The financial crisis has made clear the need for regulatory changes in Canada’s financial services industry, but a more important lesson is the need for greater financial literacy, says Keith Costello, president and CEO of the Canadian Institute of Financial Planners.

Speaking at the CIFPs’s annual national conference in Halifax on Wednesday, Costello said changes to regulation could play only a limited role in fixing the problems in the industry.

“The education of advisors and consumers is the ultimate solution,” Costello said. “Let’s not believe that regulation and oversight will replace the real solution.”

CIFPs supports the adoption of a single national regulator in Canada, but Costello said the effectiveness of a reformed regulatory system depends on its implementation.

He argued that regulations are often developed in a top-down manner, with a focus on products and firms, rather than consumer protection. Education standards should be a key focus of regulations, Costello said.

The financial crisis has presented a rare opportunity to help Canadians realize the importance of financial literacy, he added.

Costello lauded the federal government’s commitment to enhancing financial literacy in the 2009 federal budget. He hopes that education on financial issues will help consumers recognize the importance of having a comprehensive financial plan — and a qualified advisor to design that plan.

By generating this awareness, improved financial literacy will help to bolster the role of financial planning in Canada, Costello said: “Financial planning can only grow organically, with educated planners engaging and educating clients.”

IE