The situation around the use of the financial planner title has proven to be an enormous step backward, writes Jason Pereira of Woodgate Financial.ekazansk/iStockPhoto / Getty Images
Sign up for the Globe Advisor weekly newsletter for professional financial advisors on our sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know. For more from Globe Advisor, visit our homepage.
A recently enacted law from Ontario’s provincial government to ensure that Canadians receive qualified financial advice from professionals using the title of “financial advisor” or “financial planner” has fallen well short of its purpose.
Specifically, the Financial Services Regulatory Authority of Ontario (FSRA), the regulatory body that Ontario’s government tasked with implementing the Financial Professionals Title Protection Rule, has proven with its latest approval of a financial planner designation that consumer protection is not a priority of this framework. That designation, the chartered financial planner, is easily confused with the internationally recognized certified financial planner (CFP).
The rule, which came into effect in 2022, was flawed from the beginning. For starters, it’s effectively toothless in that it grants no enforcement powers other than the ability for FSRA to issue letters saying, “stop it” and censuring the violators on its website.
But its implementation got worse with the inclusion of the financial advisor title. While financial planning has an International Standards Organization (ISO) code standardizing what is involved in financial planning, an international standards body, regional credentialing bodies and a globally recognized credential in the CFP, the term financial advisor has no such support structure. It constitutes nothing more than two words put together to describe a catch-all for any financial advice, from retirement to insurance to general spending. It’s hard to protect something that hasn’t even been defined.
After various twists and turns, the result is that everyone in Ontario licensed to sell mutual funds or securities can now call themselves a financial advisor – like they did before. This rubber stamp fails to acknowledge the difference between product sales and advice.
The situation around the use of the financial planner title has also proven to be an enormous step backward in both the professionalization of the industry and consumer protection. This implementation could’ve been the most straightforward ever: utilize the ISO standard as a benchmark and ensure a high level of proficiency across the areas it covers before deeming a designation worthy of the financial planner title. Only FP Canada’s credentials – the CFP and the qualified associate financial planner – would have met this standard.
Instead, FSRA created a dog’s breakfast by accepting three other designations and lowering the bar for entry. Worse yet, there are credentialing bodies that have no demonstrable history of enforcement, a baseline requirement under the rule. One would be hard pressed to understand how this constitutes consumer protection.
However, FSRA’s recent approval of the Canadian Institute of Financial Planning’s (CIFP) chartered financial planner designation has to be the worst twist. The CIFP decided to resurrect the designation, which had not been issued in more than 20 years, and FSRA accepted it into the framework.
That’s right, the regulator officially recognizes two different CFP designations. As a condition of approval, the chartered financial planner designation is not allowed to use the CFP acronym, but the similarity of the names is bound to create confusion. And the CIFP’s lack of enforcement capabilities makes it difficult to see how use of the acronym will be policed. The CIFP could have named this designation anything else. It didn’t.
Let’s imagine we permitted this in other fields. Is the person filing your taxes with CPA after their name a chartered professional accountant or a clerical product accountant? Is your medical professional with MD after their name a medical doctor or a medical director?
And why stop at two CFPs? Are other credentialing bodies now going to issue their own designation with the same three letters? Cash and financial planner or chicken fried planner, anyone?
It’s anyone’s guess how FSRA thinks this move will protect consumers or the integrity of this framework.
There’s a long history of industry association conflict that led to this situation, and the CIFP no doubt feels justified in its actions. But the result is a massive step backward. After all, who will look to obtain this “other” CFP when the global standard exists – unless they’re unwilling to meet the higher standard?
Industry organizations and consumer protection advocates have already issued joint statements calling on FSRA to reverse its approval and, failing that, calling for the province to step in. But that’s not enough. Anyone who considers themselves a professional in this industry should make their voice heard. Failure to do so is to fail our profession and the public we serve.
Jason Pereira is a senior partner and financial planner at Woodgate Financial Inc. in Toronto.
For more from Globe Advisor, visit our homepage.