After decades of discussion and debate among industry, consumer groups and governments across Canada, with the April 11 Ontario budget, a government has finally acted to mitigate consumer confusion and protect consumers from getting financial advice from unqualified people. A first of its kind, the Financial Professionals Title Protection Act will require anyone in Ontario wishing to use “financial planner” or “financial advisor” as a title to have a recognized certification.
This is a huge and long-overdue step in the right direction. For far too long, consumers looking for advice on any number of financial matters have been left to navigate a marketplace that consists of a myriad of titles and a lack of clarity on who is qualified to offer what advice. Not only has this failed to make financial planning more accessible, it has obscured the benefits of financial planning and created confusion as to the different types of financial advice available to Canadians.
While the financial planner title has been well defined and understood throughout the financial services industry for a long time, “financial advisor” has been used to describe anybody and everybody who sells financial products, or offers financial advice of any kind.
To the average consumer, though, neither title is well understood. As a result, Canadians needing financial advice have had no way of knowing whom to turn to, or how to determine the type or quality of advice they can expect to receive. If appropriately implemented, last month’s legislation will change all that — at least in Ontario.
Devil in details
Presumably to ensure swift passage of this long-overdue legislation, the Ontario government chose to keep the Financial Professionals Title Protection Act at a high level, introducing a framework on which title restrictions will be based, but leaving the details of regulations and rulemaking to the new Financial Services Regulatory Authority (FSRA).
While the new legislation is efficient and straightforward, much work still remains for the FSRA in developing specific regulations that will ensure the title protection/restriction is meaningful, eliminates consumer confusion and adequately protects consumers.
Titles must be clearly defined in regulation
To ensure the financial advisor and financial planner titles are clearly understood, they must each be well — and distinctly — defined in regulation. Consumers need to be able to identify what sort of services and advice they can expect from financial planners or financial advisors, and need the clarity that will help them understand the knowledge, skills and abilities required for each. This can only happen if there are clear, distinct definitions in law for both titles.
Meaningful credentials in the public interest
For the Act to truly deliver its intended public interest outcomes, the FSRA’s regulations must also be comprehensive and restrictive in determining what credentialling bodies and corresponding credentials will be approved under each of the financial advisor and/or financial planner title categories.
The Act does stipulate that the FSRA may establish criteria for credentialling bodies to be approved based on “the applicant’s governance structure and practices, and disciplinary processes the applicant must have in place for individuals holding approved credentials it has issued.” It also indicates that the FSRA’s criteria for approving specific credentials may include “educational… and examination requirements, codes of ethics and professional standards, and continuing education requirements.”
Although this is a great first step, it is only a start. To ensure the public interest is protected, it will also be important to ensure that before any credentialling body is approved, it must have a governance structure that avoids conflicts regarding the public interest, and has sufficient expertise, resources and infrastructure to fulfil its mandate.
Need for Canada-wide, consistent title restrictions
With the introduction of the Financial Professionals Title Protection Act, the Ontario government has taken an important step in protecting Ontarians and reducing consumer confusion over titles, but much hard work remains. The FSRA’s job of enacting regulations that impose tight restrictions on what credentialling bodies and what credentials are approved will be a critical next step.
Ontario has provided a simple, straightforward and meaningful framework to protect and restrict the use of the financial planner and financial advisor titles. To make a truly meaningful difference, it’s time for other governments to follow suit.