Advocis brings advisor perspective to committee hearings

(August 20, 2004) Any new national securities regulatory structure must be acceptable to the advisor community, says the president of Advocis. Steve Howard says he’s concerned that the voice of advisors is not being heard in the current debate over securities reform.

Howard appeared on Thursday afternoon before Ontario’s standing committee on finance and economic affairs, which is studying Purdy Crawford’s five-year review of the province’s securities laws.

In his presentation, Howard said he supported the Crawford committee’s call for a national regulator, but added that the models proposed so far “perpetuate conflicts of interest within the current regulatory framework.”

Under the Advocis proposal, securities regulators would continue to regulate the distribution of financial products while financial advice would be regulated by an independent professional body, which would set standards for advisors, such as a requirement to hold a professional designation, adhere to codes of conduct and practice standards, acquire continuing education credits and maintain errors and omissions insurance coverage.

“In essence, the professional body would set and police guidelines respecting the ability of anyone to hold him or herself out as a financial advisor,” Howard told the committee, which consists of about a dozen Ontario members of parliament from three political parties. “This would establish accountability to the consumer, one that does not exist today, directly between the advice and the recipient of that advice.”

“I’m not here to comment on the best model for national regulation,” he explained. “I’m here to say that the element of advice has been overlooked and should not be swept into whatever that model might be.”

Howard says he’s worried that if politicians agree on a new national regulatory structure without taking advice-related issues into account, those concerns might never be dealt with. “We’ve seen that in many other instances. So what’s critical to us is that before they start down this road, they consider this fundamental element.”

But it’s unclear whether the committee will be able to include the Advocis proposal in its final report. The committee is charged with studying recommendations that were in the Crawford report, which gave short shrift to advice-related issues.

“I was disappointed but not surprised that it [the advice issue] was not in the Crawford report,” Howard said in an interview following his presentation. “All of this exploration is happening within the current regulatory regime. And what we have recognized is that the problem lies within that regime.”

Still, Howard says he’s pleased that Advocis at least had the opportunity to present its views in a public forum. “We were the only organization that brought this perspective to this committee and it’s an important perspective for them to hear,” Howard said.

Indeed, no other advisor associations have appeared before the standing committee, and the only individual advisor who presented this week was Larry Elford, a now-retired broker based in Alberta.

In his presentation notes, Elford pointed out that it’s difficult for consumers to know if they are dealing with a licensed and registered financial professional, since there are no clear standards in this area.

“How do you tell if you are dealing with a trusted advisor, versus a salesperson in advisor’s clothing?” Elford asked. “This is yet another example of how the industry ignores rules intended to inform or to protect the public, if it is in the self-interest of the industry,” he added.

Meanwhile, Howard says he will continue promoting the Advocis proposal in other jurisdictions. “We’ve had a great deal of receptivity on this. I hope our attendance [at the committee hearings] was effective but other bodies around the country understand what we are talking about and are beginning to pay attention.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com