: Federation of Mutual Fund Dealers - Submission

September 18th 2015

VIA E-MAIL ONLY

Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives
c/o Frost Building North, Room 458
4th Floor, 95 Grosvenor Street
Toronto, On M7A 1Z1
Fin.Adv.Pln@ontario.ca

Dear Sirs and Mesdames:

The Federation of Mutual Fund Dealers (the “Federation”) has been, since 1996, Canada’s only dedicated voice of mutual fund dealers. We currently represent dealer firms with over $124 billion of assets under administration and 18 thousand licensed advisors that provide financial services to over 3.8 million Canadians and their families.

The Federation submitted comments last year in response to your previous consultation regarding the regulation of financial planners. For ease of reference we have included this letter below as Appendix A.

We appreciate the opportunity to comment on your current consultation and we will address each question in turn.

  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 (“FPSC”) in their Canadian Financial Planning Definitions, Standards & Competencies publication1 defines ‘financial planning’ as follows:

Financial planning is a disciplined, multi-step process of assessing an individual’s current financial and personal circumstances against his future desired state and developing strategies that help meet his personal goals, needs and priorities in a way that aims to optimize the allocation of his resources. Financial planning takes into account the interrelationships among relevant financial planning areas in formulating appropriate strategies. Financial planning areas include financial management, insurance and risk management, investment planning, retirement planning, tax planning, estate planning and legal aspects. Financial planning is an ongoing process involving regular monitoring of an individual’s progress toward meeting his personal goals, needs and priorities, a re-evaluation of financial strategies in place and recommended revisions, where necessary.

We believe that all financial planners are financial advisors, but not all financial advisors are financial planners, so yes, financial advice and financial planning are separate. The Ontario Securities Act defines ‘advisor’ as follows:

“adviser” means a person or company engaging in or holding himself, herself or itself out as engaging in the business of advising others as to the investing in or the buying or selling of securities; (“conseiller”)

This definition suggests that the sale of a product is linked to advice. A planner however need not sell a product and would therefore not necessarily be a licensed adviser.

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

Quite simply, no. However, we believe that in order to simplify the matter in the minds of the investing public, SROs could simply impose a holding out requirement. If a registrant wants to hold themselves out as a financial planner, they should be required to prove to their dealer that they have completed a certification process that has bestowed upon them the title of financial planner or that the certification allows them to use the term.

  1. 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 believe that existing regulation around conflicts and potential conflicts is adequate. Any non-adherence or inadequate supervision that may exist does not mean that we need to introduce a higher standard. It means that we have to find a better way to promote adherence and improve supervision.

  1. To what extent, if at all, should the activities of those who engage in financial planning and/or giving financial advice be further regulated?

We are not advocating further regulation except for the imposition of a holding out requirement. We are advocating a professional oversight model, one which would impose a proficiency standard on anyone, registrant or not, who holds themselves out as a ‘financial planner’. This professional oversight model would also have a disciplinary function to ensure proper conduct of those with the “financial planner” accreditation.

There would be no licensing or registration requirements and therefore no associated costs, but as we noted above, certification as a ‘financial planner’ would be required in order to use the title. The activities included would be those contained in the above definition of a ‘financial planner’. We do not believe that there should be any regulation of compensation, and the complaints and discipline function would be assumed by the professional body.

  1. What harm(s) and/or benefit(s) do consumers experience in the current environment?

We do believe that in the current environment it is difficult for consumers to be able to make the distinction between financial advice and financial planning. They are terms that the financial services industry itself grapples with. Confusion on the part of the consumer does not foster confidence in the capital markets. We are suggesting that a simple solution would make the most sense: regulate the holding out issue i.e. you may not use the title ‘financial planner’ unless you are certified as such and can provide evidence to the professional oversight body if you are not a registrant, and in addition to your dealer if you are a registrant.

  1. 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. The availability of a registry, one national registry, not provincial, would allow consumers to easily access this information, and a better informed consumer is a better consumer.

We believe that these simple solutions would be a cost effective and efficient way to clarify for industry participants and consumers the scope of functionality of financial planners, and to differentiate ‘financial planning’ from the sale of a product. Oversight by a professional body would negate the need for additional regulation and the inevitable costs associated with that. Rather than quote it here, we would also draw your attention to the FPSC document referred to above and their definitions of ‘financial planner’ and ‘financial plan’. These may provide further clarity regarding the matters discussed here.

We thank you again for the opportunity to provide comments on this important matter. Should you have any questions or wish to discuss this submission, do not hesitate to contact the undersigned.

Regards,

Federation of Mutual Fund Dealers

Sandra L. Kegie
Executive Director

 

1 http://www.slideshare.net/FPSC/fpsc-definitions-enwebdownloadedfromissuu