Too many cooks in Canada

Canada has no cohesive system of regulation and suffers from an identity crisis that is probably the result of too many cooks stirring the industry broth.

There is a plethora of industry bodies including the Financial Planning Standards Council of Canada (FPSCC) that confers and regulates the use of the Certified Financial Planner (CFP) designation, the Mutual Fund Dealers Association that licenses and regulates independent planners and bank advisers, the Investment Dealers Association that licenses and regulates advisers who work for groups that fall under its jurisdiction and various provincial insurance councils across the country that regulate and license those who sell insurance products within a financial planning practice.

Each province also has a securities commission and a financial services commission.

There are at least four different organisations delivering educational programs that lead to at least three other designations outside the CFP — Registered Financial Planner awarded by the Institute of Advanced Financial Planners; Chartered Life Underwriter given by the Canadian Association of Insurance and Financial Advisors (CAIFA); and Personal Financial Planner granted by the Institute of Canadian Bankers upon completion of the institute’s personal financial planning program and designation qualification process.

However, the industry has recognised the need for consolidation. Trevor Orme, a CFP with National Bank Financial in British Colombia, says that while the FPSCC is spearheading a movement to try to standardise the regulation and licensing of financial planners, squabbling has already begun amongst the interested parties.

“Already there is a breakaway group that does not agree with the direction that the FPSCC is heading,” he says.

Better news is that two professional associations — CAIFA and the Canadian Association of Financial Planners — recently merged to form Advocis, an association of professional financial advisers with thousands of members from 50 chapters across the country.

Confused? So too are Canadian consumers, who, according to several Canadian advisers, have no real understanding of what the designations mean — not even CFP.

“Several years ago there was a general consensus that the CFP designation was ‘the one’,” Orme says. “And most educational bodies formatted their programs to achieve the educational requirements that the FPSCC had laid out. That was a big issue — [but] it still lacks much of a voice, or recognition by the public.”

Some advisers have dual licences in order to work across a range of products but many, according to CFP Mike Ellis from Ontario, have none at all.

Although he expects the situation to change in the next couple of years, at the moment, he says that while no-one can proclaim to be, for example, a CFP if they are not, anyone can hang out a shingle and call themselves a financial planner — all they need “is a pulse”.

And while in Australia we have had to deal with the fallout following the ACA/ASICreport, in Canada, the collapse of corporate giants like Enron and Worldcom have had what adviser Mario da Silva from Ontario describes as a “trickle-down” effect on public confidence.

“Some consumers feel they can’t trust anyone,” he says.

Ellis says that the public has been trained to expect free advice, so it is fee resistant. Add that to three consecutive years of down markets and some people, says da Silva, have “given up on long-term planning”.

It’s a situation which is probably not helped by the fact that if you work as an adviser in Canada, even if you are a CFP, chances are you sell mostly mutual funds and insurance products on a commission basis. Ellis estimates that around 80 per cent of CFPs in Canada operate this way.

“Many planners work for loosely regulated planning companies, licensed as “mutual fund dealers” and often work out of their own homes, giving very poor investment and planning advice,” he says.

“They push products for commissions and give free planning as a sales gimmick.”

A minority of advisers, around 20 per cent, are what Ellis describes as “full” service financial advisers.

“They typically work for large brokerage firms selling everything and charging fees and/or commissions.”

Orme, who worked on a pilot program that created the financial planning group of a large Canadian bank, says: “We saw very few fee-for-service planners anywhere in the country.”