What is the question?  Financial Adviser and Financial Advisor were not put on the prohibited list because a very large percentage of all industry professional use those terms.  Sure, they do not contain the word ‘Planner’ but the term Advisor or Adviser certainly leads consumers to the same place.  In fact it may be worse.  After all, a Planner may not even yield advice, only a summation of circumstances and possible options.  So as a ‘Planner”, I need to be regulated because I MAY proffer advice in executing my role.  Meanwhile ‘Adviser’ by dictionary meaning is “A person who gives advice in a particular field’ (in this case Financial) is not part of the recommendation aimed at protecting consumers, even though their very name implies that they are advice providers.

So my two cents.  We are dancing around worrying about the term Financial Planner and whether it is skilled people brandishing it, while tens of thousands of individuals are walking around proclaiming they provide “Advice on Finances”, the literal meaning of Financial Advisor, without any appreciable education or experience requirement.  Now, do not get me wrong here.  Many Financial Advisors are well educated, capable, competent and experienced but many are not because it is not required.

If we wish to protect consumers, we need to focus on legal obligations, standards and requirements not names.  The names will shake themselves out if we require that:

1) if you hold out to the public that you offer advice or you do in fact provide advice, you immediately become a fiduciary and bind yourself and your organization to a fiduciary standard.

2) to be a fiduciary you need to be appropriately educated and competent, and hold a suitable credential related to the advice you deliver as evidence of same.

So the next time you are looking for some help with your finances, do not focus on the terms Financial Planner, Financial Advisor, Wealth Manager, Fee Only Planner, Senior Financial Consultant or any other claim on a business card or brochure.  Simply ask:  “Are you a Fiduciary”?  If Yes, ask for some advice.  If No, keeping looking, we are out there.

Interested in learning why your risk capacity is essential in developing your financial plan and investment strategy? Read our previous post here. 

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