Saturday, July 9, 2011


Enforceable proficiency requirements and ethical principles for anyone providing financial planning services are being established

Financial planning is a rare pocket within the financial services industry in that it lacks national supervision. But momentum is gathering behind efforts to create professional standards and oversight for financial planners across the country.

In an unprecedented level of co-operation among industry sectors, five organizations have teamed up to create the Coalition for Professional Standards for Financial Planners. The coalition is aiming to establish enforceable proficiency requirements and ethical principles for anyone providing financial planning services.

“We think that we really need to get together and agree on some fundamental principles and values that any future oversight or regulation of financial planning should be based on,” says Cary List, president and CEO of the Toronto-based Financial Planning Standards Council, one of the five member organizations.

The other members are the Canadian Institute of Financial Planners, Advocis (both also based in Toronto), the Delta, B.C.-based Institute of Advanced Financial Planners and the Verdun, Que.based Institut québécois de planification financière.

These five organizations share the common goal of providing investors with clarity and better protection when working with financial planners. Currently, List says, investors have no reliable way of identifying financial planners who are qualified, competent and held to an ethical standard: “There’s insufficient consumer protection. We have piecemeal regulation.”

Throughout most of Canada, anyone can claim to be a financial planner without meeting requirements for qualifications or professional oversight. One exception is British Columbia, where advisors holding themselves out as financial planners must hold either the certified financial planner designation or another financial services industry designation, such as chartered financial analyst, registered financial planner or chartered life underwriter.

Quebec boasts the strictest requirements in Canada: financial planners must earn a diploma from the IQPF, obtain a permit from the Autorité des marchés financiers and meet continuing education requirements. “[The financial planning sector in Quebec],” says Jocelyne HouleLeSarge, president and CEO of IQPF, “is better regulated than in the rest of Canada.”

But even Quebec’s model doesn’t go far enough, she argues, because the rules are not properly enforced: “It doesn’t prevent people from calling themselves financial planners or financial advisors or offering services pretending to be financial planners. So, our concerns are the same all across the country.”

Outside of Quebec, the only financial planners subject to oversight and professional standards are those who hold professional designations, such as the CFP or RFP; the bodies administering these designations hold their members accountable to specific practice standards and codes of ethics. Designation-holders who fail to meet the standards are typically stripped of their designation — but are not prevented from continuing to practice without the designation.

This leaves a substantial proportion of financial planners who are not subject to any oversight, says List: “For every one person who holds the CFP who’s calling themselves a financial planner, there are at least two others who don’t hold the CFP.”

List adds that six of every 10 complaints that the FPSC receives pertain to industry practitioners who do not hold the CFP designation and thus do not fall under the authority of the FPSC.

The coalition is pushing for rules that would force all financial planners to be held accountable to a professional oversight body. This is one of four key principles that the coalition’s member organizations have agreed upon as the foundation for their work.

The other principles stipulate that those holding themselves out as“financial planners” must: meet certain proficiency requirements, including specific levels of education and experience, and passing a financial planning examination; meet prescribed continuing education requirements; and agree to be held accountable to a code of ethics, practice standards, and the rules and regulations of a professional body.

The proposed principles also include a requirement for planners to meet a minimum professional duty of care by: putting their clients’ interests ahead of their own, avoiding conflicts of interest; and fully disclosing and fairly managing any unavoidable conflicts of interest.

Many financial planners applaud the establishment of the coalition. “It’s nice to have a uniform set of standards and proficiency,” says Kevan Herod, a financial planner and owner of Peterborough, Ont. based Herod Financial Services, which is licensed by the Investment Industry Regulatory Organization of Canada and operates under the umbrella of Burlington, Ont.-based Manulife Securities Inc. “There has to be a level of standard to make it fair. What bothers me is that somebody can open up a shop and call themselves a ‘planner’ and not have to take any courses.”

Having multiple sets of standards only creates confusion among the public, Herod says. He adds that most clients are unfamiliar with the various industry designations and the factors that differentiate them: “As a consumer, you’d probably feel more comfortable knowing that there’s one body instead of multiple bodies. I think it improves the perception [by] the public, in the sense that it’s one voice or one set of rules.”

Financial services firms have also expressed support for the coalition.Winnipeg-based Investors Group Inc. supports new national standards, provided that they don’t limit methods used to compensate financial planners or impose onerous new requirements on financial planners who already hold credentials such as the CFP.

“Investors Group strongly supports the development and education of advisors,” says Debbie Ammeter, vice president of advanced financial planning at Investors Group. “We support incremental evolution and development of standards that serve clients well but also don’t destroy the fabric of a system that today is delivering value.”

Regulators also support the coalition’s efforts, says List: “We’ve had very positive feedback.”

Megan Harman
Investment Executive
July 2011


Financial Advisor Eugene Oregon said...

think it improves the perception [by] the public, in the sense that it’s one voice or one set of rules.

cfp certification education program said...

Are there still no state requirements for CFP professionals in terms of renewing their licenses? I think they really should set it up and like other licenses that requires things like continuing education to renew their licenses every year or two, CFP should have that as well. to ensure that only the best planners are serving the country.

financial planning advisor said...

It is necessary to understand the need for approaching a financial planning advisor. Clients should be clear about the financial goals that they need to achieve, as well as the specified areas to get expertise.

Dan Zwicker said...

In the delivery of financial advice to a client a professional financial services advisor assumes the responsibilty of a fiduciary. To meet the professional criteria implicit in that role a financial services advisor must be held to the same standard of experience, education, training and continuing education as any other professional in the classical professions of accounting and law.

Respectfully submitted,

Dan Zwicker
Toronto, Canada