: Business Career College Corporation

9090 51 Ave NW
Edmonton AB  T6E 5X4

19 September 2015

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

SUBMISSION TO THE EXPERT COMMITTEE TO CONSIDER FINANCIAL ADVISORY AND FINANCIAL PLANNING POLICY ALTERNATIVES

Esteemed Committee Members;

Business Career College (Edmonton) Corporation is a for-profit financial services education firm. We, and our predecessor firms, have been in the business of educating financial advisors and financial planners since 1997. During that time, we have trained in excess of 30,000 participants in this industry. We intend to bring that experience to bear in our submission to this committee.

Prior to answering the specific questions posed by the panel, we would like to encourage those who can influence such matters to consider adding some financial advisors to the Panel. In our experience, it is customary to include practitioners in the decision-making process, and we have concerns that the Panel seems to comprise only those who are not active in the industry.

Our answers follow each of the 6 questions posed, below:

1. What activities are within the scope of financial planning? Is the provision of financial advice different from financial planning? If so, please explain the distinction.

The Financial Planning Standards Council and the Institut Québécois de planification financière have already defined financial planning in their document, A Matter of Trust. This document is available for public consumption at http://www.fpsc.ca/a-matter-of-trust . Page 13 of that document includes a concise definition of a financial plan, which is probably the most useful way to define financial planning.

In our opinion, financial planning is but one of a broader range of activities that take place under the umbrella of the provision of financial advice. Financial advice might include very narrow discussions around the terms and conditions of a credit card, or what type of insurance to purchase, or an estimate of probate (or estate administration) fees (or taxes), but it might also include a full financial planning engagement. 

While there are hundreds or thousands of activities that might comprise financial advice, and some of those activities might be included within financial planning, financial planning is just one activity in the range of financial advice.

2. Is the current regulatory scheme governing those who engage in financial planning and/or the giving of financial advice adequate?

No.

The current regulatory scheme leaves several areas to be desired. We believe some of the noticeable shortfalls include:

  1. Confusion around titles, business models, and holding out practices in general. We believe that the consumer is not well served when a financial advisor`s business card, advertising, website, and so forth do not clearly indicate the services offered by that advisor.
  2. Confusion around designations. There are dozens or even hundreds of designations and professional certifications available to those in the industry today. We believe that designations used by financial advisors must be overseen by an independent not-for-profit entity with a clearly defined code of ethics, and an examination process that is substantially independent from the rest of the process used to grant the designation. While we live in an increasingly complex world, we believe that there are perhaps a dozen valid post-nominals available in this industry today.
  3. Confusion around compensation models. While CRM2 has made some efforts to alleviate this, we are not convinced that it is clear. We believe that consumers would be better served if it were obvious and clear how advisors are compensated for all lines of business.

3. What legal standard(s) should govern conflicts of interest and potential conflicts of interest that may arise in financial planning and the giving of financial advice?

We are of the opinion that there is no benefit to a legislated fiduciary standard. We have not seen the evidence that this creates any appreciable benefit for consumers.

Rather, we believe that a suitability standard is the appropriate standard. This allows advisors the widest range of possible business models, and allows consumers choice in their selection of advisory models. Advisors who wish to adopt a fiduciary model can easily do so by holding themselves out as a fiduciary.

4. To what extent, if at all, should the activities of those who engage in financial planning and/or giving financial advice be further regulated? Please consider the following in your response:

  • Licensing and registration requirements;
  • Education, training and ethical responsibilities;
  • Titles and designations of individuals who engage in financial planning and/or the giving of financial advice;
  • Specific activities that should be included or excluded in a regulatory scheme;
  • Costs and other burdens of regulation;
  • Regulation of compensation; and
  • Complaints and discipline mechanisms.
  1. We believe that licensing and registration requirements should continue to be attached to the sale of products. We believe that, wherever possible, common standards between provinces should be implemented.
  2. We believe that, if a new organization does come into existence, that a Code of Ethics similar to that currently employed by Advocis would be most appropriate. Training responsibilities should be standardized, as the current set of training responsibilities creates a hodge podge of requirements for advisors. This increases compliance and regulatory burdens, which is an indirect cost that must be borne by consumers.
  3. We believe the application of a uniform set of titles and designations should be the first priority for this committee. Titles should have a clear indication as to what the titleholder will do for clients. Some possible examples include:
    • Financial Planner: The advisor engages in full financial planning engagements, or limited engagements where made clear to the client. All clients receive a written letter of engagement. The advisor is responsible to a financial planning organization, such as the Financial Planning Standards Council.
    • Insurance Agent: The advisor’s primary role is the sale of insurance products. The advisor holds one or more licenses. The advisor may be responsible to an Insurance Council or similar entity.
    • Mutual Funds Representative: The advisor’s primary role is the sale of mutual funds and similar products. The advisor is responsible to the MFDA.
    • Investment Advisor: The advisor’s primary role is the sale of securities. The advisor is responsible to IIROC.
    • Credit Agent: The advisor’s primary role is the delivery of credit products, including loans and mortgages.
    • Exempt Market Representative: The advisor’s primary role is the delivery of exempt market securities. The advisor belongs to one of the national exempt market associations, either PCMA or NEMA.
  4. All activities, including activities in the banking world, should be encompassed in some form. This would include deposit brokerage; credit cards; consumer loans; auto loans; and payday loans, as some examples.
  5. It is unrealistic to expect that there will be no added costs. However, it seems that this regulator is likely to take on some functions that are currently handled by other regulators. As such, a key to the acceptance and success of this regulator is early buy-in and coordination with other regulators. If other regulators are not willing to release some of their current responsibilities, then why pursue this activity? So, for those who are already subject to a regulatory regime, this new structure should represent a transfer of responsibility, rather than a new layer of responsibility. On the other hand, for those who do not currently fall under a regulatory regime, this structure will add a layer of regulation and costs that do not currently exist.
  6. We are unsure what is meant by regulation of compensation. Would there be some restriction placed on compensation? We have previously commented at 2c, above, on compensation. We do believe that full and transparent disclosure of compensation models is important across all financial advisory.
  7. It is our belief that, for those who hold existing licenses, there are generally complaint mechanisms in place. Attempts at the federal level (eg. FCAC) to create a catch-all complaints handling mechanism have been lukewarm at best.  

5. What harm(s) and/or benefit(s) do consumers experience in the current environment? Please provide specific evidence to support your views where available.

The benefits of the current system primarily relate to choice. Consumers have a wide range of different models to choose from when obtaining financial services and advice. We believe that choice is key, as consumers don’t all fit into one neat box, and should not be treated as if they do.

The weakness of the current system is the confusion that consumers might be subject to. A consumer who deals with a certain type of advisor, for example, might never be exposed to the idea that tax efficiency or estate planning options are not being explored. In an ideal world, consumers would be free to choose an advisor who will not explore tax efficiency or estate planning options, but will be aware that those options are not being explored.

We are aware that there are examples of fraud and theft in the current models, but we believe that those examples almost exclusively can be traced back to human behaviour, rather than systematic failures.

6. Should consumers have access to a central registry of information regarding individuals and entities that engage in financial planning and the giving of financial advice including their complaint or discipline history?

Yes.

Respectfully Yours,

//original signed//

Jason R. Watt CD CLU
Director
Business Career College Corp