The plethora of different titles in the investment advice business is creating confusion among investors, and the industry should take steps to simplify and clarify the roles of different types of advisors, industry executives said on Wednesday.
At the Financial Planning Standards Council’s Vision 2020 conference in Toronto, speakers admitted that it’s challenging for the average consumer to differentiate between the services they should expect to receive from a financial advisor versus an investment representative versus a financial planner, among many other titles common in the industry.
“The reality is that most people out there in the public…really don’t have a firm understanding of what financial planning is or what the titles mean,” said Jason Round, senior manager of financial planning support at the Royal Bank of Canada. “I think it’s incumbent on us as an industry…to articulate that more.”
The wide range of different titles has resulted from a lack of agreement within the industry on which titles are most appropriate, according to Stephen Ison, principal at Edward Jones.
“There’s just a lack of consensus,” he said. “There hasn’t been a mechanism to co-ordinate this discussion among all of the different financial institutions that would propose to offer advice in one form or another.”
Kim Thompson, senior vice president of advisory services at Credential Financial Inc., said the multitude of titles is also a result of advisors trying to differentiate themselves and establish a specialization. But she suggested that this has gone too far, leading to more confusion.
“We’re not making it any easier for [clients],” Thompson said. “The title doesn’t resonate with respect to service they can expect.”
Amy Young, principal at wealth management consulting firm Upside Consulting Group Inc., said advisors have a responsibility to clarify for clients the specific services that they offer.
“They often forget to take the time to be clear up front about what specifically they can and cannot offer to that client,” she said.
Regulators could play a role in addressing this confusion by clearly defining a limited number of acceptable titles, and setting standards that professionals must meet in order to identify themselves as financial advisors, financial planners, or other titles. Round said he would support the establishment of such standards.
“We’re comfortable with that notion that there would be a more rigid framework that says ‘here’s the titles that are acceptable, and here’s what you need to have in order to use those titles’,” he said.
But Young said the industry should be cautious about welcoming new regulations.
“Be careful what you wish for,” she said. “There are lots of well-intentioned regulatory changes that have not had the intended effect.”
Young said some variety in titles is positive in order to differentiate the skill sets in the industry.
“We’re not doing consumers any favours by trying to oversimplify the situation, and allowing them to abdicate their responsibility to become informed,” she said.
Thompson suggested that rather than implementing prescriptive rules around titles, regulators establish guidelines in this area for clarity.