: Jan 10, 2014 Ministry of Finance Roundtable



DATE: Friday, January 10, 2014

HELD AT: Ontario Ministry of Finance, 900 Bay Street, Macdonald Block, Humber Room, Toronto, Ontario

BEFORE: Christian Bode  Moderator


Alan Goldhar - Investor Advisory Panel
Cary List - Financial Planning Standards Council
Daniel Ongaro - Financial Planning Standards Council
Debra Bell - Canadian Securities Institute
Ed Skwarek - Financial Advisors Association of Canada
Guy Armstrong - Investor Economics
Hasan Khan - MD Management Limited
Hugh Murphy - Credo Consulting Inc.
Joe Rosati - Independent Mortgage Brokers Association of Ontario
John J. De Goey - Burgeonvest Bick Securities Limited
John Lawford - Public Interest Advocacy Centre
John Novachis - Investment Planning Counsel
Jon Cockerline - The Investment Funds Institute of Canada
Jonathan Bishop - Public Interest Advocacy Centre
Kevin Bandelow - Sun Life Assurance Company of Canada 
Leanne Winter - Sun Life Assurance Company of Canada
Lee Bennett - TD Wealth Financial Planning
Lindsay Speed - The Canadian Foundation for Advancement of Investor Rights
Marshall Beyer - Canadian Securities Institute
Maye Mouftah - Ontario Securities Commission
Nancy Allen - Independent Financial Brokers of Canada
Peter Goldthorpe - Canadian Life and Health Insurance Association Inc.
Peter McLachlin - Financial Advisors Association of Canada
Stacey Shein - Mutual Fund Dealers Association of Canada
Stephen Rotstein - Financial Planning Standards Council
Susan Allemang - Independant Financial Brokers of Canada
Tim Pryor - Mackenzie Financial Corporation
Trish Tervit - Environics Comminications
Vince Linsley - AGF Mangement Limited
Whitney Bell - Borden Ladner Gervais LLP
Cara O'Hagan - Ministry of Finance
Christian Bode - Ministry of Finance
Clemencia Cimbron - Ministry of Finance
Frank Allen - Ministry of Finance
Luba Mycak - Ministry of Finance
Mayya Mukhamedyarova - Ministry of Finance
Paul Braithwaite - Ministry of Finance        
Sadruddin Salman - Ministry of Finance
Shameez Rabdi - Ministry of Finance

--- Upon commencing at 11:03 a.m.

THE MODERATOR:  Good morning, welcome, and thank you, everyone, for attending the consultation on the merits with proceeding with more tailored regulation of financial planners in Ontario.

My name is Christian Bode.  I am with the Ministry of Finance, Communications Services Branch.  We appreciate that you are taking part of your workday to contribute your expertise, experience and ideas to a consultation that is important to the Ontario Ministry of Finance.

You have been invited by the Securities Reform Division to provide your input about the merits of more tailored regulation of financial planners.

As you can see by the number of attendees, this invitation has elicited great interest.  Your comments and ideas are important to the Ministry as we seek better understanding of the current structure and regulatory oversight of financial planning.  This includes whether there will be merit in proceeding with more tailored regulation of financial planners and, if so, to what type of regulatory framework.

Representatives from the Ministry of Finance are in attendance this morning to listen to your comments.  We have Frank Allen, Assistant Deputy Minister in the Securities Reform Division, and we have also staff from the Insurance and Deposit-taking Policy area.

I will say a few words about the protocol for discussion.  With your invitation, you were provided with four questions that we would like to explore.  First, is Ontario's current regulatory approach in relation to financial planning appropriate?

Second, how would you improve Ontario's current regulatory approach?

Third, are there approaches to regulating financial planners which you would recommend?

And finally, would regulation affect your business model of providing financial planning services and, if so, in what way?

With your invitation, you were also provided the opportunity to make an oral presentation and some of you have elected to deliver comments in that format.  We will start with each presentation before moving on to the questions and discussion.

I would like to remind you that in the interest of facilitating an opportunity for as many attendees as possible to comment, each presentation will be limited to five minutes.  And fortunately, for all the attendees, I will be very strict about this rule.

Once the presentations are completed, we will direct our attention to the questions and your comments.  We are having the discussion of today's session transcribed.  So, I would ask that before you speak, please state fully your name and the name of your organization, if applicable.

I will be moderating the discussion, again, to ensure that we listen to as many of you as possible.  I would like that you limit your comment to the subject of the particular question under discussion, so we move in an orderly fashion.  If your comments stray to another question, I will ask you to conserve your thought for the appropriate moment.

Also, if there are any members of the media in attendance today, I would ask you to identify yourself and your organization.

And finally, last but not least, before I introduce Cara O'Hagan, Director of Policy, Minister's Office, and last but not least, if you have a mobile phone or any other transmitting device, we kindly ask that you turn it on silent now for the duration of the session. With this being said, I would like to invite Frank to say a few introductory remarks.

MR. ALLEN:  Thank you, Christian.  I would like to echo Christian's welcome, and express our appreciation for your taking time to join us today.  We have another session scheduled on Tuesday; both of them will be well attended, and reflect the great interest in this topic.

The impetus for these two sessions was the Government's commitment in the 2013 Fall Statement to investigate the merits of proceeding with more tailored regulation of financial planners.  In order to maximize the time available for the presentations and discussions, I will really just touch on a few points in the consultation paper that underscore the importance to the Ministry of this issue, and why this consideration is being done at this time.

Financial decisions confronting individuals, families, Ontarians in general are becoming increasingly complex and very important for their livelihood.  Consumers need access to informed, trustworthy, professional financial advice to better allow them to achieve their financial goals.

For careful readers of the Fall Economic Statement, you will have noted that the comments about considering and investigating the merits of proceeding with more tailored regulation appeared in two places in the document.  It was under a consumer protection discussion in the jobs and growth chapter of the Fall Economic Statement, and it was also in the retirement income strategy section of the statement, which is a very important reflection of the impact that financial planners have on Ontarians in general.

Currently in Ontario, as you are well aware, there is no general regulatory framework in place to regulate the activities of individuals who offer the broad range of financial advice and planning services. The absence of a general regulatory framework has provoked some questions about proficiency, quality standards and potential conflicts of interest.

The Government and the Ministry of Finance in particular is seeking to obtain a better understanding of these issues and to gain a fuller appreciation of the current structure and state of the financial planning marketplace.  We are undertaking this preliminary review - - I would characterize it as a high-level review -- in order to determine the merits of developing more tailored regulation and, if there were to be more tailored regulation, what form that might take.

As part of the review, we must understand whether regulation would be advantageous for consumers in terms of investor or consumer choice, promoting more informed decision making and generally enhancing consumer and investor protection.

At the same time, we are mindful of the necessary balance for industry participants in terms of consequences such as regulatory burden, complexity of regulation and the cost.  And, in proceeding today and on Tuesday and in the course of reviewing the written submissions, we will be trying to move in a balanced way in considering what is best for Ontario and Ontarians in this important area.  So we look forward to today's discussion and, once again, thank you for joining us.

THE MODERATOR:  Thank you.  I will now be proceeding.  I will invite the presenters:  the first place, Financial Planning Standards Council, if you ... you can sit or you can ...

MR. LIST:  I am good here, if everybody can hear me.

THE MODERATOR:  If everybody can hear, you can stay the remainder of the day.

MR. LIST:  Great.  Thank you, Christian, and thanks, Frank, for setting the stage, and I do have some prepared remarks.  I am going to talk faster than I would like to because I know that there are time limits, and I hope you don't start my time until my first word of my prepared remarks, so ...

The Financial Planning Standards Council is a not-for-profit organization that develops, promotes and enforces professional standards in financial planning through the granting and enforcement of the certified financial planner's certification.  Those who achieve this distinction are trained to provide financial planning at the highest level of competence expected of the profession.

In Canada, there are over 17,000 certified financial planning professionals in good standing, over 9,000 of them in Ontario.  Further, through our membership in the International Financial Planning Standards Board and corresponding network, which spans 24 territories, there are over 150,000 certified financial planning professionals worldwide.

Certification granted by FPSC provides assurance to Canadians that the design of their financial future rests with a competent and qualified professional who will put clients' interests ahead of their own.  FPSC, together with our partners in Quebec, institut Quebecois de planification finanicier, IQPF, continually develop, promote and enforce the highest standards of competence, practice and ethics for the profession.

I currently chair the Coalition for Professional Standards for Financial Planners, a group of four organizations which has developed and published a statement of principles by which we believe financial planners should be bound.  In addition to FPSC, the coalition members include the Canadian Institute of Financial Planners, the Institute of Advanced Financial Planners and the IQPF.

We are encouraged by the Ontario Government's interest in this topic, and are pleased to offer our expertise in the development of a solution for Ontario.

There has recently been much discussion on a number of regulatory matters regarding existing regulation related to product-based advice and transactions.  However, we are concerned that the continued focus related solely to product-based advice and transactions, at the expense of discussion regarding requisite standards and oversight related to the professional non-product-specific advice, that is, financial planning, is doing the public a disservice.

We have identified two fundamental problems:  First, studies clearly demonstrate that Canadians are not getting the financial planning help they need from qualified professional financial planners.  This is partially the result of a lack of understanding of how to identify a qualified financial planner and of what they should expect of a financial planner and/or a financial plan.

Second, today's unregulated financial planning environment leaves consumers vulnerable and at risk of receiving advice from individuals holding themselves out as planners who would have not had to meet any qualifications based on accepted unified standards of ethics, competence or practice.  The term "financial planning" is too often used as a sales pitch to sell product, and the title "financial planner" is used haphazardly throughout the industry.

The majority of those people in Canada who imply through title and/or advertising that they are financial planners are in fact licensed and qualified only to give advice related to product recommendations or purchase, and expertise in product advice gained from licensure does not equate to competence in financial planning.  Nevertheless, our studies have shown that consumers believe it does.

There is no doubt that Canadians need the guidance of competent professional financial planners. Study after study reveals the current societal challenges we face.  An aging population has put great strain on our social safety nets.  In fact, Premier Wynne recently highlighted this issue as it relates to retirement security.  Consumer debt levels continue to escalate and gaps in workplace wellness programs have left our population in the most financially vulnerable and precarious positions that we have experienced in decades.

The time is clearly right for financial planning.  However, during these times of societal vulnerability, it is important that consumers are appropriately served and protected by qualified and competent financial planners.  Clear, singular standards of competence, ethics and practice must be accepted and permitted to be enforced.

We are pleased that the Ontario government has identified that further regulation regarding the purchase of investment insurance products or advice therein may not be the answer when it comes to consumer protection regarding financial planning.  It is our view that, one, there must be a single unified set of standards for financial planners and financial plans so that consumers will be protected by knowing their financial planner has the necessary professional competencies and will act ethically and with due prudence and professionalism.

Two, there must be a unified definition of what is a financial planner and financial planning and what constitutes a financial plan so that consumers understand their importance and know what to expect when seeking out a financial planner.

Three, the government should create title and holding-out restrictions.  Only those who have demonstrated their competence by meeting a single unified qualification standard and ongoing professional ethics and continuous professional development requirements should be permitted to call themselves financial planners.  As a result, consumers will cease to be at risk of poor or inappropriate planning by those who have not met minimum competency standards.

Four, financial planner accountability should be to a professional oversight body that understands financial planning and professional obligations and that represents the public interest. Standard-setting for and oversight of financial planners should not be placed on a piecemeal basis through product and product-advice-based regulation.  A professional model for financial planners will provide confidence to consumers that their interests are represented and protected by a cross-sector body that is expert in financial planning and expert in the establishment and enforcement of the financial planning profession.

THE MODERATOR:  One minute left.

MR. LIST:  Okay, thank you.  FPSC and its coalition partners have been working diligently to bring forward a single unified set of minimum standards required to hold out as a financial planner and unified definitions of what constitutes a financial planner.  These standards and definitions are based on those already enforced and accepted by over 22,000 licensed or certified financial planners in Canada.  These standards and principles that our coalition is proposing form the basis of a professional model for financial planning, not only in Ontario but for all of Canada.

The solution we propose is simple: Codify in law professional certification structure, governance and oversight mechanisms that already exist in practice but that are currently voluntary, and make them a requirement for all who wish to claim financial planning as their own.  Such a model remains self-funded by professional planners, establishes no additional regulatory burden other than to require that all who claim to be professional planners meet and continue to meet the competency and ethical requirements expected of those who have stepped up to and continue to adhere to the unified standards already in place.

THE MODERATOR:  One more thought, and we will continue ...

MR. LIST:  The benefits to all stakeholders:  The government will benefit from the adoption of greater consumer protection through simple proof and no added cost model.  Industry will benefit through reduced compliance risk, assurance of consistency of quality, delivery of financial planning and clear and simple direction regarding qualification requirements. The profession will benefit from increased confidence placed on financial planners and added credibility and clarity of their role as critical players in helping guide Ontarians to a better future.

And finally and most importantly, consumers will benefit as they will have greater protections and clarity around what they should expect from a financial planner, and through participation in the planning process only with a duly qualified individual, consumers will gain greater control of their financial futures and will be protected from the potentially devastating damage that can be done by the advice provided by individuals holding themselves out as financial planners who are neither certified nor competent to do so. I will cut it off there.

THE MODERATOR:  Thank you.

MR. LIST:  We will be distributing our comments ...

THE MODERATOR:  And your name?

MR. LIST:  I am sorry, Cary List, president and CEO.

THE MODERATOR:  Cary List?  I didn’t get that.  Thank you, thank you for your presentation.  We will now move to, I think, to the Public Interest Advocacy Centre.  Yes?

MR. BISHOP:  Good morning.  Thank you for the ...

THE MODERATOR:  And state your name?

MR. BISHOP:  My name is Jonathan Bishop. I am a research analyst for the Public Interest Advocacy Centre, or PIAC.

PIAC is pleased to participate in any dialogue within the financial planning industry that will ultimately benefit consumers in Ontario.  We were established in 1976 as a non-profit, charitable, non- governmental organization.  We provide legal representation, research and advocacy for consumers and delivery of important public services, such as telecom, energy, financial services and transportation, and we also provide advice surrounding issues arising from this work, namely competition law, privacy law, e-commerce and general consumer protection.

This morning we would like to raise two points with you.  The first is the perceived conflict of interest inherent in the current compensation model for financial advice providers operating in Ontario.

The second is the need for a standardized use and application of titles for those who provide financial services advice to consumers also located in Ontario.

These views have been developed through consulting with Ontario consumers through PIAC's two studies of the financial advice industry in 2008 and 2012. Copies of these studies can be found in our website at www.piac.ca.

During these investigations we found, through focus groups, that few participants mentioned an obligation to disclose fees and commissions, conflicts of interest or the obligations of financial planners to their clients.  Most were not sure whether financial planners were, in fact, obligated to make such disclosures.  A few believed that disclosure of these issues was a legal obligation or that changes in regulation were in place to ensure that it soon would be, and only a few were aware that disclosure was actually not a legal obligation.

In addition, few were also aware that most planners receive the majority of their income from third- party commissions, trailers or other benefits.  Most assume that any commissions received vary directly with the growth of the portfolios being managed, thus providing the planner with an incentive to choose the best possible investment vehicles for their clients.

Many participants had not received full disclosure of fees and commissions and did not understand how their planners were being remunerated.  Thus, many did not understand the potential conflict of interest stemming from third-party commissions.

Turning to the second issue, the need for a standardized use of titles, our research found that both consumers and planners themselves were confused about how financial planning, the titles worked and how it was regulated.  They were confused by the designations.  There was a near consensus that financial plans was only a teaser to sell securities, those claiming to be planners when they were doing investments only and not providing the independent, expert financial advice in all six areas generally defined as financial planning.

As a result of our 2012 examination, PIAC concluded that Canadian consumers remain in need of increased protection when engaged in the financial advice and planning industry.

The Ministry, unfortunately, has a problem on its hands.  It knows that a majority of Ontarians don't trust the advice they receive from financial service providers, as per an OSC survey done in March.  It is well aware that only 20 per cent of investors strongly agree they generally trust their financial advisor's advice.

The Government is also aware that 64 per cent of respondents in the same survey either agree or strongly agree that how a financial advisor is paid impacts the recommendations they are going to receive as a consumer.

Consumers have told us they want strengthened regulation of financial service providers, including clearer professional standards on the use of title, rigourous educational requirements, ethics training and stricter regulatory enforcement of the rules.  In short, they want to be able to trust the service that is being provided to them.

We believe a positive development would be the employment of a uniform standard of care for investors, complete with a full disclosure of how financial planners are being compensated.

The Ministry of Finance may be also receiving an unknown amount of political pressure to provide movement on this file in the lead-up to the next provincial election.  The "X" factor of political interest could be a great benefit to the resolution of concerns expressed by consumers regarding this industry.  However, it could also spell the rushed introduction of regulations or legislation containing a host of unintended consequences that will further confuse both consumers and financial service providers.

Some actors in the financial planning industry have had a few opportunities to reform themselves over the past few decades, and have largely taken what we consider a 3-D approach, deny, delay, debate, instead of being truly proactive as we have seen in other jurisdictions.

THE MODERATOR:  One minute left.

MR. BISHOP:  The industry has been warned repeatedly that if no progress is made, they can expect the regulation of investment advice and possibly the regulation of financial planning.

In this spirit, PIAC encourages industry leaders to promote policy solutions beneficial to both consumers and the industry.

We are very pleased the Ministry has turned its attention to this important policy debate, and I want to thank you folks once again for the opportunity to present PIAC's views, and we look forward to participating in this debate this morning.  Thank you.

THE MODERATOR:  Thank you, very much.  We will now move to Credo Consulting.

MR. MURPHY:  My name is Hugh Murphy, and I am the president of Credo Consulting.  Thanks very much, first of all, for inviting me to make this presentation -- and I didn't recognize it was going to be a debate.  It's going to be a debate?  I see.

I am offering my comments -- and I hope I don't speak as quickly as Cary.  I am offering my comments because of the tremendous potential value that regulatory reform related to financial planning and advice might create, because of the growing need for financial advice at a time when the financial advice industry is under tremendous and arguably increasing stress.

Reforms to regulations have the potential to affect Canadians greatly.  My research firm specializes in studying financial advisors.  We spent the last decade conducting research almost solely with Canada's retail financial advisors.  Occasionally, Credo was asked to conduct research with consumers.  We wince when we are asked to do.

We have conducted enough research with investors to know how incredibly, how astonishingly ignorant consumers are with respect to matters financial. If I found one thing in the last decade, one thing that I have found in the last decade is that consumers don't generally need protection from very, very few corrupt financial advisors who are simply bound to exist somewhere in the marketplace.  Rather, consumers need protection from themselves.  And the protection should come directly from the guidance and knowledge the financial advisor community helps to deliver.

I call them all financial advisors because, whether they hold the CFP designation or the PFP or the CLU or any other designation or certification, consumers who depend on the financial advisors simply don't have the financial literacy to distinguish between these.

Anyone that hangs their shield out as a financial advisor -- anyone can hang their shield out as a financial advisor.  And anyone who speaks the language of money has the potential to do real good or real harm to the vast body of consumers who simply don't have the financial literacy to help themselves effectively.

Must standards exist for the very broad range of competencies in the realm of financial advice? Certainly.  And whether they hold the CFP designation that is made available by financial planners or the Financial Planning Standards Council, or not, the majority of financial advisors indicate that the FPSC is moving in the right direction and is at the leading edge of the delivery of these standards.

Many are equally concerned or equally certain, rather, that there are other valid pathways to becoming extremely competent and valued financial guides. What is critical is that these advisors must assume a fiduciary role with their clients.

In a recent focus group that Credo conducted, an advisor explained, "If I were the finance minister, I would look at the CFP and the CFA types of standards of fiduciary responsibility.  There are financial salespeople, and there are professional fiduciary financial advisors, and there is a huge distinction between the two."

I believe the financial advice industry is, in some respect, in peril.  We have a population of financial advisors that are heading towards retirement at the same pace as the rest of us.  And when my firm speaks, or when my firm asks advisors what guidance they would give to younger people who aspire to be financial advisors, they often laugh -- financial advisors, that is. They almost invariably tell that, given the current regulatory environment and the degree to which oversight, compliance and administrative matters have become so painfully onerous, they would not encourage people to follow in their footsteps.

Advisors simply tolerate compliance audits that they feel are conducted by officers who don't have the knowledge, skills or ability to judge the suitability of the guidance that is being purveyed by advisors whose work they are examining.

In another interview with an advisor, she explained:  "Financial advice should be managed by a professional organization, not by a compliance organization.  Compliance is utterly incompetent at identifying what good advice is.  The industry uses compliance as an enforcement tool to get advisors to toe the company line and not the client's line."

THE MODERATOR:  One minute left.

MR. MURPHY:  It is a cover your ... cover yourself game, and it has been like that for 30 years, since I first got into the business.

And the people that support compliance will promote schmucks to heroism based on their production -- product pushing -- and not based on the advice they give to clients.

Another advisor offered:  "Financial advising is similar to the practice of medicine in that there is a judgment issue.  It is far too complex for anyone outside the profession to know whether advice is good or not."

In two recent Credo studies with more than a thousand advisors, we had more than three quarters of advisors indicating that complying with regulatory and compliance issues was among their top challenges.  In fact, only one other item, their time-management challenges, was identified as a greater regulatory issue.

The pendulum has swung to a point where the regulatory and compliance environment is making the business of being a financial advisor a more unpalatable occupation than it ever has been, and this is at a point in time where more Canadians are in dire need of financial literacy and guidance than ever before.  This is a terrible ...

THE MODERATOR:  Last statement, please.

MR. MURPHY:  Yes.  This is a terrible indictment of the current environment, and Credo encourages the Ministry to look for ways to simplify the regulatory framework and afford the financial advisor community greater flexibility and latitude to deliver appropriate guidance to consumers.

But, in the same breath, I will yet more strongly encourage the Ministry to ensure that forceful regulations are in place, regulations that fully charge all advisors with accepting and properly respecting their roles as, most importantly, fiduciaries, and secondly as the critical instruments in developing financial literacy among Canadians.  Thank you for your time and consideration.

THE MODERATOR:  Thank you.  We have one additional presentation from the Independent Financial Brokers of Canada.

MS ALLAN:  Thank you.

THE MODERATOR:  State your name and ...

MS ALLAN:  My name is Nancy Allan.  I am executive director of Independent Financial Brokers of Canada, and I am joined here today by Susan Allemang, our director of policy and regulatory affairs.

On behalf of IFB and our 4,000-plus members, we thank the Ministry for inviting us to attend this discussion.  We welcome the opportunity to provide the perspective of the people we represent; indeed, they are very engaged on this topic.  The other day we sent out the Ministry's four questions by e-mail to our members and we have been absolutely deluged with responses ever since.

These responses have informed our presentation here today and, through our words, the Ministry is hearing the voices of the province's independent brokers.  At IFB, we don't represent big corporations or Bay Street firms.  Most of our members are self-employed and operate small community-based businesses across the province.  Their meetings typically happen around the kitchen table over a cup of coffee.  Their livelihoods depend on building trust, and many of the relationships they forge span decades.

Our members help Ontario families plan for the future, save and invest money and better protect their families.  The client comes first, and that is not just a motto.  Since 2002, it has been a guiding principle, and all members of IFB are required each and every year to reaffirm their adherence to our code of ethics, which compels them in all instances to place the interest of the client above all others.

The majority of our members are licensed to sell life insurance.  Many are also registered to sell mutual funds and other securities and about 20 per cent are certified financial planners.  All of our members, without exception, operate in a financial services industry that is already highly regulated and answer to at least one provincial licensing body.

Suffice to say that our members operate under government and regulatory bodies that have the ability to discipline, to hear and process consumer complaints, to impose sanctions and penalties and to revoke registrations and licences.  This is as it should be.  Financial decisions are important and they can also be very complicated.

Our organization and our members believe that the people of Ontario and Canada are best served by duly accredited and licensed professionals.  We support regulation and oversight that protects consumers.  Like any Ontarian, however, we question the need for potentially excessive and duplicate regulation that would undermine the ability of our community-based members to run a successful business and help their clients plan for tomorrow.

Many of our members are able to hold themselves out as financial planners by virtue of their professional designation.  They create detailed financial plans and specific product recommendations that fit within those plans.  They have a set of standards they must comply with in order to maintain their designation and, because they hold one or more financial services licences, they are also regulated by one or more provincial licensing bodies.

Others of our members, indeed the majority, hold a wide variety of other professional designations, but do not hold themselves out to be financial planners.  They are licensed and they are subject to a regulatory framework.  In the course of serving their clients, they conduct needs analyses and other financial planning-related activities that quite legitimately form a key part of their work as financial advisors.

IFB welcomes the opportunity to be part of these discussions.  We believe that financial services professionals should be regulated.  This helps to ensure a consistent level of consumer protection, including access to complaint mechanisms and restitution, as well as culling those individuals who bring disrepute to the profession and reduce investor confidence.

We look forward to participating with the Ministry as it moves through this process of evaluating the merits of regulating financial planners in Ontario. We are hopeful that our comments here today will assist in a better understanding of the regulatory landscape our members already operate in.

Our time here today is brief and we will certainly submit a more formal written response addressing the four questions set out by the Ministry, but the key point I would like to leave you with today is that the self-employed Ontarians and small business owners who make up our membership already operate in a regulated environment.  Much is expected of them, and they are held to account each and every day, and that is as it should be.  Thank you.

THE MODERATOR:  Thank you.  Thank you for the presentations.  We will now move to the open discussion.

The first question, of course, is Ontario's current regulatory approach in relation to financial planners appropriate?

If you want to participate and to make comments, just have ... establish eye-to-eye contact, raise your hand, and I will do my best to respect the order of the queue.  And keep in mind that I cannot give up the floor; we have about 20 minutes per question, and we have to move fairly quickly.  So when your comment, your thought is already done, I may ... I will ask you to share with other attendees.  So, there is a ... someone wants to?  Okay, here.  Please?

MR. SKWAREK:  I am Ed Skwarek, and I am with Advocis.  Just a comment, briefly, on question 1, is the Ontario ... currently, is the regulatory approach appropriate?  First, the financial planning.

And I see a bit of a problem in terms of the terms that we are using, and that is a direct result of the lack of definition of what is a financial advisor and what is a financial planner.

I think many of us share the same views around this table about the professionalization of the industry, but our perspective is we have to look at it more broadly.  In Ontario, there are approximately 40,000 licensed financial advisors.  So if you look at ... picture this as a Venn diagram.  You have the big circle, and you have financial advisors.  Within that, you have specializations such as financial planning, people with the CFP, CLUs.  These people are specialists within the broader spectrum; that is how we view it.  They are also licensed, for the most part, to provide financial advice if they are engaged in the selling of product, that execution.

So I think what we have to talk about first is let's get these terms defined, what they are, and then determine what is a regulatory outcome that we hope to achieve in bringing a professional standard forward. Once we identify what that role is, we can then determine, do we need to capture all 40,000, or do we just capture financial planners, the 9,000?

In our view, if we go too narrow, there is serious risk that consumers will not get the benefit that we hope is going to be the outcome:  greater financial security, greater confidence in the advice that they are getting, better ... just a better feeling for the financial advisors they are dealing with.

Now when we talk about is regulation currently appropriate, I think it currently is not, and that is because we have seen an evolution in the industry, and every industry goes through this evolutionary process. And, you know, at one point it was certainly product based, the selling of financial product.  And we have seen rules from the MFDA, through IIROC, where you have to do needs analysis, where you have to know what your products are about, you have to know what your clients' needs are.

So every financial advisor is involved to some degree in financial planning, but not to the same extent as people who have gone through a specialization process to become financial planners.

And in conclusion, then, to draw the analogy that was ... Credo made the point about the medical industry; I would like to just take that a little further.  If you were to look at the medical industry, and again use a Venn diagram, and the big circle is all doctors, within that you have specializations; you have oncologists, you have thoracic surgeons.  If you just regulated those specializations, then the consumers of medical products would be at great risk because people who are MDs, that generalist, would be unregulated, and I don't think any of us would consider for a second regulating that way where we would exclude the generalists.  You have to include them, because out of those generalist groups, that is where you get your specialized experts going forward.

So we view it as a need to capture everybody to start with, define what the roles are, include the specializations and recognize them, and that would ensure a better consumer outcome down the road.

And we do believe in, sort of, professionalization of the industry because the MFDA and IIROC do a great job in regulating what they were brought forward to do, brokers and dealers, but then the delegating the responsibility of the oversight to those broker and dealers to look after, to ensure compliance on the part of the financial advisors is a misalignment of regulatory needs.  You need to be regulated by a group that understands what you are doing, and there is no better group to regulate financial advisors and planners than financial advisors and planners themselves.

THE MODERATOR:  Thank you.  We have one ...

MR. LAWFORD:  My name is John Lawford.  I am the executive director of the Public Interest Advisory Centre.

As Jonathan noted, we started studying this issue in earnest in 2008, and looked at it again in 2012.  And our view, from having done regulatory law and consumer work in other areas is that, with much respect, Ed, the approach you are suggesting may work for a mature, regulated profession, but you are not.

We have a situation here where I think the approach of going big to financial advisors here is too big a piece to cut off.  One looks smaller, and then work your way into regulating financial advisors and defining these terms by starting from defining financial planning and regulating financial planning; that is our conclusion of our two reports.

That particular area looks a lot like a regulated profession.  There are six planning areas, or five or seven, or whichever way you guys define it, and it is fairly well broken off from the rest of the industry. It is not tainted by compensation structures necessarily. It looks like a place where you can start, and Quebec has approached it in that manner, and then done the larger regulation of the whole industry.

It is just too big a piece to cut off, and we are concerned about inertia, so that if the effort becomes stalled because you are starting to roll in all of the other regulators and all the other concerns around the way financial advice in relation to particular products is considered, that will get nowhere.  So we would much prefer concentrating ... actually, unfortunately, exactly the opposite to what you suggested.

THE MODERATOR:  Thank you, for your comment.  We have one ...

MR. LIST:  Cary List, again.  It is an interesting, good, I think, philosophical conversation here, and I want to come back to the question, which is is Ontario's regulatory approach, current regulatory approach appropriate? -- and echo some of the things that Ed said around the approach, which is that historically, the approach to regulation was related to the purchase or sale of product or transactions.

The world has changed dramatically.  And to some of the comments that were made also by Hugh at Credo is that what we are facing now, with the current regulatory approach, is an expectation by consumers, by Canadians and Ontarians, that they are getting professional advice.  And I will deal with the advisor/planner question separately but, whether you call it ... we just talked specifically about the planning or some sort of professional advice, from people who actually have been appropriately licensed and qualified to actually offer a wider range of professional, what we call non- product-specific advice, than perhaps what is required under the licence, the current licensing regime.

So we would argue that the regulatory approach today for those that are actually licensed to sell products or provide advice regarding securities and mutual funds is fine.  Perhaps there could be enhancements to it, but that is not our concern.

However, when we get into the provision of professional planning, professional advice that is not tied directly to the relative merits of one product or another, we would echo some of the comments that were said before, that the current regulatory approach doesn't work because you have compliance and oversight being undertaken by organizations or individuals who actually don't understand the complexities of client needs and the complexities, frankly, of what needs to be known, the competencies and knowledge required of the individual serving their clients.

With respect to the question of regulating all advice or planning, and I think this is a very challenging one, the approach that we have taken and what I laid out in my very quickly spoken comments is that we would echo, I think, some of what John Lawford said regarding where do you start, that one of the challenges we face is how do you define what a financial advisor is? A financial advisor today in Ontario and Canada and frankly around the world can mean so many different things, and it actually doesn't refer to any specific, clearly articulated set of knowledge, skills, abilities or competencies.

So should there be work on potentially reforming that and clearly defining titles definitions? Absolutely.  Frankly, one solution, and we are not proposing this, but could be to outlaw the term "financial advisor" entirely and create titles that mean something very specific where you can put specific knowledge, skills, abilities and competencies attached to them, and have agreement on that.

The reason, we believe ... well, we are about financial planning, have always been as our coalition; that is one of the reasons we are starting there.  But we know that there has been a lot more development of what are the requisite knowledge, skills and abilities, what does it mean to be a financial planner, what does financial planning mean.  Not well understood or necessarily bought yet, by the consumer, but certainly we are a lot further along in defining that space, and we would echo what John said.

If you start there, look at moving from an area where you can actually bite it off, where you maybe can get some consistency of understanding around the table, that may very well grow into something like a regulated financial services professions group, as opposed to a regulated health professions group.

THE MODERATOR:  Thank you, Cary, although some of your argumentation was answering question 3, it was very worthwhile.  Yes, sir?

MR. GOLDHAR:  I am Alan Goldhar.  I am from the Investment Advisory Panel of the Ontario Securities Commission, and I think our stance on the regulatory environment now is obviously it is not adequate; it is designed, as has already been brought up, really to protect the industry and the players in the industry as opposed to the clients.  If it was for the clients, we would have a best-interests type of scenario where advice given is in the best interests of the client and not just suitable for the client, which is a big area of discussion right now, and there is lots of literature on that.

I used to be in the regulatory area of a big, large investment firm, and I know what I was looking for and it wasn't in the best interests of the client; it was in the best interests of the company that paid me and hired me.  That was my core job, to ensure that rules and regulations were followed so that the company and the company employees did not get into trouble.  So in that alone, that is a major area of concern.

Fiduciary duties:  We don't know, do advisors have it, not have it?  As consumers, they have no idea.  They assume they do but in fact, of course, advisors do not have a fiduciary duty, and that is something that needs to be discussed around, well, what is your job?  Are you a financial advisor and, if so, what responsibilities and duties come with that, and that is the definitions that we have to work through.

Provide clear distinction, as Cary brought up, about advice versus sales.  I mean, those are completely distinct and they should be clearly distinct to the consumer, and they are not.  They are ... obviously, financial plans are often used as a marketing tool to sell product, and that is really ... it sets an environment, potential for a loss for clients, for ... because the client says, "Well, you told me to do this," and they've got all the documentation to say, "Well, here is my rationale and logic for going that route a year ago so, if you have losses, sorry.  I mean, it was logical, it just didn't work out the way you wanted."

It shouldn't be a chance of ... a game of chance like that; it really should be something where financial planning is not supposed to be, "Let's guess, let's take a best guess at what is going to happen next year."  That is, of course, not what financial planning in the professional sense is about.

The last is there is a sense of, if we had some regulation here, tougher regulation about who can call themselves what, whatever those names come up with, it is going to create barriers to entry to the profession, which is what we want.  We want people that are very serious about this profession, that are willing to go through the courses, the exams, the regulatory requirements and maintain their technical knowledge, and not just be a fly by night where you can write, you know, a securities exam and some sort of licensing thing in one day, and then become licensed to call yourself a financial planner.

I think I received my licence to sell at a very young age, and I had no idea what I was doing.  It just seemed like an interesting thing at the time.  I actually took it, the exam, for my own interest.  I never actually sold.  I was always on the finance side, but I could have, and I knew very little, and certainly could have caused a lot of damage to clients.  I mean, I wouldn't have lasted in the industry had I done that, but I certainly could have created a fair amount of problems for clients without that, without the regulatory requirement of financial planner.  That's it.

THE MODERATOR:  Thank you.  Did you want to add something?

MR. MURPHY:  Yes, I would just like to make the tangential comment that I honestly don't think it is currently the time to be putting up more barriers to entry.  Managing, getting people involved and interested in producing and delivering good advice to Canadians right now is critically important.

Somehow addressing, creating policy that addresses certainly consumer financial literacy is critical, but creating barriers to entry for people who genuinely want to deliver good advice to Canadians, I would have a problem with that.

MR. GOLDHAR:  Barriers to entry to those who don't want to be regulated and don't want to have the professional designations, et cetera, who just want to take the Canadian Securities Course and then call themselves financial advisors.

MR. MURPHY:  Very good.

MR. GOLDHAR:  That is the barriers to entry that I am referring to.


MR. BEYER:  I just want to respond.  You probably took the Canadian Securities Course about the same time I did.  I am with the Canadian Securities Institute, by the way.

MR. GOLDHAR:  Yes, I ... it’s a great course.  I advise you ...

THE MODERATOR:  Your name is Marshall?

MR. BEYER:  Marshall Beyer, sorry.  The standards have risen considerably since ... in fact, there are five exams and approximately 500 hours of study required to earn your licence, and then maintain your licence over the first 30 months of your career.

MR. GOLDHAR:  No insult intended.

MR. BEYER:  So, I just wanted to make that point.

THE MODERATOR:  I took my Canadian Securities Courses in 1988, and I ended up in communications.  So, there is always another side ...

Any other ... if ... or that we can have a subquestion, or we can move to the question no. 2.  No. 2? Yes, okay.

No. 2, question no. 2, “How would you improve Ontario's current regulatory approach?”  We sort of flirted with this.  Mr. Lawford?

MR. LAWFORD:  I think, from our point of view, and again, working with some consumers in focus groups and on reading the secondary literature and speaking to some financial planners, I think that there is a number of things that could really be done to improve the regulatory approach, and no. 1 is taking the focus off product licensing and putting it more on a professional approach and coming up with standards and standards of care.  That is a very tricky issue, but you know, I will come back to that.

But, from the bottom line, consumers want to know who they are buying stuff from.  So, they don't know which title means what, and it would be nice, and in fact proper consumer protection to have titles mean something and relate to the service that is being provided.  So, that is, I think, kind of an easy one to knock off, to be absolutely honest.  If you can't get people in a room to decide what titles mean, you have a pretty structural problem.

Up from there, consumers need to know what the tensions are, if you will, in their relationship with their advisors.  So that means how they get paid because, at the moment, people think that financial advice is given by magic.  They think they walk into a bank and somehow it is just given to them, and they don't know how those folks are paid at all.  That is the fact, and we have to undo that.

Part of financial literacy is just giving people a little dose of reality, and someone has to say to them, "Listen, this is how I get paid."

And it happens in many other industries. Mortgage brokers have to tell people how they get paid. Every other industry has to tell people how they get remunerated, and it is just simply not acceptable to let that continue.  Whether people should be disqualified if they have a conflict of interest is a different matter, and that has to do with the standard they might make.

We also think that at the end of the day you have to get as far down the road as licensing and giving exams that are standard, and preparing people for the industry, and that that is not something that should be done in various routes through whichever designation you choose to come through and whichever product you are choosing to sell; it should be standard, because then people know that they are getting a standard level of service.

And then, finally, I think you have to have something of a net, and although it is not super-well funded, it is very nice for people in Quebec to understand that they have a fund for when there are the bad apples. So, I know that fund is often dry because people had ... there is a lot of bad apples, but having a compensation fund which members of this profession and their employers pay into is really of importance to consumers because it all great to try to get money out of a ... blood out of a stone.  But, you know, when someone has been truly a bad apple and flown the coop, the consumer is left holding the bag, and there is nothing there.

So those are the kinds of improvements that we would like to have, those specific results out of this process.

THE MODERATOR:  Thank you.  Cary?

MR. LIST:  Thank you.  Improvements to your current regulatory approach, I think that, absolutely, clarity around titles in law is critically important.  But the nature of the regulatory environment in Ontario and across Canada, frankly, is such that the regulators, whether it is the SROs or the securities commissions or the insurance commissions, have been built and established on the basis of product or capital markets regulation, not on the provision of professional advice.

So we would ... we have to remember that we are talking about consumer protection, consumer interest and what is going to actually help the clients wade through this whole scenario.  And creating a securities commission or insurance council or SRO-based regulations and requirements around this is actually going to add additional confusion to consumers because you have ... you still have arbitrage within the industry, where people can pick and choose which regulator they want to work under.

So we would say improve the regulatory approach, again, by taking a look at a professional view of this.  Those that want to be licensed to sell securities or insurance can continue to do so under the existing regime, and that should be fine.  But if you are looking at titles that mean something in terms of proficiency, competence, ethical obligations, knowledge, skills and abilities related to how they are holding themselves out with respect to the client, that should be considered in a professional model, not the existing product regulatory model.

They can sit nicely beside the licensure as to what products you may have, but that shouldn't be undertaken by existing structures of organizations that don't know or understand the depth and complexities of those professional services.  So that is how we perceive improving professional regulation.

THE MODERATOR:  Thank you, Cary.  We have...

MR. SKWAREK:  Ed Skwarek, Advocis.  I agree with so much with what I am hearing, consumers being the focus, making sure they are appropriately protected. But when we look at then how do we want to reform our approach we have to make sure we are being both practical and that we are simplifying things for consumers.

In my mind, we are not being practical if we are going to further slice and dice what financial advice is.  Certainly, we need to define it, but then saying some is included, and what it is, both a profession, and some are excluded, just examine the practical outcome of that.

So now we are saying, "Let's introduce a profession, and we will call that financial planning.  And some financial advisors are in this professional group. Others are outside of this professional group, and the ones that are outside of it, they are going to be regulated, continue to be regulated by the MFDA and IIROC."

We are just adding complexity.  Consumers are going to get further away ... when we talk about we need financial literacy, if we keep making the product more complex, the way we are going to be regulating it in the oversight, we are going to get further away from making this something that is understandable by the consumer.

We have to make sure we are taking a simple approach and, in our view, everybody in the tent to start with, and then removing certain people; it keeps it simpler.  If I am dealing with somebody called a financial advisor, they are going to be a professional.  We have to raise the standard.  So we have to enhance the entry levels, we have to bring it up, but we have to do it in a reasonable fashion.

We have to keep in mind that there are practical considerations here, and this can't simply be a philosophical discussion on, you know, what is a financial planner, what is a financial advisor?  All important questions, but the outcome won't be very practical.

THE MODERATOR:  I would go to madam, first and then you, sir, and then ...

MS ALLEMANG:  Okay.  Susan Allemang, Independent Financial Brokers.  I guess I am agreeing and disagreeing with pieces of things that are going on around the table.

In terms of the disclosure, there is actually quite a lot of disclosure for financial consumers who deal with regulated entities.  So we have the point- of-sale disclosure, which has the fund facts for mutual funds and for segregated funds.  We have increasing requirements for disclosure on ... that includes information on trailing commissions and commissions related.

We have, coming up within the next few years, Phase 2 of the client relationship management process, which will actually require specific compensation information to be disclosed as part of the performance and overall value of an investor's portfolio.

In terms of continuing to enhance disclosure, however, I think that does go back very fundamentally to the issues around financial literacy.  I know Ontario has introduced a program within the secondary school system to provide more information and understanding of financial services, and I think that is very valuable.

Organizations such as ourselves and many others around the table are actively involved in promoting financial literacy to consumers, and there has certainly been a lot of strides made.  I think when you look at something like the CFP, the Financial Planning Standards Council has done a good job of raising awareness of what constitutes a CFP versus people that don't have a CFP.

So I think that ... I don't ... we are not really looking at, from our standpoint, that there are huge gaps in the system, and for people that are already regulated.  The people that are not regulated, clearly, like, we don't support those individuals.  We don’t support people hanging out a shingle and saying that, "I can do this or this for you."  So those would be the people who may not be subject to the regulation anyway; I mean, you are always going to have a certain element of people who want to work outside the system.  But, for the vast majority, they are regulated and are accountable.

THE MODERATOR:  Thank you.

MR. GOLDHAR:  Alan Goldhar from the IAP again.  I knew there was quite a bit of information on this, obviously.  The discussion has been going on for years.  I did find a document called ... it is from the Financial Planning Standards Board, "Regulatory and Oversight of the Financial Planning Profession."

And, as Advocis just indicated, I think keeping it simple is probably the best route, and that is why I like this document, even though it was 2010 when it was published.  It seems to keep things simple.  It is a starting point.

So if I could quickly just go through the four points they make as possible recommendations:  Use of the title, "financial planner" should be protected in law or regulation.  Simple.  So let's not discuss about financial advisors or financial planners but ... yet, until that is in place.

The second is financial planners should be held to a fiduciary standard of care in law.  It seems pretty straightforward.  You may get arguments on that, and I have been at symposiums where there is some discussion and arguments from lawyers who say, "Well, you know, they don't need to go that far," and some of the arguments have been, "Well, clients already think there is a fiduciary duty with advisors," but there isn't.  So the fact that they find out after the fact, and there is a loss, is of no use.

The third one is use of related titles should be covered in law and regulation, also.  So not only the financial advisor but, if there are other titles that are going to confuse the consumer, those need to be discussed more, too.

And the last one is oversight of the financial planners should be undertaken by a professional financial planning body.  It would not be the responsibility of the government to do the oversight and regulation; it would be some professional financial planning body, the FPSC, there are others, obviously.

So that burden would not fall to the government; it would stay within some association, some bodies, depending on which body you are a member of.

Pretty simple, four very simple suggestions that come up, and you work with those, and you can come up with more detail.

MR. LIST:  I know you had something, but I want to clarify, because Alan referenced the Financial Planning Standards Board, and I want to make sure that people understand, that wasn't our publication.  We are a member of FPSB.  That is our international body that we are a member of.  Stephen Rotstein, our vice president, policy, was on that committee that published that.  So it is not our words.  It is our global body that Stephen has participated in.

THE MODERATOR:  That is called a point of privilege, so ...

MR. LIST:  Thank you, point of privilege.


MR. DE GOEY:  My name is John De Goey.  I am a certified financial planner or practitioner, and associate portfolio manager at a firm called Burgeonvest Bick Securities Limited, here in Toronto.  I am one of the relatively few people who is participating today who is actually a practising financial planner.

One of the things that I find interesting in the first two questions in listening to the people who go around the table is that they are sort of mixing, as a Venn diagram.  Cary mentioned that there are about 9,000 certified financial planners in Ontario, and Ed mentioned that there are about 40,000 financial advisors in various capacities.

And listening to people speak, many people, I think, when they are speaking, are speaking to the 40,000 financial advisors question, when in fact the question being asked is with regard to the 9,000 financial planners.  And so it is important that, again, we have talked about this a few times, that people have ... John has mentioned this as well, that we need to be clear with the titles, and when even the people who are close to it within the room are unclear as to what we are talking about, there is an obvious concern that we may be biting off more than we can chew.

So in the interest of full disclosure, I agree with what John says and with what Cary says, that we should really be ... we are focusing right now on the 9,000 certified financial planners, unless we decide to draw the line for financial planning, the line, somewhere else, and, you know, PFPs or whatever, but I think it should be the CFPs.  And then, once that law has been established and the line has been drawn, we can start raising the bar.

As it is right now, there is an arbitrage opportunity where you have so many SROs for insurance, for mutual funds, for securities, at least those three, that are setting their own rules with regard to their own internal product sales, you are not really raising the bar.  If you want to protect consumers and protect their retirement income, the greatest way of having that certitude is to have a clear test that is unambiguous, that people know that the advisor either has it or does not have it.

So if you have 9,000 people who have cleared a certain hurdle and that only those 9,000 people within Ontario are qualified to give financial planning advice, that is what will protect consumers because, otherwise, they will go to other people who they ... but, in the long run, I agree with Ed.  I think at the end of the day the objective is to get all 40,000 people in Ontario to a certain level.  I think that is too hard to do, at first.


MR. SKWAREK:  Ed Skwarek, from Advocis, again.  I think John raised a really important question or point and that was, you know, in these documents it refers to financial planners.  The Fall Economic Statement, just going by memory at this point, started off talking about consideration for how to regulate financial advisors, including financial planners, and then started using the term financial planner through the document.

In conversations with the ministerial staff, we said, "Is this what ... what is the objective that the Ministry is trying to achieve?  Are you trying to keep this as a narrow discussion on financial planners, or is this a broader discussion about financial advisors inclusive of financial planners?"  And we were told that often, the use of the term may not be ... no offence to communications people at all, the use of the term may not be fully understood by the drafters of the documents and the people in the communications department going forward.

I can understand why that mistake happens, or that confusion.  It is not a mistake.  I can understand why that confusion happens, but I think we have to be careful and really clarify what we are talking about in these consultations, because are we to assume, then, that this is really supposed to be just a narrow discussion about financial planners, or is this supposed to be a broader discussion about financial advisors?

And I think we need the clarity there before we can move forward.  Absent that, I am concerned that, you know, we may be moving in the wrong direction or other people may be moving in the wrong direction.

THE MODERATOR:  Yes, please, Cary?

MR. LIST:  I think Ed makes a really good point, and we raised that with the ministerial staff, as well.  And I think it speaks to consumer confusion, and I think we can all agree on that, that there is interchangeable use of terms.

However, that doesn't refute the fact that there is ... within the realm of financial planning, there has been a lot more evolution in clarification of what a financial planner is, what financial planning is, standards around that, than this broader notion of financial advice.

And I would like to go back to the suggestion around what can be done to improve a regulatory approach, is if there is an opportunity to define professional space, you know, as you talked about planning as a specific area, is there a professional space ... throwing out this generic term that everybody is using for everything, including a licensed mutual fund salesperson, and re-establishing terms and titles that consumers are going to understand, that is going to resonate with them, that could actually have clearly defined knowledge, skills, abilities, competencies built around them.  It is not our space, but we would certainly not argue against such a concept if it made sense.

MS O'HAGAN:  If I can just interject, because I am from the Minister's Office and I was involved in reviewing many of the drafts that led to the Fall Economic Statement.  I would just like to express this in the negative, really.

So the use of the term, in one instance, "financial advisors and planners", and then in subsequent instances, "financial planners" was not intended in any way to limit the scope of this discussion.

MR. PRYOR:  Just picking up on Cara's comment, a lot of the discussion has been focused about IIROC/MFDA and that regulated channel, the 40,000 advisors and the 9,000 that is specific to financial planners.

The question I would ask Cara just on that basis was presumably you are all ... the Ministry, from a policy perspective, will be looking at the person goes into a bank branch, an elderly person, gets advice on their GICs and not in the stocks and bonds, and the bank teller says, or whoever at the bank, says, "Well, you know, this is your income, and this is what you want, so we should buy some GICs that mature at various periods." To me, that is financial planning, too.

So is ... if it is the scope of the review of the policy perspective from the Ministry, then I think we have forgotten, we haven't talked a lot about what is going on out there, outside of the IIROC and the MFDA channel, and it could be in the bank channel, the credit union channel, all other sort of channels where financial services are being provided, where it could be financial planning, depending on how you want to define it.

So I think that is part of the concern that I have is the concern we have talked about is the regulated channel, but it is on the unregulated channel, the Ministry is ... there is nothing there, so it has to do something.  I am not sure what, but ...

MS O'HAGAN:  Well, I think that is one of the reasons why we are having these consultations is to, you know, look at all these issues.

THE MODERATOR:  Any other comment on this question?  If not, then we can move to question no. 3: “Are there approaches to regulating financial planners which you would recommend, and ... for example, how does your proposal compare to how Ontario regulates other professional services, service providers, and how does it compare to ... how would it compare to what is being done elsewhere?”

MR. MURPHY :  A question, to begin?


MR. MURPHY:  Are we now talking about financial planners or financial advisors?

MR. LIST:  And it is not a rhetorical question, right?

MR. MURPHY:  Yes, I am afraid it is not.


MR. McLACHLIN:  Hi, I am Peter McLachlin, also from Advocis.  I guess in terms of question 3, and what sort of a regulatory approach we would like to see, we have been first starting to define that from Advocis's point of view, I guess from a negative position:  We don't want to see a regulatory model that is ... leads to a bifurcation of the financial advice sector in Ontario.

We don't want to see financial planners, for example, subject to a certain stricter set of regulatory requirements and then a broader set of financial advisors not subject to that because we are fearful that will lead to, inevitably, a race to the bottom, in which individuals and firms, for whatever reason, perhaps some of them will be unscrupulous, most of them will simply be trying to avoid onerous compliance requirements, will decide, "Okay, let's not go the financial planning route.  We will go the financial advisory route."

I guess related to that there is also a general concern that there could be at least the appearance of regulatory capture if a smaller group with a higher threshold of standards is regulated, and the rest of the sort of great unwashed advisors are left to simply wander around, adhering to perhaps existing suitability requirements.  So the appearance of regulatory capture could perhaps flow fairly quickly from a bifurcated model.

Another problem obviously with a bifurcated model is that we see it as basically  very wasteful of regulatory resources, particularly on the government side.  And, of course, on the firm's side, one can see that there would now have to be two sets of compliance systems, and that would be very expensive.

Finally, in terms of consumer confusion, we think that there should be a common, uniform set of standards, for example, in terms of what information has to be disclosed in a background check, what ... are there appropriate ways of gathering data from retail intermediaries, what data is to be gathered, how is it to be recorded?  What are the appropriate dispute resolution mechanisms?

Are financial planners going to be subject to something more stringent, as opposed to advisors in general?  Then, again, we see it is skewing of incentives.

So for all these reasons, we would urge that the Ministry strongly consider a uniform, comprehensive approach to this question.

THE MODERATOR:  Thank you for your comment.

MR. LAWFORD:  John Lawford again.  It is tempting, it is so tempting to say absolutely right, Advocis, because you are.  At the end of the day you are, because everybody should be following standards that are all pretty much the same.  It is just, when ... in having looked at this a couple of times over a few years, and I agree that you are in the industry longer than we are, but we are in the consumer protection industry longer than you are.

So we just see this as a situation where starting with the smaller group of financial planners, it is not confusing to consumers to say, "This group has a designation.  This group does these things, 1, 2, 3, 4, 5, 6."  Part of it is selling securities, perhaps, but a lot of it is not.  A lot of it is not.  And the other folks may or may not do some of the things that financial planners do, but they don't do them all.  They don't do them all, and it is very simple, I think, for a consumer to be told by a group like ours, or by the Ministry, or anyone else, you have two choices:  You can take your money, and you can go and get it all planned out with a provider that has this designation, and there you go, and you can be assured that they have an oversight body, and we have regulations around what they have to do in terms of qualifications.

Or you can go the other route, where the compensation is from a different manner, and they are not doing all of these things and they are not regulated in a professional body sort of way, but there may be regulations around what they sell you.  Take your pick. There may be different ways of charging the consumer for those two ones.  Somebody may feel that they don't need to have a full plan done.  Somebody might think that they do, and we might recommend, given the way the market shakes out, that somebody takes one route or the other.

The reason why that is efficient is because, at the moment, people are poaching back and forth; at least, that is the way it looks to consumers, I think, is that there are a lot of groups calling themselves financial planners who don't do very much of the other activities.  And then the folks on the financial planning side are complaining that they do all this work, and folks are calling them the same thing.  It is selling two different products, is what it looks like to us; financial planning is not the same thing as financial advice.

So at the end of the day, why we would like to have everybody following certain standards ... you know, it really looks like two different products to us.


MR. LIST:  Two points:  One, they are completely unrelated, so I will address the first one, which was this discussion between John and Ed.  It does sound tempting, and you know, I think a lot of these conversations, we are agreeing on an awful lot of the problem here.

Where we really find that right now it is not possible or prudent to try to bring everybody under one umbrella, it would be comparable to, if you look at the regulated health professions in Ontario, and you were to imagine that everybody was a professional regulated health provider.  It doesn't mean anything, because it means too much.  There are too many people operating in that realm.  You couldn't create a clear set of knowledge, skills, abilities, competencies that those individuals are supposed to deliver, all under one title or one umbrella.

And that is in fact why, in Ontario, we have rules or guidelines around all of the regulated health professions, and then specific, clear knowledge, skills, abilities around a specific, clearly identified profession.  Might there be overlap?  Absolutely.  So that was the first point.

The second point, completely unrelated: What approaches should the government consider? Irrespective of that argument, if we are moving to recognizing the importance of professional advice, look at a model that regulates professional advice through a professional model, not through the existing SRO structure, to us, that would be akin to, if you look at opticians, who in most cases  are allowed to sell ... I mean, do sell eyeglasses, and make money from it, and allowed to offer them, but it would be akin to them being regulated by the ... those that regulate the manufacture and distribution of the eyeglasses; that is ... it is completely ludicrous.  So look at professional advice for what it is, and allow that to be regulated as a profession.

Can they be licensed on the other side? Absolutely, but leave the regulation of product and transactions and specific advice around what products I should buy to the existing regulatory structures and leave professional regulation to a professional one.

THE MODERATOR:  Thank you, Cary.  Ed?

MR. SKWAREK:  Ed Skwarek, from Advocis. Yes, there is so much common ground, I think, around this room on what the problem is, and I think we all agree that the current system is not working the way it needs to work.  So then what approach should we follow to get the end goal of we have consumer protection, enhanced preparation for their financial well being, do we go narrow, or do we go broad?  I think those are the two choices we have to make.

The narrow approach is let's professionalize financial planning.  The broad approach is let's professionalize financial advice.  What is the difference?  The first one, professionalizing financial planning, you are going to capture 9,000 out of a group of 40,000.  Going back to what is the purpose, consumer protection, with 31,000 outside of the envelope, are you achieving that consumer protection that you are looking for?  I don't think you can.

And if the goal is consumer protection, I don't think we have a choice but to say, let's go everybody under the tent.  And I have heard people saying, you know, it is tempting to go that route, but it is not necessary.  I don't think it is tempting at all.  I think it is mandatory, it is necessary, and I don't think it is biting off more than we can chew.  I think what you are saying, the time has come to look at things and set the bar.  This is what the bar is.  These are the requirements we are going to be expecting of all 40,000 financial advisors in Canada.

But we have to understand, within that group, they are not all equal either, and that is the specialized people, the CLUs, the CFPs.  They have dedicated themselves to enhancing their professionalism as a specialist would, and people who want to use those people recognize, (a) it is going to cost more.

Not everybody needs to be going to that specialist, though, either.  We have to look at who are we trying to serve.  The consumer is a very diverse group. There are people who are putting $5,000 a year into their ... or $2,500 into their RRSP, and there are other people who are using complex insurance products and tax rules to achieve their goals.  So it is very different.  Those are the people who need the specialists, but everybody needs to have the financial advice to help prepare them for later in life, because the government simply cannot provide the services that they have been doing.

We have to tackle the problem now, and if we don't, if we go narrow as opposed to broad, we are not solving any problem at all, and we are not enhancing consumer protection.

THE MODERATOR:  Thank you.  I believe we have a ... did you raise your ...?

MS BELL:  Yes, yes, I did.  I just wanted to ...

THE MODERATOR:  Go ahead.  And state your name.

MS BELL:  Sorry, Debbie Bell, I am with the Canadian Securities Institute, and it is not often that I like to agree with Cary, but I am afraid I am going to have to here.

MR. LIST:  Oh, come on ...

MS BELL:  We certainly agree that there should be some standards for financial advisors, but they shouldn't be the same for all financial advisors; different consumers need different levels of consumer advice.  And so we need to be sure that we look at those standards, and not set the bar so high for everybody that not ... that those people who really need the advice at the base levels won't be getting them because the senior advisors won't have time for those individuals.

THE MODERATOR:  Thank you.  If these are all the comments, we can move to...

MR. MCLACHLIN:  Sorry, I have one, sorry.

THE MODERATOR:  Sorry, sorry.

MR. MCLACHLIN:  Peter McLachlin, Advocis. Just a couple of follow-up points:  Advocis certainly agrees that there are concerns over efficiency and inertia regarding potential reform, but we agree also, like most people here, that reform is necessary.

Several sort of disparate or unconnected points:  I think most people recognize there is an alphabet-soup problem of titles.  That is, perhaps, somewhat intractable at this stage.  I don't think we need necessarily to try to solve that problem if we are willing to bring in a  baseline set of standards for anyone who is holding out as a financial advisor, a minimum set of requirements.

And if there are other people who want more a specialized designation, that they feel CFPs should be held to a higher standard, it certainly doesn't conflict with the minimum baseline standards for everybody in the retail intermediary sector when it comes to securities.

In terms of efficiency, I think the real efficiency concern would be to only regulate a smaller group that perhaps Main Street Canadians can't afford, and then we can see a further skewing of incentives and a larger advice gap, skewing of incentives in terms of who is going to enter the profession and who they plan on serving in the profession, and the growing advice gap for middle-class Canadians.  And, of course, this is happening to some extent overseas with the RDR.

Anyway, that is all I wanted to say, thank you.


MR. LAWFORD:  Yes.  No, I wanted to make our position more clear in the sense that we are not against a two-stage process which could be happening concurrently.  I just don't know how the government wants to move on this.  And it is sort of interesting, also, that we don’t have any ... I don't know if we have anybody from the consumer ministry here, as well, today but a more structural approach would be to knock off, if I can put it that way, the financial planning regulation, while at the same time working towards the regulation of the financial advisors at a certain level.  They are not mutually exclusive, and Quebec did that.  And so you have the financial planners with their institute, and they have an overall regulation of their financial advisors, which is higher than Ontario's.

And we are just trying to push both things.  It is just ... and I do and don't agree with Ed that it is too big a piece to chew.  It is a big meal.  So you have to do the parts you can do, and not ignore the other parts, as well.  So that is some clarification of our position.  We are not against having all advisors with standards, and we just think that the financial planners is being a little misused, and that that is an easy one to deal with ... not an easy one, but it is a more discrete area that can be handled in a different way, but it fits in with another, larger regulatory scheme for all advisors.

So that is...I just want to clarify that.

MR. ROTSTEIN:  It is Stephen Rotstein from the Financial Planning Standards Council.  I just want to pick up on this discussion of who a financial advisor is. And obviously I work in the sector, and I've got to tell you, I have no idea who a financial advisor is.  It is not a homogeneous group.

We are talking about salespeople, mutual fund salespeople, we are talking about insurance salespeople, we are talking about people who truly are financial planners.  I am not sure if my mother-in-law is a financial advisor.  She gives me a lot of financial advice.  So you know, the taxi driver, are they a financial advisor?

MR. MURPHY:  How is it working for you?

MR. ROTSTEIN:  It is not.  So, you know, that is the problem.  I mean, we are trying to talk about this 40,000; I am not even sure where we are getting this 40,000 number from.  And I am not sure where we are carving it.

But I do know, in the model that we have talked about today that FPSC has proposed, we are talking about people who are held out as financial planners.  It is a distinct title.  Know what it is.  There is knowledge, skills and ability backing it up.

As I say, it is a bite-sized chew as opposed to, I don't know, a buffet or something.  So I think it is a more of a proportional and appropriate model for the government to consider.

THE MODERATOR:  I think we have a point of privilege.

MR. SKWAREK:  Yes.  It is Ed Skwarek from Advocis, just to provide clarification where the ... well, actually, a point of clarification then maybe a comment on where the 40,000 number is coming from.  That 40,000 number is the number of people in Ontario licensed to either sell insurance products or securities products, either MFDA licensees or IIROC licensees.  So that is where that 40,000 comes from.

We are talking about moving away from financial sales.  I think we have moved away from just ... it is not just the sale of a product anymore.  A financial advisor, if they are licensed under IIROC or under the MFDA, has to do a needs analysis.  So it is not just sales.  It is talking to the client, determining what their needs are, and then trying to identify the appropriate product for them.

So it is just not ... I don't think we can say this is a mutual fund salesperson; this is a financial advisor providing advice on mutual funds based on the information that they have gathered in meeting with their client.

MR. DE GOEY:  A point of personal privilege, then.


MR. DE GOEY:  John De Goey.  I just realized that, even what Ed said, I thought I had it all down, and then I realized that maybe not.

One of my friends, Cynthia Kett, is one of the best financial planners in the country.  She is not licensed to sell anything.  So she is not part of that 40,000 that you just mentioned.  Just so we are clear...

So again, to the people from the Ministry here, you have to be really clear, because we keep on talking about different things, and every time I think I know what we are talking about, it turns out we are talking about something else.

So really, really provide some clarity here, because I thought we were talking about the 9,000 financial planners.  Maybe we are talking about the 40,000 people who have a licence to sell something, 9,000 of which are planners, 31,000 of which are not, but there might be some people who are financial planners who don't have a licence.  It is functions and relations, it is Venn diagrams.  Get the Venn diagram right, because we are talking about different things here, people.

THE MODERATOR:  Ed, first, and then ...

MR. SKWAREK:  Ed Skwarek, Advocis.  And you are absolutely right when you talk about, you know, some people aren't even regulated.  There is a group within the financial planning specialization that are the fee-only group, and they aren’t getting any commission for the product that they ... well, they are not actually giving the product recommendation because you can't give the product recommendation absent having a licence.

So they are outside of the envelope, but they are providing strictly -- correct me if I am misstating this -- financial planning advice, and then they may be directing that person to somebody who can execute it for them.

So I think that is a growing group, but I still think it is a small group, but you are absolutely right.

The part of the problem is absent having the appropriate definitions and what things mean, we can't say exactly how many people are in the business because, if you can't define it, then you can't do the counting. So what we have done at Advocis is just look at the licensees to get that round number.  But you are absolutely right, that there are people outside of the envelope as well.

THE MODERATOR:  We will go to Cary and then Hugh.

MR. LIST:  I would like to help in clarification a little bit on this conversation, because John made a very important point that I think got lost on all of us.

There absolutely is a number of individuals, and I can share here as a point of information, approximately 2,000 individuals across Canada; so you could figure around 1,000-plus in Ontario who are holding themselves out as financial planners through CFP certification that are not licensed to sell any products at all.

There are two aspects to that.  I think that it reinforces why any regulation should be on a professional basis, not on a ... through a product regulatory structure, because you would be leaving out a group of individuals.

The second point though is, irrespective of that, I think there is less consumer protection concern there because frankly, and I don't have a piece of paper to back this up, but I am sure we could get this information, there are very, very few, if any, individuals in that area that are actually offering financial planning, that have no link to a licence, that don't already have their CFP certification.  Again, that is my own assessment, but we can get that information.

So there are already at least some protections there, which doesn't negate the point that is being made, that it is all the more reason for a professional model that supersedes any product sales structures.

MR. MURPHY:  Actually, Cary has sort of touched on the point that I was going to make, identifying that there are about 2,000 advisors across the country. But I was going to offer that our statistics say that between about 4 and 6 per cent of financial advisors in Canada are unlicensed and make their living off purveying financial advice, professionally.

The balance, in some respect, gain at least a portion of their revenues through the use of the integration of financial product.

THE MODERATOR:  Okay.  Go ahead.

MS BELL:  I am sorry, you were finished?


MS BELL:  Okay.  I just wanted to point out that there are many other individuals that you may not be thinking of who provide estate or mortgage or tax advice, or GICs, that certainly wouldn't be overseen unless you are a mortgage broker.


MR. MURPHY:  An interesting, related point:  Some of the research we have done simply with the general population of consumers asks consumers whether or not they have a financial advisor or not.  And one of my clients was very surprised and came back to me when I told him that our statistics say about 43 per cent of Canadians claim that they have financial advisors.  But the balance of Canadians say, "Yes, well, we get financial advice from our banker or from our mother-in-law, or from," you know, these kinds of things.

So, again, this goes back to the whole issue of financial literacy in Canada.  We, as a group of specialists, can't agree on the semantics here, so that consumers should have any way of figuring it out is painfully challenging.

THE MODERATOR:  I see we are at the last part of the discussion which has approached the meaning of question 4, which ... and I will just state the question: "Would regulation affect your business model of providing financial planning services?"

Now I don't know if I should say financial planning services, financial advising services or financial services!  So ... and if so, in what way? Please.

MR. DE GOEY:  My name is John De Goey, once again from BBSL.  I am one of maybe about a thousand people in Canada who is both a portfolio manager and a certified financial planner.  Portfolio managers engage in something called investment counselling.  Investment counselling fees are tax-deductible.  Therefore, if someone engages me, I try to do everything I can and call it investment counselling so as to maximize the potential deductibility of the services I provide.

If someone contacts me and engages me to do simply financial planning, that fee is not deductible under the Income Tax Act.  So the way this works, and I have a lot of people that I know, I know a few other people that are part of that 1,000 that are both CFPs and investment counsellors, they do all the fee, do all the billing as investment counselling, and give financial planning away as a loss leader.

What I think would be much more efficacious, what would be much more purposeful, is if we could actually make it clear that financial planning is at least as valuable and in my opinion, as a person who does both, more valuable than investment counselling.  And to do that, you need to have it enshrined as being deductible in the Income Tax Act.

Now that is a federal responsibility, but to the extent that the people in Ontario can actually push for that, to speak with Minister Flaherty, I think that would provide a great deal of continuity, especially as it pertains to consumer protection and retirement income, which is something that Premier Wynne has said is important.

If you really want to incentivize people to take control of their personal finances, give them a tax break for doing so, but as long as the person they speak with and the person they engage is, in fact, qualified to do the work that is being done.

MR. LAWFORD:  I am just going to throw it out there in terms of the way the question was -- John Lawford, again -- was written, and perhaps the reason why we are in the room makes this unnecessary:  but I would also say why ... you know, I want to hear from the independents and the other folks about how it is going to impact your business.

I just want to make the point that from looking at other professions, a lot of the time, once you professionalize, your product-specific, if I could put it that way, obligations fade away, because then you just have a standard of care and you meet it, right?  And then you are not regulated by what you are selling; you just have a standard of care and, if you don't meet it, you get disciplined.  And if you do meet it, you are fine, and you don't have to fill out a form for every time you meet a client.

And I know we have heard from people that work in the industry that, "Well, yes, I can see that you are concerned about consumers, and they are complaining to you, but don't kill me with forms, because if somebody comes in with, you know, the proverbial $2,000 to invest, I can't take half an hour of my time, or an hour of my time if 50 minutes of it is filling out forms."

So I get that, and we all ... we get that at our end.  But, you know, the concern I have with the last question, just to keep in mind, is there probably will be a necessary change to this area of law because it is happening in other jurisdictions.  Consumers are mad about it, to be absolutely honest, and so business models will have to change.

But it doesn't have to be the end of the world if you are moving towards a professionalization because you should be able to drop off a lot of the paperwork, if I can call it that.  At least that is the hope or the end goal of getting where we are.


MR. LIST:  Again, I can't speak to it directly with ... it has been 15 years since I have been on the business side, or more.  But to the point of professionalization on the advice side, I think that it can impact business models in a very positive way both for the consumer and, in fact, for the planner or advisor.

I think you ... I don't know if you mentioned KYC or know your client, but there was something about filling out forms.  It immediately made me think of know-your-client requirements.  You know, I look at the structures today which say the current SROs and product regulators say, "You need to fill out these forms, and there are very strict regulations and rules, and here is the form that you have to use and here is the type of form you have to use, and the compliance department is going to make sure that you are ticking ... you know, crossing your Ts, dotting your Is, and they are going to watch for all of those little things."

Yet you have a situation where I go to my advisor, my planner, whatever that individual, who is a professional, and they say "Well, you've got a trust account here, and you've got an RSP account here and you have a cash account here, and we need to make sure for the files these are independent.  This is under a trustee relationship.  We need KYCs, each one."  This is not about knowing your client.  This is not about understanding your client's needs and addressing it.  It is about fitting and meeting regulatory requirements for the transaction and the sale of the product that does not have anything to do with the advice that you are giving for the person as a whole.

You know, these individuals are not three or four people.  They are one, and they are a whole, and with standards ... and we can't, at FPSC, we can't do anything about that, because we are not recognized, our requirements are not recognized in statute.

So if they are ... you know, the only regulations they have is their requirement to fill out whatever number of forms.  If you professionalize that, if your obligations are professional to their client, they have to have the due prudence and care to deal with their client and they have to make sure that they can support and defend, that they understand their client, they understand their client's needs to the professional body that is overseeing them, and follow all the rules around the transactions and the product at the same time.  To us, that is a win-win.

MR. GOLDHAR:  Alan Goldhar from the IAP. I have come across this issue before, whether this would impact the business model for the banking sector, and there is no one here, doesn’t appear to be anybody on our list from the banking sector, but their argument has been that the individual at the counter, when you come in with that $2,000 to invest in your RSP, they don’t want them to be ... to have to fall into this whole regulatory thing, just to call themselves something, that you would go to them.  It is just not what they are doing.

So, again, this is where we separate the sales from the advice.  Are they giving advice, if they go up to you and say "I've got $2,000," at the bank counter, "what do I do with it?"  Or how do you deal with them?  Do you have to have them regulated, too?

This is, like, the first-year banking clerk who is just learning their way, and basically they are allowed to sell GICs or term deposits, that is it.  So by the bank regulation itself, they are very restricted in what they can do, but not by financial advice or planning regulation.  So how do they fit into this whole thing, and are they brought into this 40,000 individuals?

That is, again, the distinction between advice and sales has to be made, first.  And they are on the sales side, they don't need this regulation, that's fine.  But if the bank ... you are telling the banks they have to now go through this whole regulatory thing, I think there will be opposition.

THE MODERATOR:  We will go to you sir, first, and then we will go to Ed.

MR. PRYOR:  Okay, I was just picking up on your statement, picking up on your comment, that's right, I mean, is the bank teller saying, "Here, a  five-year GIC," or is the bank teller doing more and giving some advice of what their needs may be so you cross the line into financial advice or financial planning.

The only other comment I would make is whatever we do in Ontario, we have to be cognizant that ... how this will affect national firms who will operate across all jurisdictions, and a lot of them in the securities and, MFDA and IIROC, a lot of the advisors are dually licensed in multiple provinces.

So, from a compliance and oversight point of view, whatever we do in Ontario may have significant impacts on other jurisdictions.

So to the extent ... in a perfect world, to the extent there was going to be a unified sort of approach across the country, that would be a better solution than a multi-bifurcated.  We do have Quebec, which is separate today, and ... but I am just ... I would raise that as a comment.


MR. SKWAREK:  Ed Skwarek, from Advocis, just following up on that point.  I think you are right about looking at ... you can't just look at Ontario in isolation.  But I think Ontario has signalled that they are taking a leadership role on this issue.

Advocis has been talking to other jurisdictions across Canada about these issues.  So I think there is an appetite in multiple jurisdictions for reform, yet you said Ontario is taking the initial step in that leadership role, and I really ... well, my understanding from conversations is other jurisdictions are watching very closely to see what Ontario does because I think there is a desire to move in a more harmonious fashion because of the nature of securities and insurance regulation.

And I would also add, sorry, when we talk about the model and the impact that it could have on the business model, by professionalizing, we would really ... and when I say professionalizing, I am talking about, again, that broader group of financial advisors, we are addressing a very real constitutional law issue in Canada, where you have the separation of responsibilities from federal and provincial jurisdictions.

We are also addressing the separation between insurance regulation and securities regulation; they are both very different.  But if we professionalize and set the standards, that is going to address what hasn’t been able to ... we have not been able to address in Ontario or in Canada, that difference when we see, you know, products are increasingly similar on the insurance side and on the securities side, but they are regulated differently.

And we are not going to be able to get harmonized regulations between those various sectors, but we can harmonize the regulation of the financial advisor to address things that have not been able to be ... that we have not been able to address because of that divide that exists.


MR. LIST:  Yes, we would completely agree with the issue of multi-bifurcation and the challenge in the regulatory system, both provincial jurisdiction as well as the jurisdiction within various regulatory structures.

So again, that would support a different model that could not necessarily ... you know, the federal government doesn't have jurisdiction over professions, so you couldn't have a single unified national profession, but you can have a model where the lead of one province does not actually interfere with the ability to take that out across multiple provinces.

And I think the comment was Quebec is different.  Quebec is different; however, we know that national firms are challenged with this differentiation, and one of the things that, both in the financial planning arena, the Quebec Institute of Financial Planning, which sets the standard and certifies the individuals in Quebec, and our organization that does not interfere with the Quebec regulatory system, but we have individuals across the country, we ... both of our organizations recognized that very early on and have been working now, over a period of about eight to 10 years, and it is slow and it is difficult, especially when we are dealing with Quebec, but to this notion of unifying ... and we are very, very close.  In fact, we are about to publish this year.  I have already got a draft right here, a set of unified Canadian financial planning definitions, standards and competencies, jointly published by the Quebec Institute of Financial Planning and FPSC.

So there are ways of overcoming that, and I think we need to continue and move in that direction towards ... and I think it is a lot easier in a professional model to get the professions, or the regulated professions from province to province together, and join under a single set of national standards.

It has happened in many other regulated professions, whether it is allied health, whether it is accounting or any other profession; it is still seen as a single profession across Canada, but there actually are, really, cooperation agreements amongst the provinces.

THE MODERATOR:  Thank you.  Are there more comments, ideas, suggestions?  Yes, please ...

MS ALLAN:  I guess I would just like to say something in defence of financial advisors that aren't planners, which does form the bulk of our membership, and they are not scraping the bottom of the barrel.  They are not sinking to the bottom in doing what they do; they are just choosing a different model.  And their businesses are really built on trust and providing good advice and good service to their clients.

So I just want to make sure that we don't lose sight of that in this whole discussion, that, you know, it is not that the planners are the good guys and the advisors are the ones that are sneaking and trying to get around the system, because that is not who our members are.

And obviously I don't know all of our members personally, but I know a lot of them.  I know a lot of them, and they really care about their clients.  I am saddened to hear how upset consumers are, and I think part of the problem is that advisors aren't telling their story well.

And I think Hugh, you mentioned that in your initial comments, is that advisors really need to educate their clients better on what they do and how they are paid.  There is nothing wrong with being paid by commission, and our members do disclose that in client meetings if they are paid that way.  It is not a bad thing.  I think everyone who buys a car knows that the person selling them the car is going to get a commission on the sale, and it is not inherently wrong.

But I think that is one thing that we as an organization are trying to do, is to help our members speak to their clients about what they do, and I think that is the thing I am taking away from this, is that we need to support them more in that regard.

MR. MURPHY:  Can I ask a quick question of Jonathan:  In fact, you referred to an OSC study that suggested that Canadian consumers don't trust financial ... or at least that is what I took from what you said ...

MR. BISHOP:  No, no, Ontario consumers, that didn't trust their financial advisor.  It was a study that was released in March of 2013.

MR. MURPHY:  That is very interesting to me, and I will have to ... you don’t mind me following up with you on it?  Because ...

MR. BISHOP:  No, absolutely, I would be...

MR. MURPHY:  ... my research shows quite the opposite, quite the opposite ...

MR. GOLDHAR:  The OSC site, it is right there.

MR. MURPHY:  ... and that financial advisors, whether they be ... whether they hold a CFP designation or not, are generally tremendously well trusted by consumers.

MR. GOLDHAR:  That was an initiative from our group, and it is on the website.

MR. MURPHY:  Okay.  It often comes down to the nature of the question, so ...

MR. GOLDHAR:  Absolutely.

MR. LAWFORD:  Absolutely.  I mean, just from our focus groups, it was pretty obvious that everybody thought that their particular advisor was great, but they had all heard stories that were trouble, and they didn't really trust the industry, but their person was actually really good.  I mean, so, you know, that is maybe a problem, maybe not.  I don't know.


MS SPEED:  Lindsay Speed from FAIR Canada.  I just wanted to make a quick point:  I know Cary has done a significant amount of research and I think that this will kind of follow and evolve with the consultation, but with respect to professionalism, I think that that is another issue in terms of semantics, and your definitions and that sort of thing, because I think there are a lot of things ... and I guess I am tying this directly to commissions and to your point about that, because I think it is really important to be cognizant and to understand the different models in terms of compensation of professionals.

To my mind, a true professional is not going to be driven by a compensation model.  And as much as people like to think that they are acting independently and in the best interests of the client, you hear that over and over again, but I think a lot of ... there is a lot of other discussions going on in the securities realm about whether the industry believes it acts in the best interests of the client and whether they have a legal duty to do so.  And currently, they don't.

And I think that this is a really important issue that comes into play when you are talking about financial planners, about financial advice and about the rest of it.

I mean, to John's point, I don't know how you get to a professional model of all advisors, as Ed is suggesting, with the current compensation structure.  I think there is a lot of issues and there is a lot of underlying issues.  You can disclose to your clients that you are getting paid trailing commissions, but what does disclosure mean?  Does it mean giving them a percentage, or does it mean, I guess, teaching them what that means and how the whole system drives?

So I think it is just something to be cognizant of going down the road in terms of examining what a profession is and what financial planning means, if you are going forward with regulating it in any fashion.

THE MODERATOR:  Thank you.  So we are about finished now, if there are no other comments.

I will thank you for taking part in this debate and consultation.  And if you have other suggestions and comments to make, you have until January 31st to send your submission/comments.

And if you need to be reminded of the address and e-mail address of the Ministry of Finance, just come and talk to me, and I will provide it to you.

And I would like to invite Frank to provide a few ... some wrap-up comments.

MR. ALLEN:  Fine.  Thank you, Christian. I want to thank everyone for your contributions; it has been a very helpful session.

I would just echo Christian's comments about the desirability of providing written submissions. I think some of the semantic discussion that we have benefitted from today, it would be helpful to have that amplified in writing, and get the benefit of the expertise and experience and industry familiarity that is in this room, and we will make the same request on Tuesday.

It is very important that we have the benefit of your insights into what you think we should be looking at, how you think we should be proceeding, why and how we could best work in the interests of all Ontarians.

In terms of moving forward, these two consultations are our preliminary step in this review process.  Staff in the coming weeks will be reviewing the transcripts and also reviewing the submissions that are filed by the end of the month.

And our objective will be to be able to provide an update to the Minister's Office, hopefully in a timely fashion so that it can be at least considered in terms of the process leading up to this year's spring budget.

But this is a very important topic, it is a very complex and nuanced topic.  We appreciate the viewpoints and opinions that have been shared with us, and really would benefit tremendously if you would take the time and effort to reflect your concerns and your suggestions in written submissions by the end of the month.

THE MODERATOR:  Thank you.

--- Whereupon the roundtable concluded at 12:56 p.m.

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