Setting the standard

According to IIROC’s most recent proposal regarding financial planning standards, member firms will soon be expected to check whether or not representatives who provide financial plans have completed a single course on financial planning from the CSI or have qualified for one of various financial planning designations.

A resulting fear is that, if approved, member firms will have their own de facto national standard of what constitutes financial planning – and it would sadly set the bar at an extremely low level. My friends, we can and must do better.

If giving financial advice to retail consumers is ever going to be seen as a bona fide profession, we need to set responsible standards for doing so. Allowing a planner to be officially designated after the completion of only one course is the equivalent of passing a high school biology course in order to become a practising physician. How could such a low standard possibly be in the public’s best interest?

To my mind, allowing someone to refer to themselves as a financial planner after completing a single course allows consumers to believe they are working with a bona fide professional when they are not. Can you imagine if a doctor, lawyer or accountant received their designation as a result of completing one measly course?

The Financial Planning Standards Council (FPSC) has done considerable work over the years to advance the notion that financial planning is a professional pursuit if it is accompanied by the ethics, education, examinations and experience that are part and parcel with the CFP mark. The IIROC standard is totally silent on at least two of those four elements.

Cary List, the head of the FPSC, says, “We think they [IIROC] really missed an opportunity to recognize the true value of professional certification. There are nationally and internationally accepted standards out there for what professional certification should look like. These standards require minimum levels of work experience, a standardized examination, continuing education and adherence to a code of conduct or ethics.”

List has also suggested that a single course (no matter how good it is) is an insufficient measure of competence. This takes on even greater importance given List’s belief that a fiduciary relationship exists between CFPs and their clients. My own understanding is that IIROC member firms are adamant in their view that no such relationship exists – whether the advisor is a CFP or not. If List is right, then we’re already in trouble, because there are already two classes of planners out there – CFPs who are bound by a fiduciary obligation and others who are not.

In short, List’s view is that a fi- duciary relationship exists whether IIROC proceeds with its financial planning standard or not and whether IIROC agrees with FPSC or not. Good luck in finding a retail consumer who can understand the nuances.

Industry veteran Jim Rogers has quipped that if some financial planners were charged with financial planning as a crime, they would be quickly released since there wouldn’t be enough evidence in their client files to support the charges. And don’t get me started on the (non) use of Letters of Engagement. However, passing one exam and then leading unsuspecting consumers to believe that a reasonable degree of comprehensiveness and professionalism has been demonstrated is an even greater affront.

The financial services industry remains in desperate need of true transformation to professional status. Having meaningful practice standards regarding financial planning services would clearly be a step in that direction. Simply saying (or implying) that something is so doesn’t make it so. Collectively, we need to either set the bar at a reasonably high level for professionalism or have the decency to admit that we’re not yet ready to set the bar at all. List’s view is that the IIROC standard, while better than nothing, is not nearly enough and many believe we should set the bar much higher. I agree. Anything less would be doing consumers a massive disservice.

John De Goey, CFP, is the vice president of Burgeonvest Bick Securities Limited (BBSL) and author of The Professional Financial Advisor II. The views expressed are not necessarily shared by BBSL. You can learn more about John at his Web site: www.johndegoey.com.