An international initiative to develop worldwide standards for financial planning could result in abuses by advisors who declare themselves qualified even though they are not certified, Canadian financial planning industry officials warn.

The designations of certified financial planner and registered financial planner are well established and recognized in Canada. While another set of standards may be useful for countries in which standards do not exist, industry spokespeople in Canada question the need for another standard in this country .

Consumers, they say, could find the new system confusing.

The concerns are over efforts, now underway by the Geneva-based International Organization for Standardization, to establish standards for the certification and process of financial planning. In June, the ISO’s technical committee voted to draft a set of standards. They are scheduled to be published next year.

The ISO is a network of the national standards institutes of 156 countries with a central secretariat in Geneva. Canada’s representative on the ISO is the Ottawa-based Standards Council of Canada, a federal Crown corporation that reports to Parliament through the minister of industry. Its role is to look at proposed standards and get input from stakeholders.

The ISO standardizes the certification process for industries by setting out elements of education, examination, experience and ethical conduct. The ISO now plans to set a standard for the financial planning process, including defining the client/planner relationship; gathering client data and goals; analysing and evaluating the client’s financial status; developing and presenting financial planning recommendations and alternatives; and implementing and monitoring the recommendations.

In its March 2004 business plan, the ISO technical committee said the increasing demand for financial planning advice throughout the world is poorly served by “country-by-country legislation [that] focuses more on regulation of financial product distribution [instead of] the process of advice given by an individual planner.”

“I question the added value,” says Ian Secord, president of the Delta, B.C.-based Institute of Advanced Financial Planners, a 500-member organization that is home to the RFP designation.

“Most of what this is proposing is what we expect of our members. There is nothing to be gained by advisors becoming ISO-compliant,” says Secord, who is a planner with Secord Kolo Wealth Management Group in Calgary . “When we have so many organizations now available to the consumer and industry, I don’t know where the ISO would fit — other than add to the alphabet soup.”

And he doesn’t see how the ISO effort will be good for consumers: “Following a standardized procedure is not necessarily one and the same as providing quality advice.”

The Toronto-based Canadian Institute of Financial Planners is a strong supporter of the CFP designation. “The CFP brand and certification process serve the public well,” says CIFP president Keith Costello. “The ISO brand is going to confuse the public. It’s another thing that the CFP professional will have to explain.” However, he adds, if it comes in, CFP organizations can still point out that the CFP is a higher standard.

The ISO may provide a good foundation for helping consumers worldwide, says Cary List, COO and executive vice president of the Toronto-based Financial Planners Standards Council, which awards the CFP in Canada. The ISO’s intent is to provide consumer protection, he says: “We’re all for that.”

However, List notes, the ISO was established to facilitate international free trade — in particular, to standardize business-to-business transactions. The ISO is best known for setting manufacturing standards. The idea of setting standards for personal services between business and consumers is new. It came up about five years ago, he says: “The FPSC got involved in the early stages. We took a look at it on behalf of the [Standards Council of Canada] to see if it would benefit the Canadian consumer.

“It became clear quickly,” List adds, “that this could be of tremendous benefit in countries in which there are no well-recognized standards for a certification process.”
But, he notes, the FPSC had been developing, promoting and enforcing the CFP designation in Canada since its incorporation in 1995. Industry and consumers have embraced it: there are now 16,500 CFPs in Canada — among 90,000 CFPs throughout the world. The designation is recognized in 17 countries.

The FPSC does have concerns about the imposition of the ISO standard, says List. An advisor could simply declare him- or herself ISO-compliant.

@page_break@Under ISO principles, companies can achieve compliance in one of three ways: self-declaration; second-party assessment; assessment by a third-party organization. The first method stands until a business is challenged on its self-declaration of compliance.

‘I am iso-compliant’

“It means an advisor could just stand up and say, ‘I am ISO-compliant’,” says List.
“There’s a risk that it could be used as a marketing tool by a planner who doesn’t want to demonstrate competency and ethical values and follow standards of practice by gaining professional certification from a certification body such as the FPSC. It could be easily abused because a consumer wouldn’t know what that means.”

This could have the unintended result of undermining the ISO’s intended purpose, he adds.

Costello says the ability to self-declare ISO compliance is clear evidence that it will be a lower standard than existing designations.

Meanwhile, List says, just because the Standards Council of Canada is doing its job by being involved with the ISO effort, “it doesn’t mean it is supporting or preaching it. The [council] has to reach out to industry and ask if this is something we should support. In this case, there is little or no interest.” IE