Character not a licence make an advisor

What does an advisor really need to do business these days?

Canadian advisors have the luxury of choosing the route that places them across the table from clients. They can opt for a full securities registration through the Investments Industry Regulatory Organization of Canada, take a mutual funds licence from the Mutual Fund Dealers Association, or register with a provincial securities commission and provide a wide variety of insurance solutions. Then, there are those who’ve chosen to act as planners or ICPMs and effectively sidestep product placement.

There’s no consensus about which model should dominate. Privately, a lot of advisors express belief the MFDA will one day be brought into IIROC’s fold—although none will say it on the record or handicap the timeline. One reason cited for this belief is the growing popularity of ETFs, which remain the purview of those with full securities licences (although creation of innovative mutual fund products that wrap ETFs may change that soon).

They further point to gathering momentum in Ottawa for creation of a single national securities regulator as a sign that self-regulatory consolidation is on the menu. Those who don’t believe a regulator will willingly give up its franchise need only look at the merger of the New York Stock Exchange and National Association of Securities Dealers broker oversight into FINRA a few years ago after both spent decades of saying it would never happen.

In one respect, the U.S. has a tiered licensing structure similar to Canada’s. Those holding a Series 6 are able to sell mutual funds, annuities, and other securities products wrapped inside insurance. Those trading individual stocks and bonds go for the Series 7.

And yes, that means people selling the U.S. equivalent of segregated funds are securities-licensed.

The difference is that those U.S. brokers aren’t permitted to dispense advice. That’s covered by a separate registration. And recently, there’s been a growing trend among registered investment advisors (RIAs) in the U.S. to remain on the planning side and stay out of brokerage.

Like fee planners in Canada, they’re capturing the attention, and business, of the high-net- worth. But the vast majority of U.S. brokers continue to also register as IAs because it enhances their offering to clients.

And that, of course, is the crux of the matter. If a certain degree of licensing will help an advisor better serve a client, he or she should go out and sign up. Sit through the classes. Take the tests. Hang the parchment on the wall.

If it won’t make a difference, then don’t go through the hassle. The one factor to keep in mind is change. Will you need that licence down the road? Is your client base changing? If it is, you must change with it or be left behind.

What really defines a good advisor is a sense of fiduciary duty, and the ability to get to the heart of the client’s aspirations and needs. If you can do that, then you already know which licence you need to serve them. And if you can’t, then it makes no difference which certificate hangs on your wall.