: Prosper Canada - Submission

Submission to
Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives

Presentation by Elizabeth Mulholland, CEO
May 3, 2016

Thank you very much for the opportunity to comment on the Expert panel’s proposed recommendations for the regulation of financial planning in Ontario.

Prosper Canada is a national charity dedicated to expanding economic opportunity for Canadians living in poverty through policy and program innovation.

As Canada’s leading national champion of financial empowerment, we work with government, business and community partners to develop and promote financial policies, programs and resources that transform lives and foster the prosperity of all Canadians. We help service systems and organizations in all sectors to build proven financial empowerment approaches into their businesses in ways that:

  • Are sustainable
  • Help them achieve their goals
  • Tangibly increase the financial well-being of low-income people they serve.

Our current focus is on developing and promoting financial empowerment interventions that have been proven to measurably improve the financial wellbeing of people living in poverty.

These interventions include free financial coaching and counselling -- services that typically involve helping people to assess the overall state of their finances, to set realistic financial goals and to develop and follow an action plan to achieve them. This may include helping them to resolve urgent financial issues, prepare a household budget, access basic banking, tax file and access government benefits to boost their income, manage and reduce debt, build their credit history and score, and access public savings supports (e.g. RESP and RDSP and related grants and incentives).

When delivered by properly trained personnel in conjunction with other community supports, these interventions have been shown to increase people’s incomes and improve their credit scores and savings and debt levels. When integrated with other municipal and community services, they have also been shown to improve employability, employment stability, earnings, housing stability and mental health.1

These services are relatively new in Canada, with the exception of some credit counselling agencies that offer clients more comprehensive financial counselling. These interventions have been implemented and rigorously evaluated at scale, however, in numerous U.S. cities and over 40 American cities have applied for technical assistance to establish free financial counselling centres in their low and modest income neighbourhoods.2

In Canada, we are currently piloting two models of service - one delivered by professional, accredited financial advisors who are trained to work with low-income people and provide their services on a volunteer basis through City of Toronto employment centres.3 The other model consists of training community social service providers to provide financial coaching and offering their services free of charge through community based nonprofit organizations.4 The Ontario government is also funding a third model which offers one-on-one financial problem solving and, for those clients who are ready and interested, some limited financial coaching.5

All of these services are free.

All are delivered by people specifically trained to work with low-income people and their finances, building on best practice from rigorously evaluated programs in the US and Canada.

All activities are captured in client management information systems in real time, monitored for quality, and evaluated.

No investment products are ever sold, nor is investment advice provided.

Clients typically have few if any dollars to invest and those that do wish to participate in publicly supported savings programs (TFSAs, RESPs, RDSPs), are referred to banks or credit unions to receive appropriate financial advice. Financial coaches/counsellors do not advise on investment options.

We see tremendous potential for these public services to assist tens of thousands of low income Canadians to go from financial crisis to financial stability and ultimately security, but only if this service is supported and enabled to grow and develop as it has in the United States, and Australia and the United Kingdom. None of these jurisdictions has seen the need to regulate these services as part of the financial planning industry.

The federal and Ontario governments support the expansion of these services and have invested $5.3 million6 and $5 million7 respectively to expand access to financial coaching and other financial empowerment supports across Ontario and Canada.

The regulatory changes you are proposing, however, would make this impossible in Ontario.

The training for accredited financial planners is long, expensive and largely irrelevant to the needs of the low-income Canadians we are serving. The financial context of people with low incomes is very different from that of people with more income and advice for middle-income people is often irrelevant, unachievable, or even detrimental for people with low income.8,9

If the government were to impose accreditation requirements for professional, paid financial planners on community financial coaches and counsellors, it would effectively end any possibility of enlisting community organizations and service providers in our efforts to scale this much needed service.

No community service provider would participate in a lengthy training program that was not tailored to the needs of their clients, nor would they be able to afford it in most cases. All current community financial coaches and counsellors receive formal training and are closely monitored and we look forward to developing an appropriate accreditation system, once we have sufficiently developed and tested our training and established the partnerships necessary to support a national accreditation process.10

We urge you, therefore, not to promote the wholesale regulation of financial planning as an activity, as we do not think this is a desirable, justifiable or feasible approach.

Clients of community financial coaching/counselling have everything to gain and nothing to lose from participating in the services we are developing.

Given the absence of risk and the proven benefits, we trust you will take the steps necessary to ensure that these vital services are not inadvertently caught up in your efforts to address an important but unrelated issue with respect to the regulation of paid, professional financial planners or those who purport to offer this service.

We believe you should be regulating those who hold themselves out to offer this service, and not the activity of financial planning itself, as this will largely be unenforceable and will lead to negative unintended consequences, some of which I've just outlined. As critical as it is to ensure that middle and upper income Ontarians receive high quality, trustworthy financial advice, it is equally critical that Ontarians with low incomes have access to the same. At present they have virtually no access to relevant, high quality advice from people with the experience and training to help them address their financial challenges. We are attempting to build these services but will not succeed if your current recommendations are enacted. Low income Ontarians will once again be left out – the very people who most need effective financial counselling support.

If the panel does persist in recommending regulation of financial planning activity, then I urge you to also recommend the exemption of persons who offer financial counselling or coaching as part of a community service that is free to low-income and financially vulnerable community members and does not involve the provision of investment advice or the sale of investment products.

Thank you very much.

1 See for example:

  • Prosper Canada (2013). Financial Empowerment Improving financial outcomes for low-income households. http://www.prospercanada.org/getattachment/77fecc22-dff1-4a22-9d90-1f6746c9436b/Financial-Empowerment-Improving-Financial-Outcomes.aspx
  • New York City Office of Financial Empowerment reports, “Municipal Financial Empowerment: A Supervitamin for Public Programs,” http://www.nyc.gov/html/dca/downloads/pdf/SupervitaminReportSeries.pdf
  • Nicola Brackertz, “The Impact of Financial Counselling on Alleviating Financial Stress in Low Income Households: A National Australian Empirical Study”, Social Policy and Society, Vol. 13, Issue 03, Jul 2014, pp. 389-407. http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=9275529
  • Neighborworks America (2013). Scaling Financial Coaching: Critical Lessons and Effective Practices http://www.neighborworks.org/researchtracking.aspx?id=15444&nid=3e8a45a8-9f7b-489c-8f09-57cc2c15ec61
  • Haidee Cabusora, Karina Ron, Alexandra Hernandez and Josh Blankenbeckler (2015) A Random Control Trial of Financial Coaching. http://thefinancialclinic.org/wp-content/uploads/2015/10/Clinic_and_Branches_Practitioner_Summary.pdf

2 Through the national Cities for Financial Empowerment Fund: www.cfefund.org

3 MPower Money Coaching Program: https://www.thestar.com/business/personal_finance/2015/07/02/coaching-poor-to-build-financial-safety-net-roseman.html

4 Capital One Financial Coaching Pilot Program: http://finance.yahoo.com/news/capital-one-canada-prosper-canada-124500640.html

5 Financial Empowerment and Problem Solving Program: http://www.prospercanada.org/Our-Work/Centre-for-Financial-Literacy/Financial-Coaching.aspx#feps

6 Financial Empowerment Champions Project: http://news.gc.ca/web/article-en.do?nid=1047419

7 Government of Ontario 2016 Budget: http://www.fin.gov.on.ca/en/budget/ontariobudgets/2016/ch1e.html and http://www.prospercanada.org/News-Media/News/Ontario-$5-million-financial-empowerment-investmen.aspx

8 See John Stapleton (2014) .Welcome to the Mainstream. http://www.houselink.on.ca/wp-content/uploads/Welcome-to-the-Financial-Mainstream.pdf

9 See also John Stapleton’s work on retirement planning for people with low incomes http://openpolicyontario.com/retiring-on-a-low-income-3/

10 The Calgary Financial Empowerment Collaborative is currently developing an accredited training program in partnership with Bow Valley College for local financial coaches. The credit counselling sector also has a national accreditation process for financial counsellors that could potentially be built on for this purpose. We are also exploring models from the United States.