Securities regulators are, once again, broaching the idea of increasing their oversight of financial planning activity. But while some improvement would be welcome for clients, the looming resistance highlights the deeper problem of regulatory fragmentation.

Any effort to take charge of financial planning will inevitably run into complaints that securities regulators are encroaching on territory that belongs to insurance regulators or banking supervisors. And this isn’t the only area in which that tension arises.

Attempts to adopt a common point-of-sale regime for mutual funds and segregated funds — products that are functionally equivalent — have yet to bear fruit, despite years of effort. Once simple, vanilla products, such as principal-protected notes and asset-backed commercial paper, have now evolved into more complex vehicles that can fall between the cracks in the existing, fragmented framework. The result is that consumers are often left exposed and, when things go pear-shaped, it’s not always clear who has responsibility for these files.

The industry’s pillars may have toppled, but the regulatory silos remain.

U.S. policy-makers are grappling with some of the same issues and are considering a more integrated framework.

The idea that financial services regulation should be unified is not a new one, nor is it a cure-all. Britain’s Financial Services Authority has not been able to steer its industry clear of the excesses that led to the credit crunch. But there is no question about whom to hold to account when things go wrong, or who has the obligation to monitor industry innovation and tackle emerging risks.

Critics of the existing regulatory system often focus on its jurisdictional fragmentation, and it’s not hard to see why — there is plenty of room to improve efficiency and reduce regulatory costs. While that is undeniably a problem, functional fragmentation undermines effective consumer protection by keeping regulators divided and, to some extent, conquered.

This fundamental flaw hasn’t had the attention it deserves and the industry isn’t likely to tout it. So, it’s up to legislators to recognize this failing for themselves.

If the federal government wants to tackle the mess that is financial services regulation in Canada it should consider not just a national securities regulator, but an integrated industry regulator.