Advocis offers B.C. advice on advisor incorporation

(May 14, 2004) With regulators in British Columbia considering a plan to allow advisors to incorporate, Advocis is offering suggestions as to how the program might work, including some stiff entry requirements.

The British Columbia Securities Commission (BCSC) is mulling over the creation of a new advisor registration category for “independent owner operators.” Details are expected to be announced after the province approves a new securities act, which was introduced in the B.C. legislature earlier this month.

In a letter to BCSC chair Doug Hyndman, Advocis says the new independent owner operators (IOO) would provide advice on financial, retirement and estate planning as well as risk management. They would offer a range of third-party products, such as mutual funds, term deposits and insurance products.

The IOO would be responsible for the advice and suitability of all product recommendations, Advocis says, but the product providers would handle the transaction responsibilities. Payments would be made directly to the product provider, with commission paid to the advisor. “This is very similar to what has taken place for decades in the life insurance industry,” says the letter, written by Beverly Brooks, vice-president of public affairs at Advocis.

“The current regulatory structure evolved out of a transaction-based world,” Brooks says. “The financial planning world is advice-based with the products being one of the tools available to reach specific goals. This structure will separate the supervision of transactions from the supervision of advice.”

Advocis also recommends setting high standards in the new registration category, suggesting that IOOs have a recognized professional designation — such as the CFP or CLU — at least five years experience as a securities registrant, and mandatory errors and omissions insurance coverage.

“If the requirements to act as an IOO are reasonably strict, an identifiable group of highly skilled advisors will emerge very quickly,” Advocis says. “Their advice and business skills will be a benefit to their clients and employees.”

What do you think of the BCSC’s possible inclusion of an IOO category? Will they go ahead with their program, and what would it mean to your industry? Share your thoughts with your peers in the Talvest Town Hall on Advisor.ca.

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