: Jan 14, 2014 Ministry of Finance Roundtable



DATE: Tuesday, January 14, 2014

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

BEFORE: Christian Bode  Moderator


Aubrey Armstrong - ING Direct Funds Limited
Barbara Amsden - Investment Industry Association of Canada
Brett McDonald - Investor Economics
Cary List - Financial Planning Standards Council 
Cas Litwin - FundEX Investments Inc. 
Chris Pepper - Fidelity Investments ULC
Chuck Grace - Ivey Business School, University of Western Ontario 
David Grad - PFSL Investments Canada Ltd.
Debbie Ammeter - Investors Group Financial Services Inc. 
Debra Bell - Canadian Securities Institute
Geoff Heyland - Great-West Life
Greg Pollock - Financial Advisors Association of Canada
James Ryu - Financial Advisors Association of Canada
Jim Wingrove - Co-operators Life
Joanne DeLaurentiis - The Investment Funds Institute of Canada
John Adams - PFSL Investments Canada Ltd.
John DiNovo - Banwell Financial Inc.
John J. De Goey - Burgeonvest Bick Securities Limited 
Jon Cockerline - The Investment Funds Institute of Canada
Julie Seberras - MD Private Investment Counsel and MD Management Limited
Keith Costello - Canadian Institute of Financial Planners 
Lindsay Speed - The Canadian Foundation for Advancement of Investor
Lucy Becker - Investment Industry Regulatory Organization of Canada
Marc Flynn - Canadian Securities Institute
Marian Passmore - The Canadian Foundation for Advancement of Investor Rights
Mark Fuller - Ontario Pension Board
Marsha Gerhart - Borden Ladner Gervais LLP
Marshall Beyer - Canadian Securities Institute
Maye Mouftah - Ontario Securities Commission
Michelle Alexander - Investment Industry Association of Canada
Patricia Dunwoody - Canadian ETF Association
Paul Riccardi - Investment Industry Regulatory Organization of Canada
Peter Goldthrope - Canadian Life Health Insurance Association Inc.
Peter Shena - Ontario Pension Board
Ryan Dunn - Fidelity Investments ULC
Sandra Kegie - Federatoin of Mutual Fund Dealers
Sara Clodman - The Investment Funds Institute of Canada
Sonny Goldstein - Goldstein Financial Consultants
Stacey Shein - Mutual Fund Dealers Association of Canada
Stephen Rotstein - Financial Planning Standards Council
Susan Allemang - Independent Financial Brokers of Canada
Terri Williams - Scotiabank
Terry Gibson - E.E.S. Financial Services Ltd.
Trish Tervit - Environics Communications
Cara O'Hagan - Ministry of Finance
Caroline Torres - Ministry of Finance
Christian Bode - Ministry of Finance
Clemencia Cimbron - Ministry of Finance
Frank Allen - Ministry of Finance
Harkamal Multani - Ministry of Finance
Luba Mycak - Ministry of Finance
Paul Braithwaite - Ministry of Finance
Sadruddin Salman - Ministry of Finance
Shameez Rabdi - Ministry of Finance

--- Upon commencing at 9:02 a.m.

THE MODERATOR:  Good morning, welcome, and thank you everyone for attending this consultation on the merits of proceeding with more tailored regulation of financial planners in Ontario.  My name is Christian Bode and I am with the Minister 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 regulatory structure and regulatory oversight of financial planning.  This includes whether there would be merit in proceeding with more clear regulation of financial planners, and if so, through what type of regulatory framework.

Representatives from the Ministry of Finance are in attendance this morning to listen to your comments.

First, Cara O'Hagan, the Director of Policy, the Minister's Office, and Frank Allen, Assistant Deputy Minister, Securities Reform Division.  We also have officials and staff from insurance and deposit-taking policy areas of the Ministry present with us today.

I will now say a few words about the protocol for this session.  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 planners 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 offered the opportunity to make an oral presentation, and some of you have elected to deliver comments in that format.  We will start with these presentations 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 strict about enforcing this rule.

Once the presentations are completed, we will direct our attention to the questions and your comments.

We are having the discussion at today's session transcribed, so I will ask that before you speak, please state slowly your name and the name of your organization if applicable.

I will be moderating the discussion, again, to ensure we can listen to as many views as possible.

I would like to ask you to limit your comments to the subject of the particular question under discussion so we move in an orderly manner.  If your comments relate to another question, I will ask you to conserve your thought for the appropriate moment.

If there are any members of the media in attendance today, I would like to ask you to identify yourself and your organization.  And finally, last but not least, if you have a mobile phone or any other device, we kindly ask that you turn it on silent for the duration of the session.

This being said, I would now like to invite Frank to say a few introductory remarks. Frank ...

MR. ALLEN:  Good morning.  I would like to echo Christian's welcome and express our appreciation for your taking time to join us today. We had an earlier session last Friday, and both consultation sessions have been well attended and reflect the interest in this topic of possible more tailored regulation of financial planners.

In order to maximize the time available for the presentations and discussions today, I will merely touch on a few points in the consultation paper that underscore the importance to the Ministry of this issue and why this consultation is being carried out at this time.

The impetus for these two sessions was the Government's commitment in the 2013 Ontario Economic Outlook and Fiscal Review to investigate the merits of proceeding with more tailored regulation of financial planners.

Careful readers of the Fall Economic Statement will have noted that the Government's commitment to consider and investigate the merits of proceeding with more tailored regulation of financial planners appeared in two places in the document, under the heading "Consumer Protection" in the chapter on creating jobs and growing the economy, and also in the "Retirement Income Strategy" chapter of the statement; this reflects the significance of this issue and the impact that financial planning and advice can have on Ontarians.

Financial decisions confronting families in general and individuals in particular are becoming increasingly complex and critically important for their financial well being and security now and in the future.  Ontarians need access to informed, trustworthy financial planning and advisory services to better allow them to achieve their financial goals.

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 planning and advisory 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 Ontario financial planning marketplace.  We are conducting this preliminary review, which I would characterize as a high-level review, in order to determine the merits of proceeding with more tailored regulation of financial planners and, if there were to be more tailored regulation, what form that might take.

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

At the same time, we must be mindful of any intended and unintended consequences of regulation for industry participants in terms of regulatory burden, complexity and cost.  In the course of this consultation, including our review of 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.  We look forward to today's presentations and discussion, and once again thank you for joining us.

THE MODERATOR:  Thank you, Frank. So, we have a list of 10 presentations to start with.  I would ask/invite the Investment Industry of Canada to make the first presentation.  The preferred way will be to come to the podium, so it is easier.  If you would prefer to stay at your seat, we have a mic, but it is easier to read if you have a standing podium.

MS ALEXANDER:  I hope you can see me over the podium.

THE MODERATOR:  Oh, yes, I am sure.

MS ALEXANDER:  I may have to walk around, like Phil Donahue or something.  Perhaps no one can see me, here.  I will stand over on the side, a little bit.

Hello.  My name is Michelle Alexander.  I am from the Investment Industry Association of Canada.  The IIAC is the national association representing the investment industry's position on securities regulation, public policy and industry issues on behalf of our 166 IIROC- regulated investment dealer member firms in the Canadian securities industry.  These dealer firms are the key intermediaries in Canadian capital markets, accounting for the vast majority of financial advisory services, securities trading and underwriting in public and private markets.

In general, the IIAC supports some additional clarity and standardization for the provision and supervision of financial planning in the industry.  We recognize that there are many individuals who may hold themselves out as financial planners but may not have the necessary proficiency and appropriate oversight.  For those outside of the self-regulatory organization especially, some clarity and protection for investors by those who call themselves financial planners would be welcome.

I just want to talk a little bit about how our members currently handle financial planning.  Advisors and our members regularly create a road map for clients of what their financial goals are and how to achieve them.  Whether this is technically called a financial plan, a plan or financial objectives does differ among firms.

The IIAC members generally encourage their advisors to develop these plans with their clients as a key and critical item to help them achieve their financial goals.  This type of plan helps to determine the right products and services at the outset of a relationship with the client and is reviewed going forward.

Currently, while there are no specific rules for investment dealers in place right now to address financial planning, members are considered by IIROC to be responsible for the supervision of financial planning services provided by their advisors.  IIROC-registered representatives currently have stringent proficiency and regulatory requirements, including initial education, training and ongoing continuing education.  The IIAC is concerned that these advisors may be captured if a new regulatory regime is introduced and is applicable to financial planners.  This would perhaps mean that these advisors would be required to meet different education requirements, obtain some recognized designation and may be subject to oversight from a new and separate SRO.

This unnecessary duplication would be extremely burdensome, ineffective from a cost perspective and not address the primary concern of adequate investor protection and ensuring that clients are served by appropriate professionals with the requisite skills, knowledge and conduct.

Additionally, if our advisors would be subject to such a regime, member firms would have to develop a separate framework of supervision to ensure their advisors complied with any new regulatory requirements.  Our members today are increasingly struggling to survive in the market, and tell us that the cost of compliance has become unsustainable.  The rise in operating costs over the post-financial(ph) period illustrates the impact of the regulatory burden on the bottom line.

Operating costs are strongly up across the broad in the past six to seven years at all of our firms, averaging 5 per cent annually, well above annual inflation.  As well, at present we estimate that there are close to 80 proposals for new and amended rules and regulations impacting dealers directly or indirectly, either in the consultation phase or under regulatory review.  Many of these proposals will eventually be implemented, often with enhanced technology adding further to the cost of compliance and pressure on dealer fixed costs.

Further, one of our areas of concern is some of our members hold CA or CFP designations with their own set of requirements, and we would suggest that those with certain proficiency standards, be it registered representatives, CAs or CFAs who work with member firms would be exempt from the requirements of new standards that may be introduced for those who hold themselves out as financial planners.

Lastly, I just want to mention I understand that at the roundtable last week, there was some discussion about IIROC's focus on product- based regulation.  I know my colleague, Paul Riccardi from IIROC, will probably touch on this, and while product-based regulation may have been the state of things many years ago, that is no longer the case, especially with the changes with the new client relationship model that have been in place, which have shifted regulation from product- based regulation to advice-based regulation.

The CRM is meant to regulate on the basis of the relationships formed between investors and financial services providers, rather than on the basis of the products that they buy and sell.  The CRM recognizes that people seek advisors not for the primary reason of transaction execution, but in today's financial markets advice is what most people seek.  Advice is the core of any client-advisor relationship.  And those are my remarks, thank you.  On time ...

THE MODERATOR:  Thank you.  You were even under five minutes, so congratulations.

I would like to invite the Investment Industry Regulatory Organization of Canada, please.

MR. RICCARDI:  Thank you, very much.  Good morning, ladies and gentlemen.  I want to, first of all, express IIROC's appreciation to the Government for inviting us here to provide you with some of our thoughts.  My name is Paul Riccardi.  I am a senior vice-president responsible for registration, the development of member conduct policy, as well as enforcement.

Before I get to our comments that deal specifically with the issue at hand today, I would like to give you a bit of background relating to IIROC itself.  As Ms Alexander just said, we are a national self-regulatory organization with over 400 employees located in offices across the country.  We are responsible for the oversight of over 200 investment dealers, who collectively employ over 29,000 ... more than 29,000 individual registrants, of which 22,000 are directly client facing.

We are also responsible for overseeing the equity and debt trading activities on Canada's currently 10 marketplaces.

Our mandate is really multi- faceted.  We are responsible for setting and enforcing effective high-quality regulatory investment standards, protecting Canadian investors and strengthening market integrity while at the same time maintaining efficient and competitive capital markets for Canadians.  We do so by promoting a strong culture of compliance within our dealer members by using clearly defined proficiency and continuing education standards for individual registrants, coupled with a fit and proper admission standard designed to ensure that those seeking IIROC registration not only possess the educational and professional background necessary to deal effectively with the investing public, but that they also have the appropriate moral compass.

We also promote a culture of compliance through the creation and continual reassessment of clear and effective credential rules designed to protect Canadian investors and the ongoing viability of our Canadian capital markets.  As well, we have a fulsome set of member conduct rules that are designed to ensure that IIROC registrants at all times deal fairly, honestly and in good faith with their clients by, amongst other things, ensuring that they understand their ongoing and continual obligation to know their client, make suitable investment recommendations at all times and to identify and deal effectively with either potential or actual conflicts of interest.

IIROC shares the Government's commitment to protecting the investing public and its desire to enhance professionalism within the financial services industry and this particular subset of the industry.  We believe that the most effective way to achieve this objective is, as I have said earlier, to establish clear proficiency and entry requirements, as well as having effective and fulsome member conduct rules, but that is only the first step.  IIROC works to continually reinforce its regulatory framework through business conduct and financial compliance reviews, member education programs, industry stakeholder consultations and active enforcement that holds individuals responsible for their actions, up to and including expulsion from IIROC.  It is against this backdrop and our longstanding focus on the regulation of registrant behaviour that underlies our belief that financial planning regulation is an initiative that merits serious consideration.

We appreciate the Ontario government generating dialogue on this important issue and ensuring that these consultations are broad and inclusive.  While there are different views as to how to achieve this stated objective, IIROC believes that a uniform regulatory framework that addresses issues of proficiency, fitness, ethics and conduct of financial planners across Canada will serve the best interests of both the consumers of financial planning services, but also the financial planning community itself.

As this dialogue unfolds, it is important to consider this issue within the context of the Canadian capital markets and the existing regulatory structure and organizations that already exist.  We need to be mindful that further regulatory fragmentation should be avoided, as it will give rise to unnecessary costs, which Ms Alexander already referred to, and as well we have a concern that further fragmentation will only serve to confuse investors further as to who exactly is responsible for the oversight of financial services in this province and across the country.

Whatever model is chosen, however, it needs to be cost effective and clear in its mission for all stakeholders.  We believe that this can be achieved by building on the existing regulatory framework, by drawing on existing regulatory bodies, including IIROC.

In conclusion and on behalf of IIROC, I would like, again, to thank the Government for extending this invitation and giving us an opportunity to explain our views and perspectives on this important issue.  We welcome the opportunity to continue to be involved in this process and look forward to sharing our views, experience and expertise as we work together to strengthen investor protection and improve the professionalism of the provision of financial planning services.  Thank you.

THE MODERATOR:  Thank you, Paul.  And the Canadian Securities Institute.

MR. FLYNN:  Good morning, everyone.  I am Marc Flynn from the Canadian Securities Institute.  Thank you to the Ministry for allowing us to have this dialogue here today.  So just briefly, to give a background of who we are, we are one of the leading educators in Canada and examiners in the area of financial services across all financial services.  We have been around for about 40 years, about 45,000 enrolments every year, so lots of people come through our doors that participate in all parts of the financial services, whether it is securities or banking, insurance and all the other areas within the financial services industry.

And we play multiple roles in the industry.  First and foremost, we are an educator, and our primary, you know, underpinnings came ... our relationship with IIROC for the last 40 years, we used to be part of them, and then we were spun off.  And, basically, we have the mandate from IIROC, for everybody in the securities business, to do the education and the examination for all the licensing and all the different roles, advising client-facing roles and also institutional roles and supervisory roles within the IIROC platform.  So, that is our primary mandate.

But since then, we have broadened it out over the last many years.  The Canadian Securities Administrators, of which the Ontario Securities Commission is part of, we have the mandate to train licensees in mutual funds and also in portfolio managers and exempt market dealers.  So we cover different ranges from different regulators when it comes to exams and courses, and we also are one of the providers leading to the licensing examinations in Ontario and other provinces.  So, that is our first part.

The second part is we also have ... we are a standard setter in our own right.  We actually have four professional designations that we oversee, some more recent, some that have been around for a long time.  Basically, designations go on top of the licensing, the basic requirements that are necessary to be licensed, so these are people who want to extend their professionalization, which is a lot of part of this discussion.

So, we have designations in financial planning, called a personal financial planner.  We also have a designation in wealth management and a designation in portfolio management.  Part of that is showing that advice is not one size fits all, that there are different areas of specialization, and people ... they might be product-based licensees, as Paul touched on, but their direction and where they want to go with their profession is sort of client based, and the expertise they need to meet those diverse needs.

So that is our role as both an educator and as an examiner, but also as a standard setter.  And I think that gives us a little bit of a sense of what are the dynamics in the industry and what is affordable and achievable when it comes to standards and competence.  So I am going to focus a little bit on that and, while Michelle and Paul focused a little bit on the structure of regulatory framework and the SROs that exist and some of the challenges of having multiple SROs or additional ones, I am going to focus a little bit on how competency and standards evolve over time.

And I think this is where this is all about; it is not necessarily with a new structure, a new entity, but it does evolve.  And I will get into a couple of the different examples.  One of them is in the IIROC world itself, so your traditional securities business.  You know, in the sixties and seventies, we all think of the broker that called you on the golf course to say to buy something; that is the picture that people might have of the broker in the sixties and seventies.   And so the proficiency requirements in those days focused on product, focused on trading and stock- picking analysis.

Then, in the seventies, or in the ... basically, that evolved into the ... and there were licensing requirements that were robust at the time, but they were limited to that space.

In the 1990s, you had more products out there, mutual funds, many more investors coming into the market than just sophisticated investors who needed advice, more advice, more planning advice.  And so the proficiency standards evolved, as well.  There were additional courses added, one of them in financial planning and one of them in investment management that licensees could choose within their 30 months of registration to go in one direction or the other, depending on their business.  So, that is what happened in the 1990s.

In 2000, there is a reaction to the Enron crisis, so we had much more focus on ethics.  So the regulatory course included about a third more content on ethics and focused on that.  So it shows how it evolves.

And then, mid-2000s, the securities industry decided that all their advisors can't just be investment managers or financial planners.  They need to know a little bit of both, because all their clients are going to want some sense of that.  So now the requirement of all investment advisors for the last nearly 10 years now is a robust course that they have to take within two and a half years of being registered, that covers both sides of their role, including financial planning.  So that is how some of the evolution ... it does show how things can change.

We worked also in the area of financial planning with the Canadian banks to upgrade the designation, the PFP designation that we have, and to create a whole new program that was built up in the 2000s to incorporate financial planning into what the banks needed.  Recently, at a CSA level, at the Ontario securities level, it came out last week that talked about portfolio managers and exempt market dealers, another set of people that also deal with clients.

They also put in new guidelines regarding know your client, know your product and ultimately suitability.  So these are all evolving things that show that standards can evolve, and everybody is agreeing that the higher standards are good, but they have to be in sync with increased professionalization that has to be affordable and achievable.

So I think it just shows that I think it is not so much structural, but there are standards that can improve and there are ways to do it, and the industry has shown it has evolved over time.  Thank you.

THE MODERATOR:  Thank you, Marc.  Ontario Pension Board.

MR. FULLER:  Now, as they say, for something entirely different.  I am Mark Fuller from Ontario Pension Board.  Ontario Pension Board is the administrator of the public service pension plan here in Ontario, and oversees more than $20 billion in assets and serves more than 80,000 members and pensioners.

And we are here today because our work brings us into direct contact with the retail wealth management industry, and that has led us to form some views about what needs to be done in order to protect our members and the general population.

There are two elements to this conversation.  The first is why is regulation needed, and the second is how it should be accomplished.  I am going to use my time this morning to talk about the why rather than the how. I am familiar with the Financial Planning Standards Council's representations to this group that were made on Friday, and we endorse their recommendations around the how.

So there are three main reasons we have identified why regulation is needed.  The first is the aging of the population.  That aging leads to an increased need for financial planning. Some may say, "Well, it is too late for that cohort, the 50-plus crowd."  We say no, now is precisely the time that they are in the greatest need for comprehensive financial planning services during the payout and retirement phase.  They are at the most vulnerable stage of their life cycle, where they have little or no human capital left to compensate for a mistake or a loss, and so they need competent, ethical, comprehensive financial planning services.

The second reason is the decline of the defined benefit pension model that is occurring really across the globe, but certainly in Canada.  And that translates also into a need for increased financial planning.  A D-B plan is, in effect, a collectively run comprehensive financial plan.  D-B administrators have comprehensive legal fiduciary duties to their members and pensioners.  We are subject to what amounts to extensive consumer protection legislation for our membership and, with the decline of D-B, that protection is disappearing from a broad swath of the population and it is leaving a big hole in wealth management consumer protection legislation.

So we see a need for improved access to comprehensive and ethical financial planning.  D-B plans are structured with the intention of delivering a lifetime retirement income, hopefully an adequate one, and our perspective is that too many in the wealth management industry, too many service providers, are focused only on the asset side, the investment return side of the equation and not the lifetime income adequacy side of the equation.

And with the decline of D-B, our view is that the industry needs to shift its attention and focus to comprehensive planning and helping clients identify and manage to a lifetime retirement income, and CFP training or financial planning training would be directed toward that.

The decline of the defined benefit plan means that more assets are going to be available, going forward to the retail service wealth management industry, and the bottom line is that when it comes to investing in financial planning, most individuals are highly vulnerable.  The playing field is steeply slanted against them, and it needs to be levelled, and a little more regulation seems like a reasonable trade-off for the additional assets that are going to flow into retail wealth management.

So linking the holding out of oneself as a financial planner to establish the competency and ethical standards should raise the value of financial planning as a designation and should increase the size of the financial planning community and make competent and ethical comprehensive financial planning accessible to many more people in society.

The third reason that we see regulation is necessary is that we see quite variable standards of practice with respect to our members.  By way of example, we see industry players pressing our members to cash out their D-B benefits.  Our perspective is that that is a conflict of interest when the person earns a fee based on the volume of assets gathered with no performance downside for the advisor.

Pensions are highly, highly complex, and our view is that anyone recommending that a customer withdraw their assets from a D-B plan should be deemed to be holding out to that person that they are fully competent to evaluate that decision solely from the perspective of the best interests of their client.

Our experience, though, is that many who are holding themselves out as capable of doing so don't have anywhere close to an adequate understanding of the risk/reward trade-off that they are urging their clients to make.  So ... and we see no standards of practice around advising around that kind of a decision.

We do, however, see, when we experience certified financial planners, we see a much more balanced approach to that decision and advice.  So that informs why we would see an expanded sort of designation for a requirement for the community as being something that would represent a major step forward and be sound public policy.  Thank you.

THE MODERATOR:  Thank you, Mark.  Financial Advisors Association of Canada.

MR. POLLOCK:  Good morning.  My name is Greg Pollock with the Financial Advisors Association of Canada, otherwise known as Advocis. Advocis is a national association of financial advisors and planners with roots going back over a hundred years, and was formally recognized in 1924 under a special act of Parliament here in Canada.

Today, we have over 5,000 active members in Ontario, many of whom are small business entrepreneurial advisors operating under various business models.

I want to thank the Ministry of Finance officials and the staff in the Minister's Office for commencing these consultations.

This provision of financial advice to Ontarians is a key element in addressing the everyday financial needs of Ontarians.  These needs change regularly throughout the life cycle, and so the provision of financial planning must be dynamic, both responding and planning for these events.  We are heartened to read, in the Minister's Fall Economic Statement, that government would be looking more carefully at the regulation of financial advisors including financial planners. And while the language and the questions before us today focus on the term "financial planner", we know that the term has been used interchangeably with "financial advisor."  As suggested in the Minister's statement, the actual scope of the discussion is on financial advice, inclusive of financial planners.

Financial planning and financial advice are often used interchangeably.  In fact, in the Financial Planning Standards Council longitudinal study, the value of financial planning under the definitions of "Comprehensive Planning" and "Limited Planning", the term "financial advisor" is used to describe the individuals providing the planning services.

We would agree.  In order to regulate financial planners in Ontario, it is crucial that all financial advisors be regulated.  After all, what is the public policy reason for regulating such individuals?  In our view, it is to protect the public interest by ensuring quality consumer protection.

Let me use an analogy:  Imagine if medical doctors were not regulated in Ontario today, and someone decided that we should regulate cardiologists.  Would it make sense to regulate only cardiologists, or would Ontarians be better served by regulating all medical doctors?

The same applies for financial planners.  Yes, we need to regulate financial planners, but we also must regulate the pool of individuals from which financial planners specialize, and that is financial advisors.

Financial services has evolved to a point where change is at hand.  The focus is no longer on the sale of product, and hasn't been for some time.  The focus is much more holistic, focusing on knowing your client, understanding their needs, understanding the complex products available to your client and then providing recommendations that will assist your clients in meeting their needs and goals.

Existing regulation by the OSC, MFDA and IIROC is focused on the product and not the advice.  This is an outdated model due to the evolution of the industry.  And I heard previous comments earlier, and let's have the debate.  The result is increased regulatory and compliance costs that are not achieving what consumers need, want and require.  Moving forward, we need to be clear, for the benefit of advisors and their clients.

Consider the outcome if we were to focus any reform on the professionalization of financial planners and exclude the broader and much larger group of financial advisors.  Consumers would remain at risk.  Anyone would be able to hold out and carry on business as a financial advisor; think Earl Jones.

Consider the impact on industry.  We would have one group of professionals, the financial planners, and another group of financial advisors.  This simply would add another layer, and we have heard similar comments.  Companies would need two sets of compliance rules.  The vast majority of financial advisors would be regulated by the MFDA or IIROC and the financial planners would be regulated by their professional body.

What are the risks in such a system that is adding complexity to the already complex mix?  It could result in companies deciding against the use of financial planners due to the added cost of regulation and oversight.  They may choose to use the broader group of financial advisors, an unidentified group, even in cases where the client may benefit from dealing with a specialist.  The outcome can reasonably be viewed as a disservice to the consumer at large.

Advocis published a paper, "Raising the Professional Bar, Creating Greater Consumer Protection Through Higher Professional Standards."  In this paper, we have identified what we view as the current problems that require change in our industry.  We have also provided a broad overview of what we view as a path to a solution.  If we keep, as the focus, the best interests of the consumer, then it is clear that any solution will require that we bring all financial planners and all financial advisors under the same tent.  Thank you.

THE MODERATOR:  Thank you, Greg.  Canadian Foundation for Advancement of Investors' Rights.

MS PASSMORE:  Good morning.  My name is Marian Passmore, I am director of policy at FAIR Canada, the Canadian Foundation for Advancement of Investor Rights.  We are a non- profit organization which advocates on behalf of the consumer in securities regulation.  We would like to thank the Government for inviting us here today to provide our comments.

FAIR Canada would like to commend the Government for recognizing the need to have financial advice provided to Ontarians that best serves the consumer's financial goals and making it a priority to address this.

Consumers need to be adequately protected.  Consumers believe that financial advisors, whether they are dealing with a planner or a different registrant, such as calling themselves an advisor, are required to provide a device that is in their best interest when this is actually not the case.

Many consumers use financial planners who also sell financial products to them. We have seen that very few consumers actually receive a written financial plan and often financial plans are used as teasers to sell product.

Many financial planners themselves are frustrated by the inability to provide true financial planning services and put into practice what they spent so much time learning given the way that the financial industry is structured today, which forces them to meet targets and sell product. The current system we do not think serves the industry or the consumer well and does not encourage the emergence of a financial planning profession.

What do we think is the appropriate regulatory approach?  FAIR Canada has provided comments to the CSA regarding how to improve consumer outcomes.  We believe that in order for consumers to obtain sound professional advice, the following changes need to be made:  There needs to be a removal of conflicted remuneration.  In order to align the interests of the advisor and the consumer, third-party embedded commissions should be removed and other forms of remuneration which result in conflicted advice should be examined and eliminated to the largest extent possible.

There should be implemented a statutory best-interest standard, and an increase of the minimum proficiency standards for those who want to hold themselves out as professionals, rather than as salespeople.  We also believe that somebody should be prevented from holding themselves out as a professional unless they provide unbiased and unconflicted advice.  That is the approach that we think would have the greatest benefit to the consumer.

With respect to the regulation of financial planners, if the Government is solely looking at the regulation of financial planners only, the Government is looking at regulating the provision of advice which affects financial decisions and not just investment decisions, decisions such as whether to pay down debts, pay down or save for a mortgage, purchase life insurance, et cetera.

FAIR Canada is not aware of any data on the extent to which the provision of financial plans has led to consumer complaints or consumer harm, and recommends that the Government made public this information if they have it, or obtain this data.

FAIR Canada is more aware of data regarding poor consumer outcomes through unsuitable recommendations or recommendations that whilst they may be suitable, are high cost, high fee, and do not lead to the ability to adequately save for one's retirement or best outcomes for the consumer, things such as unsuitable recommendations to borrow to invest, churning of accounts, undisclosed DSC charges and so on.

With respect to regulating those who provide financial planning, we believe that it should be the case that those who hold out as a financial planner should have to meet objective proficiency requirements and, if they obtain a licence to be ... so as to obtain a licence.  And, in that way the consumer would be able to ascertain, through going to one location and checking, whether the particular individual is registered and/or licensed to provide the services given.

There should also be the ability to have the consumers make a clear choice between conflict-free financial advice and people who are salespeople, only allow those who provide financial planning advice free from conflicts to call themselves a financial planner and to meet the required proficiency.

As I have mentioned, consider a comprehensive, one-step licensing registration check so that the consumer can easily ascertain whether the person they are seeking financial advice from is properly licensed and/or a registrant.

We suggest that the regulation of financial planning that is in Quebec be examined.  There, there is a need for special training.  There are duties to act with competence and professional integrity, requirements to disclose commissions and referral fees and the duty to prohibit self- dealing; that should be a base of, sort of the starting point.

And, obviously, there needs to be thought given as to how to regulate financial planning, who is going to do it.  And we believe that existing statutory regulators should be looked at to do this because creating yet other SROs would take an inordinate amount of time and potentially be duplicative.

And those are our comments.  Thank you.

THE MODERATOR:  Thank you, Marian. The Canadian Life and Health Insurance Association.

MR. GOLDTHORPE:  Thank you.  My name is Peter Goldthorpe.  I am with the Canadian Life and Health Insurance Association.

CLHIA represents Canada's life insurance companies, and I am joined today by representatives from two of our member companies, Geoff Heyland from Great-West London Canada, and Jim Wingrove from Co-operators, and they will be able to answer any of the difficult questions that get raised during today's discussion.

For the reasons that Mark Fuller from the Ontario Pension Board cited, CLHIA agrees that this is an important initiative, and financial planning needs to be better understood by consumers.  And probably the standards that are in place for financial planners need to be better recognized and officially recognized by the Government.

I was happy to hear the comments by Michelle Alexander this morning about the shift from product-based regulation to advice-based regulation.  I think it is important in any responsible public policy discussion that we recognize what is already working and make sure, as Mr. Allen was commenting earlier, that we don't duplicate that or introduce any unnecessary complexity.

Certainly one of the reasons why we are here today is we believe, insurance companies believe that a tremendous amount of advice-giving that is already in place in Canada is regulated and is working well, and we have no desire to see that regulation duplicated, introducing unnecessary complexities.

Having said that, we do ... are of the view that financial planning has emerged as a profession over the last several decades, and it is time now to recognize that as a unique and specialized ... as a unique and specialized profession, and the work of organizations like the Financial Planning Standards Council to give that profession more recognition, develop standards that the practitioners follow is welcome and should be encouraged and enhanced.

So I think that the additional, any additional comments are probably more appropriately addressed in the specific questions, so I will leave it at that.

THE MODERATOR:  Thank you, Peter. And now, the Canadian Institute of Financial Planners, please.

MR. COSTELLO:  Thank you.  Well, thank you very much and good morning.  And first of all, like other speakers, I would like to thank the Ontario Government for showing great leadership in this issue.

And I have worked in the industry for the last 15, 16 years on this specific topic, and I am so elated that we finally got into the right realm of discussion.  And I would hope that this dialogue will lead to further discussions across Canada and other jurisdictions so that we have a common standard.

I represent an organization called the Canadian Institute of Financial Planners.  We have 6,000 CFP members ...

THE MODERATOR:  And, actually, state your name.

MR. COSTELLO:  Sorry.  Sorry, my apologies:  Keith Costello.  We represent 6,000 CFP members across Canada, 60 per cent are in Ontario. We have two focuses, one on managing members and helping them with their practices from a professional perspective and working with the Financial Planning Standards Council.

We also provide education services, getting people the accreditation they need to hold out as financial planners, and also providing post-certification support such as continuing education services.

And as my colleague said on Friday's session from the Financial Planning Standards Council, we are involved in a coalition to advocate and develop a national financial planning standard for Canadians, and we hope, certainly, our work can be used in this dialogue.

Now one of the great things about coming last is you can, you know, contrast the views of people.  And I think we have an excellent opportunity here to build a proper financial planning regulation and industry in Canada.  And most likely, if we had started today, we may approach it this way.  But we didn't.  It evolved, and we all know that.  It evolved, and there is certainly nothing wrong with that.

But let's not say we can't create the right model because we have existing stakeholders and existing structures that have interests that do not allow us to do that.

And as I go further with that point, financial planning has evolved.  It is evolved, where Canadians need comprehensible, holistic financial planning.  And it is not necessarily product sales, it is not necessarily investment advice, but it sits above this.

And there are other complementary services that are well taken and needed by Canadians, but they are better left for those areas.

Now the best way ... in my opinion, there are two questions here.  How do we do it, and why do we do it?  Well, I just stated why we do it, because it is a consumer issue, a very important consumer issue.  But how do we do it?  Some of the issues in working in the industry, and our members are frustrated by, no. 1, is arbitrage.  If I am working as a financial planner in the insurance sector, in the securities sector, there is no commonality of the advice, and what you need, qualifications and the compliance, which is troubling.

So let's take a model of a professional model where ... it used to be chartered accountants, where they called ... the merging of CPAs now, Canadian Professional Accountant, and how they do it.  You know, there is one oversight body, one professional standard, and they work in various industries.  They do their professional financial services and they adhere to the regulation within that industry.  So there is certainly no complex ... no duplication nor conflict of interest there, when you are dealing with that.

More specifically, how we would support it is the professional model.  We think there is a group of financial planners we have identified that have ... that presently adhere to these standards, and we are working to improve that, that would be perfect to professionalize and have a professional model.

What is a professional model?  Well, you have a unified, one standard everyone follows.  You have titles restrictions.

One of the other issues in the industry has been people call themselves financial planners, but they are not financial planners.  Now my colleague, Greg Pollock, who I respect very much, I certainly have no problem with his point of view but, you know, if you are going to call it professionalized, then we are going to have ...I  believe there is about a hundred thousand advisors in the industry sectors, in the financial services in Canada, then we are going to have a hundred thousand financial planners because a lot of financial advisors, they do a good job in their specific advice areas and what they do, but they are not what you would call at that level of professionalism, and nowhere from a legal perspective.  So I think that is an important distinction.

So if we want to professionalize everyone, we all have to come up to the same standard, and we have a hundred thousand financial planners in Canada, which would be great in my perspective.

The other thing is peer oversight. A new body that is self-funded by the professional people and overseen by professional people gives you the best guarantee for Canadian consumers that they know what they are doing, and they are held to that.  And all professional bodies, the lawyers, accountants, all use that model.  It is quite accepted in Canada and a lot of other jurisdictions and countries across the world.

Also, consumer complaint, the use of a consumer complaint process.  But ongoing professional development, where there is consistent development, so I know if I go see a financial planner, that he is keeping up in his education areas.  These are all provided by a comprehensive professional model.  I am not suggesting parts of this are not done today, but under the new realm, they should all be out.

Back to the final one, you know, regulating all financial planners or all advisors, I think we start with financial planners.  And as those complements, I call them, to financial planning, if they become necessary to professionalize and regulate in a professional model, then let's do that.

I will close with one core issue I saw in the Government's submission I was very pleased with:  What do Canadians and Ontarians need?  Well, what we need is effective financial planning advice, trusted financial planning advice, holistic financial planning advice and, the most important thing I am going to say today in our submission, independent financial advice.  And only through doing that can the objectives of this process be achieved by having that advice to Canadians by professionals in a professional model.

Thank you.

THE MODERATOR:  Thank you, Keith. Investors Group Financial Services, please?

MS AMMETER:  Good morning.  I am Debbie Ammeter, vice-president of advanced financial planning from Investors Group.  Thank you for the opportunity to speak on behalf of Investors Group.

Investors Group has approximately 4,000 advisors who serve approximately one million Canadians, and we provide personal financial planning services and product recommendations to our clients.  So we are very interested in proposed regulation in this area.

First, we are concerned that additional regulation of registered advisors would add complexity and confusion to the existing regulatory regime by adding another SRO to MFDA, IIROC and the insurance councils. We would expect that there would be areas of overlap and confusion between these SROs and a new regulator.

In our view, regulation of financial planning activities carried out by individuals who are licensed and under the supervision of a dealer should occur within the auspices of the relevant SRO. Dealers can control the financial planning activities of the individuals within their networks, they can choose and have responsibility for the advisors who hold out as financial planners.

Transactions which consist of an investment recommendation and associated needs analysis by a registered advisor should be regulated through the appropriate existing SRO, based on principles-based regulation developed in collaboration with industry. This regulation should not restrict a registered advisor's ability to use financial planning concepts and to provide financial advice and information in the course of providing investment recommendations.

However, we recognize that there is currently no regulation of unlicensed individuals who choose to call themselves financial planners, individuals who are not subject to registration or regulation under existing SROs. Such gaps should be addressed. Some of these individuals might hold a legitimate financial planning credential, others might not.

One approach could be to restrict unlicensed individuals from holding themselves out as financial planners unless they held a recognized financial planning credential.

We note that there is currently a wide range of designations which have varying degrees of proficiency, continuing education, ethics and enforcement requirements, and they should not all be treated equally for the purposes of establishing a list of recognized financial planning credentials.

Finally, the question of how new regulation might affect our business: Investors Group's business model is built around the delivery of a financial plan. We encourage, train and expect Investors Group consultants to perform a financial analysis or deliver a written financial plan before making any product recommendations because we believe this is in the best interests of our clients.

We don't limit these activities to consultants who hold a financial planning credential. We expect all clients to receive financial planning-type services of this kind within the context of a product recommendation. Regardless of whether they are dealing with a new consultant, a certified consultant or other, we believe this is also in the best interests of our clients, and we spend significant resources providing training and support to consultants to enable them to carry this out.

So we would be concerned with regulation which attempted to define and restrict the activities of a registered advisor in performing an enhanced needs analysis or know your client review as part of the investment recommendation process.

It is difficult to define financial planning. Numerous activities relating to financial planning are also part of the process of delivering financial services and sales of financial products. These activities are part of the enhanced needs analysis, know your client process and are in the best interests of clients.

In summary, regulation of the activity of financial planning would be problematic if it restricted these activities by licensed advisors. It would also be a concern if it required the creation of another regulatory body and added unnecessary confusion and complexity to the existing regulatory scheme.

Thank you.

THE MODERATOR: Thank you. Investment Fund Institute of Canada.

MR. ADAMS: Good morning, and thank you for the opportunity to speak on this issue on behalf of the Investment Funds Institute of Canada.

My name is John Adams, and I am the chief executive officer of PFSL Investments Canada Limited, one of the largest mutual fund dealers in Canada. I am a member of the board of directors of IFIC and I chair its dealer committee. It is in this capacity that I am speaking to you today.

The Investment Funds Institute of Canada is the voice of Canada's investment funds industry. IFIC brings together 150 member organizations, including fund managers, distributors and industry service organizations to foster a strong, stable investment sector where investors can realize their financial goals. IFIC is proud to have served Canada's mutual fund industry and its investors for more than 50 years.

At the end of November 2013, the industry held assets under management of more than $986 billion. The economic activity generated by the industry supported a total of 192,600 jobs, the majority of which are in Ontario.

Our industry supports the Government's initiative to review the regulation of financial planning. We believe that if regulatory gaps exist in this area, they should be addressed.

For most financial planners and advisors in our market today, this could be easily accomplished using the existing regulatory frameworks within which they operate. Ultimately, clients are best served when they know whom they are dealing with and have confidence in the advice and level of service they can expect. Industry has a strong stake in seeing that this happens.

To that end, we support minimum proficiency levels for financial planners and advisors that are tailored to the level of services provided, and that consumers should be able to easily ascertain whether or not their advisor has the requisite skills for their needs. Again, in regulated channels, this could be most efficiently achieved through current frameworks.

In our industry, regulation is not, as the consultation document suggests, only focused on product. Very extensive rules are in place to govern sales conduct, conflict management and the disclosure of compensation and services provided by advisors. Their proficiency levels are also set by regulation.

The investment funds industry, from the funds we offer to the advice we provide, is highly regulated. Mutual fund dealers and the advisors associated with them are subject to the regulatory oversight of the Mutual Fund Dealers Association.

The MFDA commenced the regulation of dealers in 2002. Since then, the MFDA has conducted four rounds of audits of all dealers. These audits are highly detailed and cover every aspect of dealer operations, from the back office finances to the supervision process over advisors. MFDA rules are very proscriptive, and the conduct of advisors as they interact with investors is a significant part of, and aspect, of those rules. Transgressions by dealers and advisors are subject to MFDA enforcement.

The number of dealers, currently about a hundred, is roughly half of what it was 15 years ago. This is due in a large part to the high regulatory standards in the industry, where significant resources are required to meet supervision and other compliance requirements. In addition, many dealers have practices in place that go beyond what is required by regulation.

The result of all this is that today we have a highly compliant industry with significant investor protection, even on the smallest accounts. We are not suggesting that there is no room for improvement of existing regulations. If this review determines, for example, that the proficiency levels of registered advisors might be insufficient for the services they provide, then revised minimum levels or continuing education requirements for the sector should be considered.

A smaller segment of financial planners in Ontario may be operating outside of regulated channels. To the extent that this is occurring, the Government should identify these service providers and consider expanding regulatory oversight to include them, as well. Investors should have reasonable confidence that the services they can expect from a financial planner or individuals with a comparable title. Regulations can help foster this confidence.

The broad challenge for government will be twofold: first, to identify activities that are currently not subject to regulation and determine whether they should be regulated and the best approach to do so and, second, to identify possible regulatory gaps in the sectors of the industry that are already regulated, and to determine how best to close those gaps. Where gaps are identified, careful consideration should be given to using the highly developed regulatory structures already in place. IFIC would be pleased to assist you in meeting those important challenges.

Thank you.

THE MODERATOR: Thank you, John. We are ready to start the exchange of ideas and discussion. We will start with the first question: I will have a microphone and I will pass it on to stakeholders and representatives ready to speak. Just raise your hand or have eye-to-eye contact with me, and I will share the mic with you.

So the first question:

"Is Ontario's current regulatory approach in relation to financial planners appropriate?"

Comments? Cary?

MR. LIST: Thanks, Christian, I know you were looking over to me, thinking that I would have something to say on this. Cary List from the Financial Planning Standards Council.

It has been a very interesting conversation this morning, and my concerns are that the focus perhaps is around whether current regulation of investment advisors and mutual fund representatives and mutual fund advisers is sufficient. And I don’t certainly believe that that was the concept that was floated by the Ontario Government.

We are talking about financial planning and financial planners and, as a few people have mentioned in this morning's comments, financial planning actually transcends in many cases the existing and current regulatory regimes because it sits on top of ...

We have worked for some time regarding the question of what is financial planning and what is a financial planner. And I think frankly there has been ... people can wordsmith, but there is not a whole lot of debate that financial planning actually looks at a discipline of engaging in the entire person, their entire financial circumstances, their entire personal circumstances, assesses that against a future desired state and develops strategies that help them meet their personal goals, needs and priorities in a way to optimize their financial position.

That includes financial management, insurance and risk management issues, investment issues, retirement issues, tax issues, estate needs and legal matters. And while the individuals who are licensed in some of those areas, around law, around investment or insurance are certainly well regulated by their existing regulatory structure, we would suggest that financial planning and financial planners, as it is defined here, is not regulated at all.

And so we don't believe that the existing regulatory regime for financial planning and planners is sufficient or appropriate, and we certainly commend the likes of IIROC and MFDA for recognizing the shift to advice.

But we would echo some of the comments that suggest that financial planning has evolved to the extent that it is well defined, the notion of who is a financial planner is well defined, and that transcends what regime they are licensed under in terms of whether it is insurance, investment advice or mutual funds.

So we actually don’t believe that the existing structure addresses the oversight or regulation of a financial planner today, in Ontario.

THE MODERATOR: Thank you. If I could ask you to state your name, please?

MR. GOLDSTEIN: I am Sonny Goldstein, I own Goldstein Financial Investments Inc., which is a mutual fund dealer regulated by the MFDA.

I have been in the trenches, selling financial products for 47 years. And what I am hearing is a lot of preaching to the converted. We all know that those who are regulated, while there may be gaps, are regulated. What we don’t have in this province and haven’t had is any kind of control over those who aren’t regulated.

Some 30 years ago, an 18-year-old friend of one of my daughters came to me and said, "Gee, I am going to be doing just what you do." And I said, "What do you mean?" "Oh, I've got a part-time job. Saturday, I am going to be working for a major trust company," and it's right near my house.

I went over there and, after a full two-hour training course, this young man was put on the RRSP desk. And he was giving financial advice as an 18 year old to people coming in to buy RSPs in February of 1983.

Not much has changed. Banks, other institutions, are still employing untrained, unlicensed people to give financial advice to the vulnerable, the most vulnerable, because they come in trusting that they are going to get decent advice.

And what we really need, what the major gap is is that anyone can hang out a shingle and call themselves a financial planner, a financial advisor, and certainly give advice, whether good, bad or indifferent. Whether they put their own interests or their client's interests first really doesn’t matter, because these people are allowed, and are paid, to give such advice of any sort.

And I think what we really need to address and what I thought this initiative was going to address was to control the use of the terminology and to certainly put in place some sort of proficiency standards, professional standards, education standards and everything needed to control the dissemination of financial advice to the public here in Ontario. Thank you.


MR. DE GOEY: My name is John De Goey, I am a financial planner and financial advisor at Burgeonvest Bick Securities Limited. My sense is that some of the people giving testimony here today are sort of wanting it both ways. We have heard a number of people give testimony that what we are trying to do is regulate advice and that the industry has evolved based on the recommendation of products, and we are now beyond that, and that we are giving advice.

And then they go on to say we don’t need another SRO because we are already regulate things on the product side. Well, I don’t believe you can have it both ways. If the people who are regulating products regulate products then they should regulate the products and stay out of the advice realm.

I know that in my firm, good as it is, there is no one at my firm who would be able to offer me equal oversight with regards to what is in fact a qualified financial plan. So, if you leave it to the foxes to guard the henhouse -- leave it to the firms that are set up to regulate based on product advice -- they will not have the capacity to do a reliable job to regulate based on advice.

Furthermore, there are some people who are certified financial planners who are not members of a firm that offer products; they offer their services on a fee-for-service basis. Who exactly is their SRO that would be regulating them? There is no one there to do it.

So to have the existing SROs provide the regulation for financial advice is not viable.


MR. RYU: Thank you. I am James Ryu from Advocis. I think in this review we really have to look from the consumer's perspective and understand how Main Street Ontarians receive their financial planning or advice.

Now clearly, this industry has a lot of rules and regulations, designations, certifications; that is all clear to all of the people in this room. But in a lot of ways that is inside baseball to the members, to the people in this room.

When it comes to average Ontarians, the way they purchase products or get financial planning is that they go to a financial advisor who reviews their situations and helps build plans and recommends products that fulfil those plans.

Now there has been some discussion about how existing regulators have shifted to more client-based regulation and, yes, that is true. But there are inherent limitations to the existing structure.

For example, at IIROC, ultimately they are reviewing securities products. But at one point of sale a consumer's purchase can be both insurance and securities products, so what we really need to do is to reform the experience that consumers have when they go to their financial advisor. We really need to develop some minimum proficiency standards for that baseline advisor, and allow financial planning to be a specialty of financial advice.

THE MODERATOR: Thank you. We can go to Question No. 2, which is:

"How would you improve Ontario's current regulatory approach?"

A subquestion: Do you want the question?

"Does the lack of regulation of financial planners or financial planning leave consumers vulnerable or at risk? If so, how?"

How would you improve that?

MR. POLLOCK: Thank you, Christian. First of all, I think some of the comments to Question 1 probably related to this question, and so I was holding back a little bit. And thanks, John, for your comments. I totally concur with what you have said in terms of disclosure, as well, and the CFP as well.

What happens is, as I'm telling you this, this is really sad, is when a client goes to an advisor today, many of those advisors are licensed on both the securities side of the industry and the insurance side of the industry. And we have different rules for those individuals, those same individuals when they are dealing with their clients. And what we need at the end of the day is a professional model. We need a one-stop shop where that client, if they have an issue with the advice and the recommendations that they have received, where they can go file a complaint and have that complaint addressed.

It is not transparent in my view, it is not simplistic in my view, and the whole issue of, you know, advisor or planner, that can be addressed. I mean, we have specializations, for sure, within our industry.

But, today, I don’t believe ... I think if you talk to the average consumer out there, first of all, they don’t know the difference between an adviser or a planner. They just simply are looking for someone to assist them with their investments, with their long-term goals, with their retirement planning, whatever it might be. And I really don’t think that overall, as an industry, we are being transparent.

I also concur with every comment that was made about we don’t need more regulation. Our organization has spoken on this issue ad nauseam. So we need to find a way to address this issue of recognizing professionals. And, if some of the advisors are not up to standard, you know, as my colleague, Keith Costello, referenced earlier, then we need to bring them up to standard. That is why we had our proposal, "Raising the Bar," raising the professional bar for all advisors, for all planners here, here in Ontario.

So that is what we want: We want simple access, we want transparency. You know, I have heard some of the comments about conflict. You know, I heard the comment from the Ontario Pension Board about conflict. And some of the individuals in this room, their business models are such that they charge a fee on the assets that they manage. And they said that, in that kind of structure, they are not conflicted. I don’t know what my friends at the pension plan board would say, but these are complex issues. I am trying to look at it from a very simplistic perspective, from a consumer perspective, who is it that is advising me, do they have my best interests at heart and if I have a concern, where do I go to get that addressed?

And I don't believe today that that is the case in Ontario. We need to change that. Financial planners totally agree with that comment; in no way are they regulated unless, as we know, 95 per cent of financial planners today, individuals who hold out as financial planners, receive compensation through products that they sell.

So there is a very small number of individuals out there who are actually making a livelihood on just creating plans and selling plans, and that is it. And the reason is is because it is very difficult to make a livelihood doing that. And, you know, I know Marian referenced that in her comments.

And so we have to be realistic about individual financial advisors and planners making a reasonable livelihood when it comes to this industry and to this profession.

So I would improve this by creating an oversight body of financial advisors and planners and removing, frankly, some of the regulatory red tape that currently exists over these same individuals under some of the dealer structures within the province and within the country.

And so, at the end of the day, I believe we are going to have less regulation, not more regulation. And so there is that difficulty that John referenced about, you know, you can't have it both ways. But I think there has to be a leap of faith here. We have to create that profession and charge those professionals and their public oversight body with public representation, charge those individuals with working in the best interests of investors and consumers.

THE MODERATOR: I will go back to you, and to Cary, two and three.

MR. FULLER: This is on the question of the vulnerability of individuals, just back ... and I don’t want to harp on this, but on the DB-cashout ...

THE MODERATOR: Excuse me, who are you?

MR. FULLER: I am Mark Fuller, from the Ontario Pension Board.

This is on the issue of advisors urging our members to cash out their defined benefit unit values.

We almost never get any due diligence questions from any advisors who are asking or urging our clients to cash out their benefits. And think about that: they are taking $500,000 to million-dollar CDs out of the plan, sometimes. I can’t buy $10,000 worth of initial public offering without extensive due diligence, know-your-client forms, et cetera, et cetera. But an advisor can advise one of our members to cash out their substantial commuted value without any sort of standards around it, whatsoever, without asking us any questions about the security level of the benefit, what the terms of ... what the benefits are in the plan, what the assumptions are that were used in the valuing of the benefits in the plan and so forth.

That is a staggering gap in regulation or oversight of standard of practice, and it is against a scenario in which most individuals take a look at even a $200,000 commuted value and they feel that they are rich, and they have no concept of what the pool of capital that is required to generate a lifetime retirement income.

So that really concerns us, and that is ... it is just one anecdote, but it really does outline some of the vulnerability that is out there.


MS DELAURENTIIS: I am Joanne DeLaurentiis, the Investment Funds Institute. Just a comment on what Mark has just identified: I think that is a clear gap and one that is likely and could probably be addressed through some change to the ... your policies, Mark ... or, you know, put it into the agreements, because that is clearly a gap.

But just ... I wanted to raise a question and an issue that hasn’t been raised so far, just on this point of how we might improve Ontario's current regulatory structure. And, I mean, it strikes me, Frank, that you are here representing the Securities Office within the Ministry of Finance and that, Cara, you are here, of course, representing the broader part of the Ministry.

But I would say an important question to ask first and foremost as a structural and systemic issue is the fact that in Ontario we’ve got securities and insurance and so on separated, unlike for example in Quebec, where the AMF aggregates and is a regulator for across financial industry and products. New Brunswick has just gone that route, Saskatchewan has as well.

So I think one of the questions to ask in this whole review is do we have the broader framework or the broader structure? Are there questions there, are there issues that should be addressed there? Because, otherwise, you know, if we start talking about another SRO or another organization, we are just creating a much more fragmented approach, and we already have a somewhat fragmented approach.

Questions have been raised about arbitrage, a regulatory arbitrage; that experience is already there, and in the market.

So I think a key structural question for Ontario is to think about whether the regulatory framework needs to be changed in any way.


MR. LIST: I would agree wholeheartedly that the last thing we need is another layer on the entire universe of those who are providing regulated advice to consumers around insurance or around securities or around mutual funds. Whether existing regulation in that area can be improved or not certainly, you know, on a one off, we are happy to weigh in on that. But I don’t think that that is the question.

Today, there are well-established regulatory structures through OSC and FSCO and then through recognition of the SROs in that regard, that we don’t believe that that is in fact what is at issue. I think though, Joanne, you have made a very important point, and it goes to the question of regulatory arbitrage and what can we do, what can be done to improve the regulatory structure around financial planners, which is to not create a whole new set of infrastructure around this, but to recognize what already is out there in the industry and exists and what, in the case of our coalition members, through CFP, through FPSC and through IPPF across Canada, 22,000 individuals have stepped up to, which is a unified, single set of standards, regardless of what regulatory regime you work in for calling yourself a financial planner, and the standards around financial planning related to that.

We are not talking about professional regulation activity; we are talking about improvements around professional ... of regulation of titles and the knowledge, skills and abilities that go along with that. And I think we can do that very easily and eliminate regulatory arbitrage, not create new regulatory arbitrage.

And the only other point that I wanted to make is that clearly this morning, the conversation has all been around investment and regulation of securities. And, you know, again, to Joanne's point, that there are other regulated areas, I don’t think the problem frankly lies with the unlicensed, the small number of unlicensed people holding themselves out as financial planners who don’t fall under OSC or FSCO in some way, shape or form.

You know, I think the problem is that the financial planners and financial planning have become, over the years, confused, naturally, with the provision of all sorts of regulated advice around, ultimately, insurance or securities.

Twenty years ago, when I started ... or 20-plus years ago, 25 years ago, financial planning actually was probably better understood not to be the purview of investment advice or insurance advice; it was something that was evolving as a notion in and of itself. And I think, today, we are seeing that consumers are very ill served by the lack of ... by the confusion related to what constitutes a financial planner and what constitutes a financial plan ... financial planning.

And it is clearly defined. What we need is to have a structure that actually encourages and reinforces the distinction between financial planners and financial planning versus existing regulated advice and advisors, and encourages the importance of that to consumers. And a professional, self-regulatory approach to financial planners and financial planning will eliminate arbitrage issues, will help to clarify the distinction between financial planner and other regulated forms of advice and will encourage consumers to know where to go to get unbiased, unconflicted advice from people who are confident and qualified.

And, you know, if you look at any other profession, professions can only be established around a clearly defined set of core knowledge skills and abilities/competencies, that is clearly defined and understood on which you can build a single unified set of standards. That is how professions are built.

And, in this discussion, I think we are confusing a whole lot of areas. I think we need to focus back on what that single subset of core knowledge, skills and abilities -- unify the standard. We have been working with our coalition to do that. Quebec has already recognized half of that by saying there must be a single set of standards, it is the Quebec Institute of Financial Planners' standards and certification that you must have if you are going to hold out. That does not get in the way of existing recognition of SROs for regulatory structures.

So we think it can be done, we can think it can be done relatively easily, continue to be self-funded by the professionals holding themselves out as planners, and with no additional regulatory route.


MR. COSTELLO: Yes. Thank you. Keith Costello, of the Canadian Institute of Financial Planners. I want to echo what Cary was saying and draw some distinctions for the Government's perspective; you are sitting here listening to the industry and other types of stakeholders and advocates.

If the world started tomorrow, again, for financial advice, because it evolved, it moved away from just buying pension plans as Mark has talked about, and we have to become more reliant and do our own planning for retirement needs, which is the critical issue, you would have educational programs at high school, and then we move up and we get it at maybe even college or university, you get a financial plan that gave you all the components, you know, "What do I need for investments, retirement planning, estate planning?"

I would get a little plan, it wouldn't be a huge one, and it would give me a pathway. And then I would go see people in the investment funds industry, their firms, and I would get a particular investment. I would go to insurance, I would get proper insurance. And it would help build my plan.

What has happened though, because it evolved, if you look at consumer marketing, you would say it becomes ubiquitous. And you have, like, a tissue is a Kleenex, and Kleenex is a brand. So we would have an independent consumer industry; it is mixed up, and some people think that financial advice is financial planning, but it is not.

Also, I heard some comments that financial planning is a specialty of financial advice. No, it is the other way around. Financial planning sits there, and the other activities are specialty activities that you need a subset of proficiencies for to help fulfil your plan.

So, having said that, what we are hoping to achieve here is not to create duplication. We think all the structures are there and there are structures that exist that work pretty close to the body, the existing Financial Planning Standards Council, various associations that can hook into that.

So the infrastructure is there. What we need to do, though, is protect that financial planning activity, and make sure this a common standard, make sure people are professional, they follow all the things that my colleague, Cary List, laid out, and that Canadians, when they go to ask for financial planning, they can be assured, with whatever structure they are getting financial planning, and the people who do financial advice, especially like investment and retirement and estate planning and insurance risk management solutions, they can do their thing. But they are not holding themselves out as comprehensive financial planners.

And I think this is the ... we can all sit here and look at our own interests, and I respect everybody's interests, and I have my own interests for our members, but this is a consumer issue. The Government should work from what the consumer needs, work back, and let’s fix the system. And I would advocate that strongly.


MS AMSDEN: Thank you. It is Barbara Amsden, I am with the Investment Industry Association of Canada.

I think earlier on, Greg had mentioned Main Street; so we should be looking at all this through a Main Street lens. And as an investor, as a person working, hopefully, to a retirement, there are kind of four key features: one is choice. So I would like to have the ability, and this should be disclosed and I believe it could maybe be clarified a bit, but it should be disclosed whether I am getting a financial plan only, advice only, or a plan and advice. And I need not ... each person may be different in terms of the exact ... what they want exactly.

Second, it should be affordable for investors at different levels of holding. So certainly none of the changes we want to put forward should leave the investor with less access to financial planning and other types of investment planning.

Third, it should maintain accessibility. Accessibility, I am looking at in two ways: no. 1, it should be simple to understand. This is something that has been lost over time, despite the very best intentions of everybody. We have got, and I don’t need to tell you, 13 regulators in terms of the CSA level but then, on top of that, we have a host of other SROs and some quasi-consumer regulation at the federal level, definitely consumer regulation at the provincial level. So we need to clarify from an investor's perspective how that comes together.

Also, we want accessibility, to what Marian has said. That would be is a party regulated or not regulated and, if so, under what category? This should be something with today's technology that can be easily put together so you link to one place to find out what they are regulated as, if at all, and also if there have ever been any infractions against that party, rather than having to go to multiple locations for that information.

The fourth and final point is accountability. The people that investors are dealing with must be accountable and, for that, we would hope to deal with regulated entities that provide a redress mechanism and which ... of various types, which again hopefully can be dealt with and is largely provided within the current format.

What hasn’t really been discussed though is the communications of this; it is a concern that I have had, certainly for a long time, that ... and the CSA survey showed this, is that investors aren't clear who regulates what. This, if anything, has become more complicated than less and therefore any change in financial planning requirements that doesn’t include this communications aspect as something that says that your brother-in-law is not a financial planner unless that person has gone through the training and can deal with the emotional aspects of a financial plan and investing, we are going to be dealing with ... just dealing with the same issues, but just called, you know, under different sort of headings going forward.

THE MODERATOR: Thank you. Peter?

MR. GOLDTHORPE: Peter Goldthorpe, Canadian Life and Health Insurance Association. There has been a lot of talk today about the distinction between financial advice and financial planning. And there has been ... one of the themes that has come out in that area is the notion that consumers don’t really understand the difference between financial advice and financial planning. And there has been a couple of different suggestions about how to address that.

When you are dealing with public policy and regulation, there are two sides of that coin that you need to pay attention to. One side of the coin is what you are trying to achieve; the other side of the coin is any unintended consequences that may result from what you are proposing.

Now there have been two, and I think we need to pay attention to both sides of that coin, of course, when we are talking about this question. There has been two, I think, general approaches that have been proposed to address the issue about what consumers understand and what consumers need.

One is to raise the bar for all of the financial advisors. So all of the financial ... all of the people out there who are currently giving advice related to financial matters are competent to provide a comprehensive financial plan. The other approach is to clarify the distinction between financial planning and financial advice.

Now if we go with the first approach, that is, raising the bar so that everyone giving financial advice is competent to provide a comprehensive financial plan, it may or may not be ideal; I am not convinced it is ideal. But it certainly comes with a lot of costs, and those need to be carefully, very carefully considered.

One, we heard in the discussion on Friday, there was a quite a bit of talk about barriers to entry. So raising that, raising the bar to that height for everyone engaged in providing financial advice would certainly create a barrier to entry to the industry and probably reduce the number of people out there that are able to give financial advice. It would also increase the expense or the cost for the advice.

So I would suggest that the alternative approach, clarifying the distinction between financial advice and financial planning, avoids those unintended consequences and makes a very significant step towards addressing the concerns that have been identified today about the quality of advice that is available to consumers.

THE MODERATOR: Thank you. I think we have touched Questions Nos. 2 and 3 in the last part of the conversation. Question No. 4 is:

"Would regulation affect your business model of providing financial planning services and, if so, in what way?"

So we have about 10 minutes left for this exchange of ideas. It is your chance to say how your business model would be affected by regulation.

MR. ADAMS: Thank you, Christian. I am going to speak as John, now, and not as IFIC, who lives and breathes this every day and has, at a senior office level, for almost 14 years. This is a very important question, and I want to follow along with what Peter said because I think he raised some important issues. Our firm deals in the, I will say, the smaller net-worth investor market. And the advice we provide to them is relatively simple, as their needs are relatively simple. Too much credit card debt; let’s get out of that. Probably not enough insurance, no savings, you need an RESP, need an RSP.

And the advice we bring to them in the form of a written needs analysis helps them to structure their affairs and bring some discipline to their financial affairs to allow them to get on a sounder financial footing, something I know the Government is concerned about, and hopefully build them from a small client into a big one, and we have built many small clients into big clients.

So I think it is important to recognize as we look at potentially adding significant additional regulation, new regulators, deciding what business models we are allowed to conduct with fees, et cetera, we have to consider who we serve, which is what we do, how they are best served, what costs they are actually incurring and whether, when all this is said and done, what has taken place, whether we will be able to continue to serve those markets or not because it is a segment of the market many firms are abandoning, but we built a business on it. And we would like to continue to do that; we think it is an important segment of the market. Thank you.

THE MODERATOR: Thank you. Additional comments?

MR. DINOVO: My name is John DiNovo, I have been a financial planner for about 28 years now. I was involved with the founding of certain financial planning standards in the early days.

I find that there are a few things that have been overlooked and maybe not exploited enough in this opportunity, and one is just the economics of delivery of advice. The question is how would a change in regulation affect my business model. We do hear from organizations like FAIR, Investor Advocates, as to what an ideal model might look like, one that is free of conflict, with that high level of professionalism.

I agree with all those things and I think it often is the ethics and the standards of the individual that plays out, independent of the model. We find conflicts in every model.

A perfect illustration is the portfolio manager who might find it is in his interest, whether he charges on a transparent-fee basis or whatever, that he could manage a client's assets better than the Ontario Pension Board could and, yet, those people are often held out at a high fiduciary standard themselves.

So I agree with a lot of what is being said here, but I think what has been overlooked is the economics of delivery. I know how this would change my practice right now.

One of the things that is not even I don’t think explicitly stated by the fund industry itself is the degree to which they subsidize financial advice. So if you are buying a mutual fund on a deferred sales charge basis, for example, there is a lot of revenue available to you for you to use to actually maybe even in some cases do a simple financial plan for a client that otherwise wouldn't be delivered.

And I would like to reference Sonny Goldstein's ... he is not here unfortunately, now, but the person, the 18 year old delivering an RSP in a trust company on a Saturday morning with two hours' training. Advice is proportional. People coming in the door who have read an article that they should maybe put some money away as a tax move to fund an RRSP can’t really afford a financial plan, typically.

A financial plan is a very labour- intensive process. I remember one of my colleagues, my esteemed colleagues in the early days, saying it is almost like delivering a baby. He was a male, so I don’t know how he could say that, but ...

But, you know, most women who have just delivered a baby often say, "I will never do it again," and, of course, they do it again. But I have to say that financial planning, to do the proper investigation of whether or not it is in the client's best interests to keep their assets with their defined-benefit plan or to roll it into ... it takes a lot of work and investigation.

And, typically, there is a very little incentive out there ... just ... so we have to be a looking at the vectors of accountability here, and whether they are properly compensated.

And the only way I can see that going forward, if we strip out the compensation that is built in already to provide for some of this advice, then we are left with the Government having to subsidize the industry, subsidize individuals who can no longer afford this advice. And I think that is a thing that you have to look at very carefully.

Now having said all of that, is there room for better standards within that advice component, and to make sure that real advice is actually being delivered? Absolutely. And I totally agree with everybody that we need to go with something that tends to forward that kind of advancement.

In terms of the other things, if we do professionalize this industry of giving advice, then there should be a dividend. And when we look at the dividends in other professions, you will see that regulation really is on the standards. And the professions are free to operate their businesses at those standards, and technically it is only at a complaint level that they are really regulated; we don’t have the same intrusiveness in other professions that we do in the investment advice business that we do now. It is very costly.

And I would say a lot of people would concur that we spend probably more time satisfying regulators now, than we do clients, and that is a big issue.

So we have to look very carefully, and look at the economics of advice.


MR. FULLER: I would just say one thing in 30 seconds to this group, and that is I think you have a self-interest in setting higher standards for yourselves. I am a recovering lawyer, and I don’t think I am ever going back there. But I often think to myself that if I were going to back there when I retire, I would have a very good business in ambulance chasing around financial advice because I don't think you understand how vulnerable you really are, and unfortunately ... or fortunately for you, most lawyers are not very financially savvy and don't really understand, you know, what the standards for advice should be around financial advisory services. I do, and I don’t see them being met very well today.


MR. WINGROVE: Jim Wingrove, Co- operators Life Insurance Company. I would like to reiterate a few things that I have heard around the table this morning. I think from a customer's perspective they want to deal with someone that has integrity, respect, trustworthiness, and I think in most parts of our industry we have good people representing clients out there.

On the other side of it, we have a varying degree of what in the client's mind is ... defines financial planning. So when I look at this last question around, you know, would regulation affect your business model, I think until we hear some suggestion from the Ontario Government around whether this is affecting financial planning or even financial advice, in total, I am not sure we can really comment on how it would obviously impact our business.

I will say though that we believe our company, like some others that are around the table here, deal with middle-income Canadians; we don’t deal in the high-end business. That is not to say that some of our advisors do hold financial planning designations and do comprehensive financial planning, but many of our advisors deal with basic life insurance needs or basic investment retirement planning -- RRSPs. And there is a segment of that marketplace quite frankly that doesn't need another layer of regulation cost in order to serve those clients well.

We have seen some of that in the UK already, where new business models have unfolded because of regulation and, quite frankly, the middle income of those countries are underserved today. So we want to make sure that clients at both extremes, depending on the type of advice, the type of service they want continue to reach that, get that service through the Ontario marketplace.

We certainly also encourage that regulation applies more to those that are doing comprehensive financial planning. And whether that is the creation of some other form of regulator to provide oversight or whether that is through the existing infrastructure, we do welcome that type of additional oversight to ensure that the industry is well protected for those who are holding themselves out as financial planners.

And, certainly, we think there should be maybe more regulation across the industry around who holds themselves out and what they are allowed to hold themselves out as. Thank you.

THE MODERATOR: Thank you. We have about four or five minutes, then, so we have Cary here. I think we can have one or two additional comments depending on the time, and it is your last chance to make a remark.

MR. LIST: Thanks, Christian. Yes, I would echo the comments that, unless we actually know what we are talking about as it relates to what the regulation might be, it is impossible to talk about what might affect a business model.

I just want to use a couple of analogies to other professions and to reiterate a couple of comments to maybe refute some suggestions around regulation that we wouldn’t support.

We think that if you are looking at consumer ... from a consumer protection perspective, we need consumers to better understand who they are going to, what the qualifications they are representing themselves as holding mean, and be able to expect a corresponding, appropriate level of advice or planning from those individuals. So that would be to us much more title and holding-out restrictions than necessarily activity restrictions, because the title and holding out would actually be much clearer to the consumer and that, in and of itself, I think is the biggest bang for the buck on the consumer protection side and the least impact on business models.

In fact, I would suggest almost no impact on business models, and I just want to use an analogy: in the accounting profession, people have choice. If they go ... if they want to get their tax returns done and they want to get some basic tax advice, they can go to H&R Block -- no disrespect to anybody who owns a franchise or who works there -- but they can go to H&R Block, they can get their tax returns prepared by somebody knowing that they are not going to a professional accountant, a CPA or a chartered accountant.

And there has developed and I would suggest there would develop the same in the financial services industry, in financial planning, an awareness that you are getting what you pay for and that you have made a decision that there is some caveat emptor there, and you are going to an H&R Block tax preparer/tax advisor.

There are many people who will go to a chartered accountant or a CPA knowing they don’t need the full-blown services, that the competencies of the individual that have been developed as a financial planner or CFP, many, many of those individuals out there can be members of the profession, can have knowledge, skills and abilities far beyond what they may be delivering in any given point in time, but consumers can decide. Do I want to pay a little bit more? Do I want to go to get the expertise of somebody who is qualified, perhaps for much more than I am delivering? Or do I want to go to somebody who is not holding themselves out in that regard, paying less, but knowing what I am getting?

So I think that this is a model that can work. And I don’t ... I think, if done correctly, it should be able to have little or no impact on the business model.

THE MODERATOR: Thank you, Cary. Any other comment?

Well, that was a very interesting and enlightening debate. Certainly, I learned many things this morning. And I would like to invite now, Frank, to say a few remarks.

MR. ALLEN: I would also like to thank all that participated today in providing us with an informative session. It would be very important if we could ask all of you to take the time and effort to prepare a written submission and submit it. There were a number of excellent comments today; it would be very helpful to have those amplified in a written submission.

It is essential that we have the benefit of the insights that you have shared with us. The expertise, the experience, and the industry and consumer knowledge in this room would be a very valuable addition to the consultation process via written submissions. So I would encourage you to assist us in that regard.

In terms of moving forward, these two consultations are the preliminary steps in our high-level review process. In the coming weeks, Ministry staff covering deposit taking, insurance, mortgage brokerage and securities will be reviewing the transcripts and also reviewing the written submissions.

Our objective is 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 spring's budget.

This is a very important topic. It is also very complex and nuanced. We appreciate all the comments and views that you have shared with us, and the Ministry would benefit tremendously if you would take the time and effort to reflect your views and recommendations in written submissions.

Lastly, I would just like to acknowledge and thank our colleague, Shameez Rabdi, who has worked tirelessly in organizing and arranging for these two sessions. And I think all of us that have participated have benefited from his hard work. Thank you.

--- Whereupon the roundtable concluded at 10:58 a.m. on Tuesday, January 10, 2014.

I HEREBY CERTIFY THE FOREGOING to be a true and accurate transcription of my Stenomask recordings to the best of my skill and ability

Certified Stenomask Reporter