: Gordon Stockman - Submission

May 17, 2016

Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives
c/o Frost Building North, Room 458
4th Floor, 95 Grosvenor Street
Toronto, Ontario
M7A 1Z1

Fin.Adv.Pln@ontario.ca

Dear Expert Committee Members,

My name is Gordon Stockman.  I am the Vice President - Financial Planning for a Mississauga-based Fee for Advice Financial Planning firm, Efficient Wealth Management Inc.

First and foremost, I would like to thank you for your clear and broad recommendation for the application of a Statutory Best Interest Duty. 

I believe that if this is indeed applied to all individuals who provide Financial Product Sales and Advice and/or Financial Planning in Ontario, it would be a force for remarkable change in the industry. Consumers expect to receive financial advice from an individual who is acting in their best interest and your recommendation takes us near the edge of that reality. 

Applying a Statutory Best Interest Duty would make it clear that a legal duty of care has been established.  In a commercial environment, it would be expected that all companies, under whichever self regulatory body they are found, would be suitably concerned about the liability associated with failing this standard and would, in their own self-interest, provide rigorous supervision of adherence to this much higher standard.  Driven by commercial self interest, SBID could bring swift change in Advice delivery.

Framed within your other recommendations, consumers will gain confidence in the Financial Planning process, Financial Planners and the financial services industry as a whole.

I also must say, I was a bit surprised by the assertion that individuals or firms performing Financial Planning activities OUTSIDE the current regulatory framework should have their Financial Planning activities regulated by the proposed Financial Services Regulatory Authority.  Not because it is not a great idea – it is – but because there are so few individuals and companies that currently meet that description, I was surprised by the mention at all.  Truly independent financial planning has been singled out and its very existence highlighted.  Let’s hope that this is a sign of the growth to come in this purely Financial Planning service area.

However, as complete as your Draft Recommendations are, I remain concerned about an issue that is oft overlooked under the existing regulatory regime(s).  This concern comes from the practical limitations I have faced while delivering comprehensive client focused financial planning for more than 20 years.  In my particular case, as a CA, now CPA, I have always felt myself bound by a duty of care to my clients in whatever capacity I served them, even that of Mutual Fund salesperson.  Early in my career, I challenged the FPSC (CFP) exam and later the Chartered Investment Manager set of exams.  I found no answer in these slew of credentials obtained.  Recently, to somewhat relieve the issue, I resorted to becoming an Advising Representative for a Portfolio Manager and an Investment Adviser Representative in the State of New York.  Obviously an unusual approach, with a long path, and it will be attempted by the few not the many of financial planners. 

What is the issue?  Well with my depth of experience, extensive education and professional commitments, I am still unable to assist clients with the simple task of selecting from a menu of investments offered by their Group RRSP or Defined Contribution pension plan.

Let me just give you a quick illustration of the problem I believe needs addressing.  Twice in the preceding two weeks, I was asked to help two novice investors.  They both came to me because they are members of their organization’s Group RRSPs and/or Defined Contribution Pension plan and were seeking some help.  I steered the conversation first to savings, taxes, their current life, their future and included some education on the importance of these personal factors and sought to de-emphasize the importance of the individual securities in their life choices.  However, it was impossible to shake their fundamental need which was: “I have a list of choices for my RRSP and Pension and I do not know what to do”.

My firm CANNOT answer that question without violating security regulations that require registration to provide securities advice tailored to individuals.  I could refer them to a Mutual Fund representative or an Investment Advisor, but neither of them can collect a fee for the service, since assets are off book (not held by their registration sponsor).  The insurance agent could help maybe but no commission is available.  I could try a Portfolio Manager, but a retail client with only $30,000 is kind of at the opposite spectrum of their usual clientele, but maybe they will do me a favour.  You see the only person that can help them out is the Group representative, and they KNOW NOTHING about the client.  So, I assisted them for FREE because, even as a Portfolio Manager, it is unclear whether they meet the test of being a “client” in the context of the usual business of a Portfolio Manager.  FREE is not going to make this service widely offered.

Please include in your Other Recommendations, that OSC exemptions should be expanded to include the providing of advice on securities by FSRA regulated firms or individuals when the securities in question are in the custody or control of an OSC or SRO regulated firm and not connected to the advice provider.  A registered representative would still be required to execute any necessary trade.

Individuals with Discount Brokerage accounts, Group Retirement accounts and DC Pension plans need your support.  Government and corporations are all moving away from Defined Benefit Plans and towards Defined Contribution Plans in a regulatory environment not supportive of this sea change.   Please make this point on behalf of the many Ontarians that need help in taking responsibility for the quality of their futures.

And the need goes beyond the obvious example above.  Financial Planning without the ability to discuss investments is hard.  It is usually a perceived problem with their current investments or advisor that has brought them to our door.  The numbers that arrive prior to making their first investment are few and far between.  It will lead to better comprehensive financial planning without undermining the protection afforded consumers by the current registration processes.

Thank You.

Gordon Stockman
Vice President – Financial Planning
Efficient Wealth Management Inc.