PROFESSIONAL FINANCIAL PLANNING - NATIONAL STANDARDS – THE FINANCIAL SERVICES INDUSTRY - CANADA

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

ADVISED INVESTORS BETTER PREPARED FOR RETIREMENT

There is yet more proof, for those still in denial, that professional financial advice paves the way for a fulfilling retirement.


The latest TD Waterhouse Canadians and Retirement Report found Canadian retirees who are getting help from financial advisors are feeling confident about their retirement savings. The pan-Canadian survey of retirees, aged 55-70, also showed that 76% of retired Canadians are using an advisor to manage their investments.


“The good news is that Canadians are not only aware of the need to plan for retirement, but they’re taking the right steps to get there,” says Patricia Lovett-Reid, senior vice-president, TD Waterhouse.



Almost three quarters of respondents working with a financial advisor feel their retirement savings are on track compared to those without professional help. Respondents working with an advisor were found by the survey to be more likely to have a financial plan (52% versus 7% without an advisor).


And financial advice appears to be widespread among the survey cohort, with 76% of retired Canadians using an advisor to manage their savings and investments.


“There’s no such thing as a tried-and-true retirement plan that is a perfect fit for everyone; it’s essential to develop and maintain a financial plan that is right for you,” said Lovett-Reid. “When it comes to money, emotions can run high. When you are trying to find an advisor, I suggest looking for someone that can help you assess your situation, both emotionally and financially.”

Read entire article on Advisor.ca:



http://www.advisor.ca/news/industry-news/advised-investors-better-prepared-of-retirement-52584


Vikram Barhat, editor
Advisor.ca
July 7, 2011

97, 98, 98, 100 - WHAT IF YOU LIVED THIS LONG? COULD YOU AFFORD IT?

Good genes can be a curse

There is a financial solution to the need for lifetime sustainable income

The Annuity

Plan to live to 100? There are 6,000 centenarians in Canada, projected to hit 20,000 by 2035.
But improved longevity and low investment returns pose a vexing problem for healthy people with good genes. If worried about outliving your money, consider taking out some longevity insurance, better known as annuities.
Life annuities purchased from life insurance firms provide streams of guaranteed income for as long as you live. Those in employer-provided defined benefit (DB) pensions have extensive annuity protection, as do those collect-
ing Canada Pension Plan or Old Age Security.
But if most of your wealth is exposed to stocks through defined-contribution pensions, RRSPs, TFSAs or non-registered investments, you may need some annuities or newfangled "finsurance" products finance professor Moshe Milevsky describes in How to Pensionize Your Nest Egg.
"If you have the insurance from your employment or job (e.g. DB pension), there is no need to buy more." But those lacking such insurance or worried about longevity risk may need to at least partly annuitize.
Annuities are as old as the hills but are being rediscovered by a new generation of investors scarred by stock-market losses in 2008. The current Barron's profiles a recent retiree, now 67, who bought annuities in 2007, in time to dodge the crash. He no longer frets about outliving his money.
Annuities are more popular in the United States because variable annuities - which add a stock-market kicker - are better and cheaper. With interest rates near historic lows, most Canadian advisors view age 67 as too young to buy life annuities. They suggest waiting until rates rise, when the interest component will be lower and the mortality premium makes up a bigger chunk of the return.

Milevsky doesn't worry that insurance firms can foot the bill if too many reach 100 because they are also. on the other side of the bet, through life insurance. "They will perform handsomely if we all live forever."

In The Only Guide to Alternative Investments You'll Ever Need, Larry Swedroe rates fixed annuities as"good" but variable annuities as "flawed." In an interview in Toronto this week, he warned you need a very long lifetime for variable annuities to pay off.

He's keener on payout annuities or SPIAs (single premium immediate annuities), especially for those in their seventies. ''It's the only asset class that can get you in effect equity-like returns without taking equity risk."

Annuity critics don't like the loss of control or the fact they leave little for heirs. But that applies only if you die young, Swedroe says. "If you live longer than you expect, You're saving the estate's money."

In Canada, Some variable annuities are called segregated funds. Clay Gillespie, managing director of Vancouver's Rogers Group Financial, prefers fixed annuities but suggests clients wait until 78 or 79 before buying.

At 60 or 65, the pickup in yield over regular bonds is only 0.5% or so. but by your late seventies mortality credits make up 80% of the return so low interest rates are less of a concern.

Michel Fortin, vice-president of Standard Life, says the lower interest rates are, the more expensive fixed annuities are, and the younger you are, the higher their cost. Most annuity buyers are between 60 and 70. The annuitization question often arises at 71, when RRSPs must be deregistered. You can also annuitize non-registered assets with tax-efficient "prescribed" annuities. Gillespie is not a fan of another type of variable annuity known as GMWB (guaranteed minimum withdrawal benefit). As structured in Canada, I don't believe they're the soluton:' Gillespie says, ''but I would use them in the U.S."
Asher Tward, vice-president of Toronto's Tridelta Financial, says GMWB fees are "way too high" at 3% or 4%, with the funds mostly balanced or fixed incQme. With SPIAs, you know what you get and can arrange for inflation indexing or term guarantees by accepting lower payouts. He suggests investing conservatively for a few years, then laddering into annuities as interest rates start to rise.

Not all annuities provide longevity insurance. Vancouver advisor Diane McCurdy uses five-year term-certain annuities to bridge clients to retirement. Some may require just five years of income while waiting for employer or public pensions to kick in at 55, 60 or 65. By the time the term is up (terms can also be 10 or 20 years), the rest of your portfolio may have grown.
These are purchased with non-registered funds: One reason McCurdy recommends clients build up non-registered savings. Jonathan Chevreau

Wealthy Boomer
Financial Post
June 26, 2011 jchevreau@nationalpost.com

CANADIAN CERTIFIED FINANCIAL PLANNERS APPROACH A FIDUCIARY STANDARD OF CLIENT RESPONSIBILITY

Proposed changes to CFP code of ethics



The changes would bring the Canadian CFP practice standards and code of ethics in line with the global CFP principles




CERTIFIED FINANCIAL PLANNERS will face an explicit expectation to put their clients' interests first at all times under proposed changes to the CFP designation's code of ethics.


The Toronto-based Financial Planning Standards Council is seeking comments on updated versions of the CFP practice standards and code of ethics. The proposed changes aim to bring the FPSC's standards in line with global CFP principles and standards, which were updated a year and a half ago by Denver-based Financial Planning Standards Board Ltd. The FPSB works with member organizations in 24 territories to develop international competency, ethics and practice standards for CFP professionals.


"The changes' are relatively small," says John Wickett, senior vice president of standards and certification at the FPSC. "In a few places, we wanted to clean up the language a little bit, tighten it up, make sure it was very dire'ctive to CFP professionals but also very clearly protecting of clients."


The most significant change is the addition of a new "client first" principle to the code of ethics, which states that "a CFP professional shall always place the client's interest first" and must "place the dient's'interests ahead of their own."


Although the code of ethics has always been implicitly client centric, this addition would make the principle explicit, Wickett says: "[There was] a desire to hit that issue head-on. Instead of not speaking to it directly, it's time to just say it outright."


The Toronto-based Canadian Foundation for Advanceme'nt of Investor Rights (a.k.a. FAIR Canada), which has called for regulations that would require all financial advisors to put their clients' interests first when providing investment advice, lauds the proposed principle.


"We think it's a step in the right direction," says Marian Passmore, FAIR Canada's associate director. "We will be interested to see how it will be enforced in practice."


FAIR Canada would like to see the FPSC add even more clarification to its code of ethics on the importance of putting clients first. Specifically, Passmore says, the principle should explicitly state that CFP professionals must not only place the client's interests ahead of their own, but also ahead of the interests of.the firm with which the CFP is associated. FAIR Canada plans to make this recommendation in the comments that it will submit as part of the consultation process.


Canada is one of many countries that recently have been engaged in a debate around the prospect of imposing a fiduciary duty on financial advisors as a way of enhancing investor protection. The proposed "client first" principle would bring CFPs in Canada one step closer to facing this type of standard.


"Really, we're not asking anything more of a CFP professional than is asked of a lawyer or a physician or anyone else put in that kind of position," says Wickett. "If you're a professional, you're a professional- and this is how you have to conduct yourself,"


Another of the FPSC's proposed changes would make the CFP code of ethics enforceable in all professional dealings by a CFP - not just in situations in which a CFP is providing financial' planning servi,ces. For instance, when a CFP is engaged in the sale of a financial product or another activity that's not, strictly speaking, financial planning, the CFP would still be expected to adhere to the ethical principles.


"That's just to make sure," says Wickett, "that there's no avoiding being held accountable to the code of ethics based on what may be a technicality."


"Conduct that contravenes these principles "may be subject to disciplinary action by [the] FPSC's enforcment department," the proposed code of ethics says.


Meanwhile, the CFP practice standards have been tweaked only modestly. Introduced in 2003, these standards outline the process that CFPs are obliged to follow when engaged in comprehensive financia! planning. For instance, the standards stipulate that financial planners must provide clients with a letter of engagement that dearly articulates the scope of services.


The proposed changes include primarily minor adjustments to the language in order to add clarity, Wickett says: "There's no shift in what is expected of a CFP professional."


Wickctt doesn't expect that the proposcd changes to either document would have much of an impact on the day-to-day activities of most CFPs; most CFPs, he says, already conduct themselves in a compliant manner.


"I don't think it's going to have a major effect on most," he says. "But I think it sends a very important message to industry, to CFP professionals and to the public that this is what's expected."


The FPSC's code of ethics and practice standards are reviewed by the council every five to eight years, and usually the changes are minor.


"You don't expect ethical principles to change that much over time," says Wickett. "But how you describe them can shift a bit as the landscape changes."


The process of revising the current standards was conducted by two task forces composed of FPSC staff, CFPs and representatives from the FPSC's seven member organizations. This last group includes the Montreal-based Institut quebecois de planification financiere, which is currently reviewing its own code of ethics. The FPSC and the IQPF aim to keep their ethical standards as consistent as possible.


The deadline for feedback on the FPSC's proposed changes by financial services industry members and the public is May 16.

Megan Harman
Investment Executive 
May 2011

THE 2ND 30 - 40 YEARS - LIFETIME RETIREMENT - HOW WE GOT FROM THERE TO HERE

                        

1960 - 1990

FINANCIAL PLANNING WAS DONE BY THE CORPORATION - NOT THE EMPLOYEE. EMPLOYEES BUDGETED INCOME - EXPENSES.- THAT'S IT! THE EMPLOYEE TRADED HIS OR HER FINANCIAL TIME FOR A GUARANTEED LIFETIME AT RETIREMENT.

Large corporations began to dismantle defined benefit pension plans over 20 years ago.


The first demographic group who were targeted were those in their mid 50's. Why? Because it is costly to fund a lifetime retirement with 10 years left (i.e. 55 - 65). This left those affected with only one choice - do it on your own. A $100,000 / year retirement income requires $2,000,000 in capital assuming a 5% rate of return on the capital - that's $200,000 / year in retirement funding. That sum speaks for itself. Most corporations did not start the retirement funding early.


Once a corporation removes a guaranteed pension for all intents and purposes an employee becomes self employed. The only advantage anyone has financially in a large institution is the opportunity to receive a pension and retire with peace of mind. Once you are on your own you are acting as an independent entrepreneur and not an employee. Loyalty cuts both ways.


That's the background that has resulted today in 60% of all working Canadians not having a defined benefit pension plan which would allow them to sleep soundly throughout the 30 - 40 years of their retirement (from as early as 55 to as late as 95 - look around you in your own family.)


Ask public servants why they work for the government from a financial point of view - their defined benefit pension.


Financial planning was done by the corporation - not the employee. Employees budgeted – income – expenses – that’s it. The employee traded his or her financial time for a guaranteed lifetime income at retirement.


Employees bought financial products for their individual accumulation purposes but had very little certainty whether they would be able to transition their accumulated savings capital into a sufficient and sustainable lifetime retirement income.


That brings us to 2011 where 14,000,000 boomers in Canada are preparing to retire and are inadequately aware of which professional financial practitioner can replace the corporate financial management team who once upon a time designed and implemented their defined benefit retirement plans......


That's where we are today.

LIFE WITHOUT A SUSTAINABLE LIFETIME PENSION IS NOT SIMPLY TOUGH - IT IS UNCONSCIONABLE

LACK OF PENSIONS A GROWING CONCERN

It will be the 'biggest social issue we're going to be debating in our society'



Talking about pensions may seem deadly boring but it will likely emerge as a much bigger issue in the years to come.


That's because of several colliding factors - aging baby boomers, low interest rates and weak stock market returns.


Plus more companies, especially small and medium-sized businesses, don't offer pension plans. Those that do are switching from defined benefit programs, with guaranteed . payouts, to defined contribution plans, which are based on accumulated contributions.


A number of pension plans have been damaged severely by the last recession or corporate bankruptcies. Nortel pensioners have engaged in a high profile public fight for their benefits, which have been compromised by the company's demise.


"Pensions will be the biggest social issue that we're going to be debating in our society over the next 10 years:' said Rick Robertson, an associate professor at the Ivey School of Business.


Statistics Canada reported this week that about 6 million Canadians were in registered pension plans as of Jan.1, 2010. Of those, 3.02 million work in the public sector as bureaucrats, nurses and teachers.


Nearly 60 per cent of working Canadians have no company pension, StatsCan says


Those working in the private sector know fewer employers offer pension plans, and more companies are switching to defined contribution plans from defined benefit plans. Some only offer defined contribution plans to new hires.


Air Canada is trying to switch newemployees to these cheaper plans. Its 3,000 pilots, who have reportedly balked at the idea. are in the midst of a ratification vote on a tentative deal. Statistics Canada says nearly 60 per cent of working Canadians - or 12.3 million peopIe - have no company pension.



While government supports are in place the Canada Pension Plan for all working Canadians, Old Age Security for all Canadians and the Guaranteed Income Supplement for low-income Canadians - it's the middle earners who are feeling the pinch.


A defined benefit plan has one huge advantage: people don't go to sleep at night worried when they have retired," said Robertson. ''It leads to very different lifestyle choices."


With these latest statistics, he believes it's only natural for governments to try to pull back on pensions, though it would lead to a very tough fight with unions.


"There are some pretty powerful unions.


Think of the teachers. Everyone says, 'Take them on: but as soon as somebody's kid doesn't have a place to go that day, then they say, 'Just solve it;" Robertson said


Any move to introduce pension changes would not solve immediate fiscal problems, but some U.S. states, where unions are weak or non-existent, have already done it


Newly hired state workers in VIrginia are now on a retirement savings program instead of the traditional defined benefit plan.


Paul Forestall, senior partner at Mercer, a human resources consulting firm, believes there will be growing pressure on governments here to move toward defined contribution plans.


The Statistics Canada data shows about 143,000 government workers were on defined contribution plans in 2009, compared with 2.8 million on defined benefit plans.


''Pensions are a big part of compensation in the public sector. Changing it won't be easy;' he said, adding public sector employees like teachers also make significant contributions to the plans. Given the decline in manufacturingjobs, Forestall is not surprised public sector workers now make up more than half of those with pension plans.


Ultimately, any changes may be dependent on government action.


While Finance Minister Jim Flaherty has expressed concern Canadians aren't saving enough for retirement, efforts to reform CPP have been thwarted by certain provinces, notably Alberta


Flaherty has floated the idea of a privately administered, voluntary program designed to help mainly the self-employed and workers at small businesses.


"I think it would be a positive change if implemented, but I'm not sure it will be enough to address coverage," Forestall said


If government reforms offer tax advantages to companies or make it easier to offer pensions, companies may start to offer defined contribution plans, though probably not defined benefit plans, he added. 
Vanessa Lu, Business Reporter
Toronto Star
May 13, 2011 

NO OPTION: RBC POLL FINDS RETIREMENT IS NOT A CHOICE FOR MANY CANADIANS

Careers ending earlier than expected, retirees seeking other income


TORONTO, April 20 /CNW/ - There are surprises in store for Canadians who are expecting to retire on a date of their own choosing, according to the 2nd Annual RBC Retirement Myths & Realities poll.


While the vast majority (83 per cent) of "pre-retirees" aged 50 plus believe they will retire on the date of their choice, almost half (41 per cent) of those who have already retired report that their retirement date was unplanned. The top three factors cited for early retirement: employer's request (18 per cent), health reasons (14 per cent) or reaching mandatory retirement age (6 per cent).


"We're finding that even Canadians who think they are well-prepared for their retirement years have not taken the unexpected into consideration," explained Lee Anne Davies, head, Retirement Strategies, RBC. "When their job disappears suddenly, they struggle with financing the added years in retirement that they hadn't counted on. This is where financial advice can ensure all aspects of retirement are explored, including the unexpected."


The RBC poll also found in the past 12 months, there has been a significant rise in the number of retirees returning to the workforce because they need the income (41 per cent in 2011 compared to 32 per cent in 2010), as well as a drop in the number of Canadians retiring debt-free (56 per cent in 2011; 61 per cent in 2010).


Fully retired Canadians, when asked what they would do if at some point their retirement income is not sufficient to support their lifestyle, responded that they would either stay in their present homes but live frugally (89 per cent); move out of their present homes to downsize or rent (87 per cent); or stay in their present homes and sell off assets (65 per cent).


"There are a number of ways to plan out how your retirement years can look," added Davies. "Seeking out good advice before retirement from financial planners can help you determine what you can do now to support your future lifestyle in retirement."


The annual RBC Retirement Myths & Realities Poll compares the perspectives of both retired and not-yet-retired Canadians, aged 50 and over. Related data charts can be accessed via www.rbc.com/newsroom/2011/0420-myths-wave1.html.


About RBC's retirement planning and other financial advice and interactive tools


Your Future by Design® is RBC's distinctive approach to help Canadians identify, plan, and realize their goals for retirement. With the guidance of RBC financial planners and investment planners and retirement planners, Your Future by Design helps Canadians create a blueprint for a successful lifestyle and financial plan for retirement based on what is truly important to them in key areas in life, including family, health, home, lifestyle, work/business, mind and spirit, and legacy.

About the RBC Myths & Realities Poll


The 2nd Annual RBC Retirement Myths & Realities Poll, which examines Canadians' expectations and experiences in retirement, was conducted by Ipsos Reid from February 25 - March 7, 2011. For this survey, a national sample of 2,245 adults aged 50 and over with household assets of at least $100,000 from Ipsos' Canadian online panel was interviewed online. A survey with an unweighted probability sample of this size and a 100 per cent response rate would have an estimated margin of error of ±2 percentage points 19 times out of 20 of what the results would have been had the entire population of adults in Canada been polled. All sample surveys and polls may be subject to other sources of error, including, but not limited to, coverage error and measurement error.


Rogers Yahoo Finance

April 20, 2011