How you handle your money now can make a big difference in what you can afford later. It can be difficult to figure out a plan or where to invest on your own and visiting a financial planner or adviser might sound like a necessary step. Most people assume that, as with most professions, a financial adviser or financial planner is a regulated title representing specific competencies. However, in most provinces, except Quebec and to some extent British Columbia, the government regulates the sale (and sellers of) financial products, while the advisory services provided by “financial planners” or “financial advisers” are not regulated.
In fact, the reason why it is so difficult to sort out the differences between financial planners and financial advisers, and to understand just what it is they can and cannot do, is because they all are not regulated – meaning they can do what they will. This has led the Ontario Government to create an expert panel to look at how the government can better regulate financial planning and those who give financial advice. PIAC is adamant that there needs to be some order brought to this industry.
“In the financial services industry right now, there are a multitude of professional titles being used: financial adviser, financial planner, registered financial planner, wealth coach and so on,” Jonathan Bishop, Research Analyst for PIAC mused. “In 2012, there were at least 25-30 different titles being kicked around the province of Ontario. There are also a multitude of title-granting associations and certification bodies. We’d like to have these titles legislated. We’d like it set up that only qualified people can call themselves a ‘financial planner’ or a ‘financial adviser’ and that it’s clear to consumers what you can expect from that title. And the fewer number of titles used, the better.”
Someone walking in to meet a “financial adviser” (or a myriad of other similar titles) might believe that there is some duty on that adviser to disclose their conflicts of interest, such as if they make a commission on the product she buys, or to put her interests above the adviser’s – to ensure she gets the best product. In fact, since only the products sold are regulated (by the Ontario Securities Commission, in Ontario and other securities commissions in other provinces), it is up to the adviser’s discretion what they disclose and up to their own ethical standards whose interests they put first.
“Financial planners” on the other hand claim that instead of just selling an investment product they look at things like personal cash flow, estate planning, income taxes, retirement planning, insurance needs and investments and build a “financial plan” for the customer to navigate all of these areas to achieve their financial goals throughout their life. Financial planners state that where they need professional advice in one of the key areas (for example, tax) that they will refer client to the appropriate expert (an accountant or tax lawyer in this case) for help. The problem with financial planners, however, is much like that for financial advisers: no one has made financial planning a regulated profession or with standard government requirements. So while there are self-appointed accreditation bodies claiming to train and oversee these requirements, competencies can vary. And even the best private accreditation schemes may not police all their members to do all aspects of the job because as a body paid for and created by members there is another conflict of interest at their heart – they may avoid disciplining those that pay the bills – leaving consumers at risk.
PIAC wants to see real and significant change in the huge and important financial services industry. Before a consumer walks through the door of anyone offering any level of financial advice to know what it is that person does, and what services they can expect. Once they’re inside, they should expect that the financial adviser or financial planner will disclose the details of what investments they sell or will recommend – including if the “adviser” is getting a commission or fee, or giving the consumer a choice based on a limited selection of financial products.
“At some point someone has to say ‘this sucks’ and there’s actually a race to the bottom in terms of standards. Because one way to get ahead is to be a bad actor, get more commission on a product, or tell customers less,” John Lawford, Executive Director of PIAC stated. “There’s an understanding in places like the U.S., Australia, and England that it’s gotten out of hand. The financial services industry is too gigantic, too unregulated, and having too direct an impact on individual consumers.”
PIAC is hoping the Ontario government will take the lead on this issue and produce some legislation that makes real changes. A financial adviser or financial planner should act in the consumer’s best interest, not their own.