Eliminating “buyer beware” from planning services

Every day, millions of Canadians seek service from health care practitioners. Stringent regulation and professional oversight of health professions help protect Canadians from receiving care from unethical or poorly qualified practitioners. Poor financial care is as detrimental to a person’s health and well-being as “bad” health care. Yet, individuals holding themselves out to the Canadian public as financial planners are not required to meet any consistent set of professional standards or be professionally accountable for their actions.

Many Canadians presume that, like health professions, financial planning is regulated. They are surprised to learn that this is in fact a “caveat emptor” industry in which their “financial planner” is not necessarily required to possess sufficient knowledge or skill to appropriately help their clients, nor are they necessarily required to always put their clients’ interests ahead of their own.

This situation is untenable. It does not adequately serve nor protect the Canadian public.

The goal: a common set of national standards

Formally announced in June 2011, the Coalition for Professional Standards for Financial Planners (The Coalition) has come together to work towards establishing a common set of national standards required for individuals who hold themselves out to be financial planners.

The Coalition is comprised of the Canadian Institute of Financial Planners (CIFP), The Financial Advisors Association of Canada (Advocis), Financial Planning Standards Council (FPSC), the Institute of Advanced Financial Planners (IAFP), and the l’Institut québécois de planification financière (IQPF). These organizations are involved in either certifying financial planners, developing financial planning standards or delivering financial planning education; each organization also has a public interest mandate.

Addressing oversight, ethics, and competence

The Coalition’s first act was to establish and endorse a Statement of Principles that provides a framework for our activities moving forward. The Principles address minimum standards related to professional oversight; they also address the obligations that a financial planner should owe to his clients, regardless of the engagement or nature of the relationship.

The Statement of Principles is founded on two key premises:

• Financial planning is fundamentally important to the well-being of Canadians. Financial planners provide important expertise and skill to Canadians; as a result, Canadians rely on financial planners and their services.
• There is insufficient consumer protection in Canada regarding who can call themselves financial planners. Current regulation is piece-meal and product-sales based; existing credentials and standards for advice and professional service are voluntary. There is no central access point for consumers, and Canadians are at the mercy of those who misrepresent themselves and their abilities.

The complete text of the Statement of Principles is available on the Coalition website: www.coalitionforprofessionalstandards.ca

The framework built into the Statement of Principles is based on three fundamental concepts:

Accountability: If an individual claims the financial planning space, he should be considered a professional; as such, he must be held accountable to professional oversight by a body whose principal purpose is to serve the public interest

Competence and Professionalism: An individual wishing to call herself a financial planner must demonstrate sufficient education and experience; pass an appropriately rigorous examination; and subscribe to an ethical code, rules of conduct, standards and regulations of a professional body. She must also undertake ongoing continuous professional development.

“Walk the Talk”: A financial planning professional must act with skill, care, diligence and good judgment. The clients’ interest always comes first. He must disclose all material facts and avoid conflicts of interest where possible; he must also always disclose and manage unavoidable conflicts in the client’s favour.

Articulating the problem is a key to success

Previous attempts to regulate financial planning have not succeeded, in part because there was not a well-articulated statement of why action is needed, as well as the absence of clear foundational principles setting out the framework for a solution.

Our next step will be to solicit agreement that the status quo is not acceptable. We will continue to reach out and seek support for the Statement of Principles from industry associations, regulators and key financial services organizations.

We’re encouraged by the conversations we’ve had with industry players and regulators in the early days of the Coalition’s activities and since the formal announcement in June. Now we ask for a formal show of support for these Principles so that we may continue to move forward.

It can be done

The formation and actions of Coalition itself show that organizations that serve varying interests in the industry can come together to define a problem and commit to finding a solution while keeping the best interests of Canadians firmly affixed in the fore.

The Coalition seeks to ensure that all Canadians are better served by a professional regulatory framework that demands high standards of financial planners, that treats them like professionals and that holds individuals who do not live up to these expectations accountable for their actions.

Learn more about the Coalition at www.coalitionforprofessionalstandards.ca