Finally – Financial Planning and Advice in the Client’s Best Interest!

The new rules for those who want to call themselves financial planners or financial advisors in Ontario are finally coming into focus after a long drawn-out process that we’ve written about before.

Earlier this month, the first two official credentialing bodies have been approved by the Financial Services Regulatory Authority of Ontario (FSRA):  FP Canada and Advocis.  After a transition period, only individuals who hold approved credentials will be allowed to call themselves ‘financial planners’ or ’financial advisors’ in Ontario.

This is great news that will benefit Ontarians who need and deserve high-quality financial advice from licensed professionals.  As you’ll see below, the old system of patchwork regulation is full of confusing titles, unqualified individuals, and salespeople who don’t have to consider the best interest of their client.

Advisor vs Adviser?

Historically, due to a technicality in securities regulations, only ‘advisers’ spelled with an ‘e’ had to consider the best interests of their clients, whereas ‘advisors’ spelled with an ‘o’ were largely salespeople pushing products.  Thank goodness – this silliness of different rules for advisors vs advisers will now end.

The Financial Professionals Title Protection Act, plus FSRA’s Rules and Guidance, will stop the practice of confusing or misleading titles which were sometimes used to dupe an unsuspecting public into trusting a glorified salesperson.

This new regime covers two categories of professionals: financial advisors and financial planners.  Financial advisors tend to focus on managing their client’s investments and/or insurance, whereas financial planners tend to provide a more integrated financial plan with short and long-term goals for debt management, savings, retirement planning, taxes, insurance and investments.

FSRA is definitely not messing around here – no more swapping an ‘e’ for an ‘o’ – they’ve specified a whole laundry list of titles and variations that could be confused with the official ‘financial planner’ and ‘financial advisor’ titles:

  • any variation in spelling or abbreviation of Financial Planner (e.g. FP) 
  • any variation of spelling or abbreviation of Financial Advisor (e.g. Financial Adviser, FA)
  • ________ Financial Planner/Advisor/Adviser (e.g. Senior Financial Planner, Qualified Financial Advisor, etc.)
  • Financial ________ Planner/Advisor/Adviser (e.g. Financial Wealth Planner, Financial Investments Advisor, etc.)
  • Financial Planner/Advisor/Adviser _________ (e.g. Financial Planner Investments)
  • Financial Planning/Advising _________ (Coach, Consultant, Counsellor, Guru, Manager, etc.)
  • any variation of the above titles in another language

FSRA also notes that this list is subject to change if people find other creative ways to skirt the rules.

After the transition period – 4 years for financial planners and 2 years for financial advisors – only those individuals with approved credentials will be allowed to use any of the variations above.  The longer transition period applies to financial planners as it can take longer to satisfy the education and other steps to qualify for this more demanding credential.

Quality Control

By approving and supervising various credentialing bodies and credentials, FSRA aims to instill confidence in consumers – particularly that they are dealing with “an individual who has a minimum standard of education, is being actively supervised by an approved credentialing body and is subject to a complaints and discipline process.”

In other words, the financial planner or advisor will be a true professional.  This will also include a minimum continuing education requirement, so that advisors keep their skills up to date.

FSRA is in the process of establishing a central online registry so that consumers will be able to look up financial advisors to confirm that they hold an approved credential, remain in good standing, and will include any disciplinary notices.

Client’s Best Interest

When first reviewing these finalized rules, I held my breath as I searched for the requirement that a financial advisor must act in their client’s best interest. 

To me, this is the most important thing.  Consumers of financial products, often because of their very low levels of financial literacy, would historically presume that the financial advice that they were receiving must be in their best interest.  Unfortunately, this was not always true.

Hooray!  The powers that be have decided that consumers need all the protection that they can get and will require that people who want to call themselves financial planners or financial advisors put their client’s best interest ahead of their own.  I applaud the government and regulator for taking this very important step.

Get the Help You Need

So, if you need financial advice related to investments and/or retirement planning, it has gotten a lot easier to find someone to help you.  With a few clicks you can start generating lists of qualified credential holders near you.  I note that the FP Canada search tool even let’s you search by area of specialty and provides important information such as minimum assets and payment model.

Now, let’s hope that more provinces follow Ontario’s lead…

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