: Gordon Stockman - Submission

My name is Gordon Stockman. I am an Advice for a Fee Financial Planner and my submission
is my own and not that of my employer. I have decided it is best to tell you a story to make my
point. It is a story of the highlights of my journey as a financial planner. I understand that it will
be a public record and I accept that. I have chosen to only address a single question with a
passionate response, instead of all your questions with glossy opinions. I trust it will be
engaging enough to get you through to my final singular notion.

In 1995, I decided to become a financial planner. I flirted with returning to my roots as a
Chartered Accountant (CA 1983) delivering tax and business advice to professionals and small
businesses, but instead chose to be more forward looking and become a future orientated
planner not a preparer of past financials and tax returns. My business strategic long term
planning skills would be redirected to individuals hoping to get a sense of what their future
would bring.

My own business plan to deliver paid financial planning services was developed and it projected
I would soon be broke. The problem was in the client acquisition and revenues. In 1995, it was
near impossible to get a family or an individual to pay for a financial plan. Few knew what it was
and fewer still knew they needed it, but most important it was available everywhere for free,
courtesy of the mutual fund industry. Selling against free is remarkably hard. There was also
the matter of perfecting my new craft and without clients that would be difficult. So in January
1996, I joined a national mutual fund distributor. At that time the distributor was starting to roll
out the most extensive laptop based financial planning platform in the industry. They were
making it possible for all of their representatives to develop as skilled planners, they were
mandating the attainment of the CFP designation within 5 years of your appointment (CFP
1998) and they had customers. I would just have to get used to commissions.

As my skills grew it became ever more apparent that all financial planning results do not
necessarily lead to the purchase of that company's mutual fund. Unfortunately, the distributor
did not allow the preparation of financial plans for a fee. Your only source of revenue was to be
the sales and service of their funds. I spent most of my time not being paid for what I did do
(planning) and being paid for what I did not do (pushing mutual funds). Having trained as a
Chartered Accountant, I was bothered in every way by the lack of objectivity and independence,
real or perceived. Failing to remain objective and independent hampers the ability to provide a
truly honest assessment. Getting paid only if a sale was made rendered all planning and advice
suspect. If I put the client's interest solely before mine, sales would be challenging and they
were. An objective and independent model, that put the client's interest first was needed.

In 2003, my wife and two friends, with business advice from me, rolled out a new model, Flat
Fee for Service Financial Planning. Yes, it was still not time for a pure Advice for a Fee model
because of fixed or embedded fees. In addition to the usual FREE competition, it was evident
that if a client did choose to pay for independent planning, such advice could not result in amuch needed cost savings from their investment advisor. After receiving valuable, quality,
holistic advice, the clients would still pay fully at their chosen investment provider plus our fees.
We felt we needed to control the whole of the fee to be able to apportion the necessary and fair
amount between the planner and the investment advisor. We also found it necessary to
influence the implementation of any portfolio strategies to ensure they were plan consistent.
Thus Efficient Wealth Management Inc. (EWM) would do the financial planning and all
investment implementations would be Fee for Service through an exclusive referral
arrangement. Mutual funds came first with Index funds and F Class funds as the base and all
trailers and commissions of other products reduced the annual agreed to fee. In 2004, a Fee for Service Broker exclusive referral arrangement was arranged and ETF implementations began.
Again, all trailers and commissions of other products reduced the annual agreed to fee.

In 2005, I left mutual funds to join EWM, the company I designed. It was my role to provide
financial plans to all clients before referral for implementation. Also, I was for the first time in
over 9 years, not registered to buy and sell mutual funds. My objectivity, independence and
integrity were restored but my ability to be completely effective was not. Many clients followed
me. I updated many plans or initiated new ones. However, I was unable to discuss with any of
them, the mutual funds they owned. The same funds they acquired when I was their
representative. I have searched hard for a business term to describe this quandary, but the
best I came up with is "It's silly." Financial planning entails many things cashflow planning, tax
optimization, risk assessments for both capacity and tolerance, withdrawal strategies, use of
guaranteed instruments and asset allocations to support all. However, at the implementation
stage, savings need to become investments and their independent planner must step aside and
pass the baton to a regulated individual that cannot truly absorb all the subtleties of the whole
plan or the personalities of the participants. As a non-regulated individual our voice must be
silent with regard to the investment selection, even when our knowledge of both the individual
and the security is superior. In this environment, it is exceedingly difficult to influence selection
with advisors even though we are the embodiment of the planning process.

For the past 10 years, I remained un-regulated by IIROC, MFDA or FSCO and the OSC. It was
not that I did not want to be registered; it was I did not want to be registered to trade. OSC
requires registration of individuals providing advice on securities either direct to them or through
a SRO. However, ALL methods of registration result in the ability to trade whether at the behest
of the client or with discretion for the client. Any organization you joined was a "trading"
organization. I followed all OSC rules carefully though frustratingly. Advice on securities was
not proffered. Exclusive referral arrangements made it easier but being misunderstood by many
did not. Over the years, our communications with IIROC were always consistent. IIROC deems
financial planning to be a securities-related activity and thus requires that dealer members
supervise this activity. They believe that the financial planning performed by EWM ultimately led
to trades, thus supervision of EWM was desirable. At the last contact, IIROC asked that the
referral arrangement be strengthened and we complied. At no time have I felt that IIROC
members on the whole capable of offering informed supervision of this highly professional and
skilled function, which is not trading related. In 2010, we found it necessary to terminate our
referral arrangement with the MFDA regulated representative. The MFDA had earlier clarified
rules, that all amounts charged clients were for trading in mutual funds. Thus fees for Financial
Planning were not allowed and this relationship became untenable. At least MFDA was
apparently aware of their members` inability to properly supervise this professional function. In
2012, we consolidated all clients under a referral arrangement with a portfolio manager. In that
same year, we began seeing a marked increase in inquiries for Fee Only Planning.

I agree with IIAC that people seek advisors not for the primary reason of transaction execution,
but advice – including with respect to taxes, estates, retirement and risk management. This is
truly a move towards a much more holistic approach to advice and it is the business I am in.
However, almost all inquiries include some issue surrounding the person's specific investments.
Transaction execution should certainly remain the role of IIAC or MFDA members. Unregulated
parties should not be able to gather assets, take custody or trade securities in an account. The
members' requirement to judge suitability at time of trade is proper. However, a more holistic
approach would recognize that the assets within a plan are a key point of discussion between
clients and their financial planners even with no trade pending. Securities advice is often
necessary and desired from the planner and should be allowable when experience and
competence are present.

Professional Financial Planners need to be able to discuss securities with individuals. OSC's
requirement for registration of individuals providing advice on securities is proper but too
narrow. All methods of registration result in abilities to trade whether at the behest of the client
or with discretion for the client. The industry knows that advice is what is sought first but
registration is focused on trade execution and custody. A method to register individuals for the
provision of advice only would meet the public`s needs for seamless holistic advice. It is not
necessary, nor should it be desirable to have all Financial Planners registered to sell securities,
but they should be able to provide advice on them with the appropriate experience and
education. Custody and or control of assets are currently regulated and should remain so.
However, advice without custody or control should be regulated separately and differently. It is
a growing issue. In Ontario currently, members of Group RRSPs, Defined Contribution Pension
Plans and investors choosing Online Service Providers are unable to access, in practical ways,
customized investment assistance consistent with their own personal financial plans.

The Expert Committee is asked to consider that any resultant financial planning regulations
should consider the possibility of providing "security advice only", without trade registration,
when assets are held in a properly regulated account. Financial Planning services are
incomplete if we cannot provide specific comments, alternative solutions or second opinions
about the client's investments.

If not to be contained within the resulting financial planning regulations, the current OSC
registration process for Portfolio Managers could be lightened for registration of individuals
providing non-custodial advice, allowing delivery of comprehensive services that are Financial
Planning focused. In Ontario a CFP with a CIM and relevant experience would work. The
relevant experience standard should be advising clients, not discretionary experience as
demanded for Portfolio Managers.

Thank you.

Gordon Stockman, CPA, CA, CFP, CIM
Vice President – Financial Planning
Efficient Wealth Management Inc.