Legislation requiring all financial advisors to have a professional designation is the quickest and most cost-effective way to protect consumers, Advocis says.

Canada’s largest association of financial advisors says by making a professional designation a condition of practice, consumers will know that they are dealing with advisors who meet high standards of education and professional conduct, resulting in greater transparency in the marketplace.

“Our members see the horror stories — people coming to them for help, consumers who have been hurt or destroyed financially because they acted on the advice of an unqualified individual,” says Steve Howard, president and CEO of Advocis, whose 16,000 members serve about 12 million clients.

Advocis says that of the roughly 100,000 individuals licensed to sell financial products in Canada, only 50% have taken or are in the process of taking advanced professional education that leads to a professional designation such as a Certified Financial Planner, Chartered Life Underwriter, Fellow of the Canadian Securities Institute or Chartered Financial Analyst.

“Those qualified only to sell product are still able to hold themselves out as `advisors’ because there is nothing in law prohibiting them from doing so,” Howard said in a statement. “They don’t have the training, and are not required to adhere to a code of conduct.

“There’s a glaring gap in the system. Unqualified individuals are out there giving bad advice to an unsuspecting public.”

Advocis members must adhere to a strict Code of Professional Conduct and meet ongoing continuing education requirements.

To further the push for reform, Howard along with Brian Mallard, Advocis chair, and Kris Birchard, chair of the CLU Institute, met recently with representatives from U.S.-based advisor groups: American College, the U.S. educational institution for financial services; the National Association of Insurance and Financial Advisors; and the Association for Investment Management and Research.

Advocis says its push for reform is a reaction to several securities regulatory reviews, in particular the Canadian Securities Administrators’ promotion of the Uniform Securities Legislation, which attempts to harmonize provincial securities regulation with the stated objective of making capital markets more efficient. The USL must be approved by each of the provincial governments.

Advocis says it takes issue with the Ontario Securities Commission proposal for a `fair dealing model’ for regulating all financial service providers, including advisors. “The FDM ignores the long-established national professional designations and the advanced education programs that already exist by recommending a new single entry level exam that all advisors, including those currently designated would have to pass.

“The FDM represents a power grab of enormous proportions, huge additional costs and further fragmentation of the system. Moreover, the FDM would only apply to Ontario, at least initially, and is years away from implementation. “