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ONTARIO MINISTRY OF FINANCE
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ROUNDTABLE SESSION I
RE:
INVESTIGATING THE MERITS OF MORE TAILORED REGULATION
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OF FINANCIAL PLANNERS IN ONTARIO
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DATE:
Friday, January 10, 2014
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HELD AT:
Ontario Ministry of Finance
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900 Bay Street, Macdonald Block,
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Humber Room
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Toronto, Ontario
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BEFORE:
Christian Bode
Moderator
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PARTICIPANTS:
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Alan Goldhar
Investor Advisory Panel
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Cary List
Financial Planning Standards Council
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Daniel Ongaro
Financial Planning Standards Council
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Debra Bell
Canadian Securities Institute
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Ed Skwarek
Financial Advisors Association of
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Canada
Guy Armstrong
Investor Economics
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Hasan Khan
MD Management Limited
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Hugh Murphy
Credo Consulting Inc.
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Joe Rosati
Independent Mortgage Brokers
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Association of Ontario
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John J. De Goey
Burgeonvest Bick Securities Limited
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John Lawford
Public Interest Advocacy Centre
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John Novachis
Investment Planning Counsel
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Jon Cockerline
The Investment Funds Institute of
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Canada
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Jonathan Bishop
Public Interest Advocacy Centre
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Kevin Bandelow
Sun Life Assurance Company of
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Canada
Leanne Winter
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Sun Life Assurance Company of
Canada
Lee Bennett
TD Wealth Financial Planning
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PARTICIPANTS:
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Lindsay Speed
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The Canadian Foundation for
Advancement of Investor Rights
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Marshall Beyer
Canadian Securities Institute
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Maye Mouftah
Ontario Securities Commission
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Nancy Allen
Independent Financial Brokers of
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Canada
Peter Goldthorpe
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Association Inc.
Peter McLachlin
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Canadian Life and Health Insurance
Financial Advisors Association of
Canada
Stacey Shein
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Mutual Fund Dealers Association
of Canada
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Stephen Rotstein
Financial Planning Standards Council
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Susan Allemang
Independant Financial Brokers of
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Canada
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Tim Pryor
Mackenzie Financial Corporation
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Trish Tervit
Environics Comminications
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Vince Linsley
AGF Mangement Limited
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Whitney Bell
Borden Ladner Gervais LLP
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Cara O'Hagan
Ministry of Finance
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Christian Bode
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Clemencia Cimbron
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Frank Allen
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PARTICIPANTS:
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Luba Mycak
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Mayya Mukhamedyarova
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Paul Braithwaite
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Sadruddin Salman
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Shameez Rabdi
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Ministry of Finance
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--- Upon commencing at 11:03 a.m.
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THE MODERATOR:
Good morning, welcome, and
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thank you, everyone, for attending the consultation on the
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merits with proceeding with more tailored regulation of
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financial planners in Ontario.
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My name is Christian Bode.
I am with the
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Ministry of Finance, Communications Services Branch.
We
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appreciate that you are taking part of your workday to
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contribute your expertise, experience and ideas to a
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consultation that is important to the Ontario Ministry of
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Finance.
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You have been invited by the Securities
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Reform Division to provide your input about the merits of
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more tailored regulation of financial planners.
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As you can see by the number of attendees,
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this invitation has elicited great interest.
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comments and ideas are important to the Ministry as we
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seek better understanding of the current structure and
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regulatory oversight of financial planning.
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whether there will be merit in proceeding with more
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tailored regulation of financial planners and, if so, to
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what type of regulatory framework.
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Your
This includes
Representatives from the Ministry of
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Finance are in attendance this morning to listen to your
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comments.
We have Frank Allen, Assistant Deputy Minister
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in the Securities Reform Division, and we have also staff
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from the Insurance and Deposit-taking Policy area.
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I will say a few words about the protocol
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for discussion.
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with four questions that we would like to explore.
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is Ontario's current regulatory approach in relation to
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financial planning appropriate?
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First,
Second, how would you improve Ontario's
current regulatory approach?
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With your invitation, you were provided
Third, are there approaches to regulating
financial planners which you would recommend?
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And finally, would regulation affect your
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business model of providing financial planning services
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and, if so, in what way?
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With your invitation, you were also
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provided the opportunity to make an oral presentation and
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some of you have elected to deliver comments in that
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format.
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moving on to the questions and discussion.
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We will start with each presentation before
I would like to remind you that in the
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interest of facilitating an opportunity for as many
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attendees as possible to comment, each presentation will
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be limited to five minutes.
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attendees, I will be very strict about this rule.
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And fortunately, for all the
Once the presentations are completed, we
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will direct our attention to the questions and your
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comments.
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transcribed.
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please state fully your name and the name of your
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organization, if applicable.
We are having the discussion of today's session
So, I would ask that before you speak,
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I will be moderating the discussion,
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again, to ensure that we listen to as many of you as
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possible.
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subject of the particular question under discussion, so we
I would like that you limit your comment to the
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move in an orderly fashion.
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another question, I will ask you to conserve your thought
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for the appropriate moment.
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If your comments stray to
Also, if there are any members of the
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media in attendance today, I would ask you to identify
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yourself and your organization.
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And finally, last but not least, before I
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introduce Cara O'Hagan, Director of Policy, Minister's
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Office, and last but not least, if you have a mobile phone
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or any other transmitting device, we kindly ask that you
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turn it on silent now for the duration of the session.
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With this being said, I would like to invite Frank to say
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a few introductory remarks.
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MR. ALLEN:
Thank you, Christian.
I would
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like to echo Christian's welcome, and express our
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appreciation for your taking time to join us today.
We
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have another session scheduled on Tuesday; both of them
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will be well attended, and reflect the great interest in
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this topic.
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The impetus for these two sessions was the
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Government's commitment in the 2013 Fall Statement to
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investigate the merits of proceeding with more tailored
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regulation of financial planners.
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the time available for the presentations and discussions,
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I will really just touch on a few points in the
In order to maximize
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consultation paper that underscore the importance to the
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Ministry of this issue, and why this consideration is
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being done at this time.
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Financial decisions confronting
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individuals, families, Ontarians in general are becoming
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increasingly complex and very important for their
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livelihood.
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trustworthy, professional financial advice to better allow
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them to achieve their financial goals.
Consumers need access to informed,
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For careful readers of the Fall Economic
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Statement, you will have noted that the comments about
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considering and investigating the merits of proceeding
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with more tailored regulation appeared in two places in
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the document.
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discussion in the jobs and growth chapter of the Fall
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Economic Statement, and it was also in the retirement
It was under a consumer protection
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income strategy section of the statement, which is a very
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important reflection of the impact that financial planners
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have on Ontarians in general.
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Currently in Ontario, as you are well
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aware, there is no general regulatory framework in place
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to regulate the activities of individuals who offer the
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broad range of financial advice and planning services.
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The absence of a general regulatory framework has provoked
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some questions about proficiency, quality standards and
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potential conflicts of interest.
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The Government and the Ministry of Finance
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in particular is seeking to obtain a better understanding
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of these issues and to gain a fuller appreciation of the
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current structure and state of the financial planning
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marketplace.
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- I would characterize it as a high-level review -- in
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order to determine the merits of developing more tailored
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regulation and, if there were to be more tailored
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regulation, what form that might take.
We are undertaking this preliminary review -
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As part of the review, we must understand
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whether regulation would be advantageous for consumers in
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terms of investor or consumer choice, promoting more
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informed decision making and generally enhancing consumer
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and investor protection.
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At the same time, we are mindful of the
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necessary balance for industry participants in terms of
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consequences such as regulatory burden, complexity of
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regulation and the cost.
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Tuesday and in the course of reviewing the written
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submissions, we will be trying to move in a balanced way
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in considering what is best for Ontario and Ontarians in
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this important area.
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discussion and, once again, thank you for joining us.
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And, in proceeding today and on
So we look forward to today's
THE MODERATOR:
Thank you.
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proceeding.
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place, Financial Planning Standards Council, if you ...
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you can sit or you can ...
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I will invite the presenters:
I will now be
MR. LIST:
the first
I am good here, if everybody
can hear me.
THE MODERATOR:
If everybody can hear,
you can stay the remainder of the day.
MR. LIST:
Great.
Thank you, Christian,
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and thanks, Frank, for setting the stage, and I do have
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some prepared remarks.
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would like to because I know that there are time limits,
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and I hope you don't start my time until my first word of
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my prepared remarks, so ...
I am going to talk faster than I
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The Financial Planning Standards Council
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is a not-for-profit organization that develops, promotes
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and enforces professional standards in financial planning
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through the granting and enforcement of the certified
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financial planner's certification.
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distinction are trained to provide financial planning at
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the highest level of competence expected of the
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profession.
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Those who achieve this
In Canada, there are over 17,000 certified
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financial planning professionals in good standing, over
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9,000 of them in Ontario.
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in the International Financial Planning Standards Board
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and corresponding network, which spans 24 territories,
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there are over 150,000 certified financial planning
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professionals worldwide.
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Further, through our membership
Certification granted by FPSC provides
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assurance to Canadians that the design of their financial
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future rests with a competent and qualified professional
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who will put clients' interests ahead of their own.
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together with our partners in Quebec, institut Quebecois
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de planification finanicier, IQPF, continually develop,
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promote and enforce the highest standards of competence,
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practice and ethics for the profession.
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FPSC,
I currently chair the Coalition for
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Professional Standards for Financial Planners, a group of
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four organizations which has developed and published a
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statement of principles by which we believe financial
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planners should be bound.
In addition to FPSC, the
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coalition members include the Canadian Institute of
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Financial Planners, the Institute of Advanced Financial
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Planners and the IQPF.
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We are encouraged by the Ontario
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Government's interest in this topic, and are pleased to
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offer our expertise in the development of a solution for
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Ontario.
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There has recently been much discussion on
a number of regulatory matters regarding existing
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regulation related to product-based advice and
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transactions.
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continued focus related solely to product-based advice and
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transactions, at the expense of discussion regarding
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requisite standards and oversight related to the
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professional non-product-specific advice, that is,
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financial planning, is doing the public a disservice.
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However, we are concerned that the
We have identified two fundamental
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problems:
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Canadians are not getting the financial planning help they
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need from qualified professional financial planners.
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is partially the result of a lack of understanding of how
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to identify a qualified financial planner and of what they
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should expect of a financial planner and/or a financial
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plan.
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First, studies clearly demonstrate that
Second, today's unregulated financial
This
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planning environment leaves consumers vulnerable and at
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risk of receiving advice from individuals holding
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themselves out as planners who would have not had to meet
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any qualifications based on accepted unified standards of
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ethics, competence or practice.
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planning" is too often used as a sales pitch to sell
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product, and the title "financial planner" is used
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haphazardly throughout the industry.
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The term "financial
The majority of those people in Canada who
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imply through title and/or advertising that they are
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financial planners are in fact licensed and qualified only
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to give advice related to product recommendations or
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purchase, and expertise in product advice gained from
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licensure does not equate to competence in financial
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planning.
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consumers believe it does.
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Nevertheless, our studies have shown that
There is no doubt that Canadians need the
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guidance of competent professional financial planners.
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Study after study reveals the current societal challenges
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we face.
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social safety nets.
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highlighted this issue as it relates to retirement
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security.
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gaps in workplace wellness programs have left our
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population in the most financially vulnerable and
An aging population has put great strain on our
In fact, Premier Wynne recently
Consumer debt levels continue to escalate and
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precarious positions that we have experienced in decades.
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The time is clearly right for financial
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planning.
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vulnerability, it is important that consumers are
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appropriately served and protected by qualified and
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competent financial planners.
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of competence, ethics and practice must be accepted and
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permitted to be enforced.
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However, during these times of societal
Clear, singular standards
We are pleased that the Ontario government
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has identified that further regulation regarding the
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purchase of investment insurance products or advice
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therein may not be the answer when it comes to consumer
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protection regarding financial planning.
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that, one, there must be a single unified set of standards
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for financial planners and financial plans so that
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consumers will be protected by knowing their financial
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planner has the necessary professional competencies and
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will act ethically and with due prudence and
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professionalism.
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It is our view
Two, there must be a unified definition of
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what is a financial planner and financial planning and
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what constitutes a financial plan so that consumers
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understand their importance and know what to expect when
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seeking out a financial planner.
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Three, the government should create title
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and holding-out restrictions.
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demonstrated their competence by meeting a single unified
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qualification standard and ongoing professional ethics and
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continuous professional development requirements should be
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permitted to call themselves financial planners.
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result, consumers will cease to be at risk of poor or
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inappropriate planning by those who have not met minimum
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competency standards.
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Only those who have
As a
Four, financial planner accountability
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should be to a professional oversight body that
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understands financial planning and professional
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obligations and that represents the public interest.
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Standard-setting for and oversight of financial planners
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should not be placed on a piecemeal basis through product
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and product-advice-based regulation.
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for financial planners will provide confidence to
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consumers that their interests are represented and
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protected by a cross-sector body that is expert in
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financial planning and expert in the establishment and
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enforcement of the financial planning profession.
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THE MODERATOR:
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MR. LIST:
A professional model
One minute left.
Okay, thank you.
FPSC and its
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coalition partners have been working diligently to bring
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forward a single unified set of minimum standards required
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to hold out as a financial planner and unified definitions
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of what constitutes a financial planner.
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and definitions are based on those already enforced and
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accepted by over 22,000 licensed or certified financial
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planners in Canada.
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our coalition is proposing form the basis of a
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professional model for financial planning, not only in
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Ontario but for all of Canada.
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These standards
These standards and principles that
The solution we propose is simple: Codify
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in law professional certification structure, governance
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and oversight mechanisms that already exist in practice
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but that are currently voluntary, and make them a
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requirement for all who wish to claim financial planning
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as their own.
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professional planners, establishes no additional
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regulatory burden other than to require that all who claim
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to be professional planners meet and continue to meet the
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competency and ethical requirements expected of those who
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have stepped up to and continue to adhere to the unified
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standards already in place.
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Such a model remains self-funded by
THE MODERATOR:
One more thought, and we
will continue ...
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MR. LIST:
The benefits to all
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stakeholders:
The government will benefit from the
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adoption of greater consumer protection through simple
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proof and no added cost model.
Industry will benefit
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through reduced compliance risk, assurance of consistency
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of quality, delivery of financial planning and clear and
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simple direction regarding qualification requirements.
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The profession will benefit from increased confidence
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placed on financial planners and added credibility and
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clarity of their role as critical players in helping guide
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Ontarians to a better future.
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And finally and most importantly,
consumers will benefit as they will have greater
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protections and clarity around what they should expect
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from a financial planner, and through participation in the
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planning process only with a duly qualified individual,
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consumers will gain greater control of their financial
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futures and will be protected from the potentially
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devastating damage that can be done by the advice provided
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by individuals holding themselves out as financial
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planners who are neither certified nor competent to do so.
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I will cut it off there.
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THE MODERATOR:
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MR. LIST:
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We will be distributing our
comments ...
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THE MODERATOR:
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MR. LIST:
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Thank you.
And your name?
I am sorry, Cary List,
president and CEO.
THE MODERATOR:
Cary List?
I didn’t get
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that.
Thank you, thank you for your presentation.
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will now move to, I think, to the Public Interest Advocacy
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Centre.
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We
Yes?
MR. BISHOP:
Good morning.
Thank you for
the ...
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THE MODERATOR:
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MR. BISHOP:
And state your name?
My name is Jonathan Bishop.
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I am a research analyst for the Public Interest Advocacy
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Centre, or PIAC.
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PIAC is pleased to participate in any
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dialogue within the financial planning industry that will
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ultimately benefit consumers in Ontario.
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established in 1976 as a non-profit, charitable, non-
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governmental organization.
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representation, research and advocacy for consumers and
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delivery of important public services, such as telecom,
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energy, financial services and transportation, and we also
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provide advice surrounding issues arising from this work,
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namely competition law, privacy law, e-commerce and
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general consumer protection.
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We were
We provide legal
This morning we would like to raise two
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points with you.
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interest inherent in the current compensation model for
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financial advice providers operating in Ontario.
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The first is the perceived conflict of
The second is the need for a standardized
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use and application of titles for those who provide
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financial services advice to consumers also located in
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Ontario.
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These views have been developed through
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consulting with Ontario consumers through PIAC's two
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studies of the financial advice industry in 2008 and 2012.
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Copies of these studies can be found in our website at
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www.piac.ca.
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During these investigations we found,
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through focus groups, that few participants mentioned an
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obligation to disclose fees and commissions, conflicts of
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interest or the obligations of financial planners to their
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clients.
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were, in fact, obligated to make such disclosures.
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believed that disclosure of these issues was a legal
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obligation or that changes in regulation were in place to
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ensure that it soon would be, and only a few were aware
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that disclosure was actually not a legal obligation.
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Most were not sure whether financial planners
A few
In addition, few were also aware that most
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planners receive the majority of their income from third-
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party commissions, trailers or other benefits.
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assume that any commissions received vary directly with
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the growth of the portfolios being managed, thus providing
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the planner with an incentive to choose the best possible
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investment vehicles for their clients.
Most
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Many participants had not received full
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disclosure of fees and commissions and did not understand
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how their planners were being remunerated.
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not understand the potential conflict of interest stemming
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from third-party commissions.
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Thus, many did
Turning to the second issue, the need for
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a standardized use of titles, our research found that both
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consumers and planners themselves were confused about how
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financial planning, the titles worked and how it was
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regulated.
They were confused by the designations.
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was a near consensus that financial plans was only a
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teaser to sell securities, those claiming to be planners
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when they were doing investments only and not providing
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the independent, expert financial advice in all six areas
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generally defined as financial planning.
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There
As a result of our 2012 examination, PIAC
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concluded that Canadian consumers remain in need of
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increased protection when engaged in the financial advice
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and planning industry.
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The Ministry, unfortunately, has a problem
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on its hands.
It knows that a majority of Ontarians don't
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trust the advice they receive from financial service
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providers, as per an OSC survey done in March.
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aware that only 20 per cent of investors strongly agree
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they generally trust their financial advisor's advice.
It is well
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The Government is also aware that 64 per
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cent of respondents in the same survey either agree or
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strongly agree that how a financial advisor is paid
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impacts the recommendations they are going to receive as a
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consumer.
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Consumers have told us they want
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strengthened regulation of financial service providers,
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including clearer professional standards on the use of
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title, rigourous educational requirements, ethics training
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and stricter regulatory enforcement of the rules.
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short, they want to be able to trust the service that is
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being provided to them.
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We believe a positive development would be
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the employment of a uniform standard of care for
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investors, complete with a full disclosure of how
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financial planners are being compensated.
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In
The Ministry of Finance may be also
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receiving an unknown amount of political pressure to
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provide movement on this file in the lead-up to the next
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provincial election.
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could be a great benefit to the resolution of concerns
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expressed by consumers regarding this industry.
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it could also spell the rushed introduction of regulations
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or legislation containing a host of unintended
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consequences that will further confuse both consumers and
The "X" factor of political interest
However,
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financial service providers.
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Some actors in the financial planning
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industry have had a few opportunities to reform themselves
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over the past few decades, and have largely taken what we
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consider a 3-D approach, deny, delay, debate, instead of
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being truly proactive as we have seen in other
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jurisdictions.
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THE MODERATOR:
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MR. BISHOP:
One minute left.
The industry has been warned
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repeatedly that if no progress is made, they can expect
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the regulation of investment advice and possibly the
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regulation of financial planning.
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In this spirit, PIAC encourages industry
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leaders to promote policy solutions beneficial to both
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consumers and the industry.
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We are very pleased the Ministry has
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turned its attention to this important policy debate, and
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I want to thank you folks once again for the opportunity
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to present PIAC's views, and we look forward to
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participating in this debate this morning.
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THE MODERATOR:
Thank you.
Thank you, very much.
We
will now move to Credo Consulting.
MR. MURPHY:
My name is Hugh Murphy, and I
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am the president of Credo Consulting.
Thanks very much,
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first of all, for inviting me to make this presentation --
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and I didn't recognize it was going to be a debate.
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going to be a debate?
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It's
I see.
I am offering my comments -- and I hope I
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don't speak as quickly as Cary.
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because of the tremendous potential value that regulatory
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reform related to financial planning and advice might
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create, because of the growing need for financial advice
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at a time when the financial advice industry is under
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tremendous and arguably increasing stress.
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I am offering my comments
Reforms to regulations have the potential
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to affect Canadians greatly.
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in studying financial advisors.
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conducting research almost solely with Canada's retail
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financial advisors.
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conduct research with consumers.
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asked to do.
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My research firm specializes
We spent the last decade
Occasionally, Credo was asked to
We wince when we are
We have conducted enough research with
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investors to know how incredibly, how astonishingly
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ignorant consumers are with respect to matters financial.
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If I found one thing in the last decade, one thing that I
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have found in the last decade is that consumers don't
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generally need protection from very, very few corrupt
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financial advisors who are simply bound to exist somewhere
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in the marketplace.
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from themselves.
Rather, consumers need protection
And the protection should come directly
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from the guidance and knowledge the financial advisor
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community helps to deliver.
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I call them all financial advisors
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because, whether they hold the CFP designation or the PFP
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or the CLU or any other designation or certification,
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consumers who depend on the financial advisors simply
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don't have the financial literacy to distinguish between
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these.
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Anyone that hangs their shield out as a
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financial advisor -- anyone can hang their shield out as a
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financial advisor.
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money has the potential to do real good or real harm to
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the vast body of consumers who simply don't have the
14
financial literacy to help themselves effectively.
And anyone who speaks the language of
15
Must standards exist for the very broad
16
range of competencies in the realm of financial advice?
17
Certainly.
18
is made available by financial planners or the Financial
19
Planning Standards Council, or not, the majority of
20
financial advisors indicate that the FPSC is moving in the
21
right direction and is at the leading edge of the delivery
22
of these standards.
23
And whether they hold the CFP designation that
Many are equally concerned or equally
24
certain, rather, that there are other valid pathways to
25
becoming extremely competent and valued financial guides.
25
1
What is critical is that these advisors must assume a
2
fiduciary role with their clients.
3
In a recent focus group that Credo
4
conducted, an advisor explained, "If I were the finance
5
minister, I would look at the CFP and the CFA types of
6
standards of fiduciary responsibility.
7
financial salespeople, and there are professional
8
fiduciary financial advisors, and there is a huge
9
distinction between the two."
10
There are
I believe the financial advice industry
11
is, in some respect, in peril.
12
financial advisors that are heading towards retirement at
13
the same pace as the rest of us.
14
or when my firm asks advisors what guidance they would
15
give to younger people who aspire to be financial
16
advisors, they often laugh -- financial advisors, that is.
17
They almost invariably tell that, given the current
18
regulatory environment and the degree to which oversight,
19
compliance and administrative matters have become so
20
painfully onerous, they would not encourage people to
21
follow in their footsteps.
22
We have a population of
And when my firm speaks,
Advisors simply tolerate compliance audits
23
that they feel are conducted by officers who don't have
24
the knowledge, skills or ability to judge the suitability
25
of the guidance that is being purveyed by advisors whose
26
1
work they are examining.
2
In another interview with an advisor, she
3
explained:
"Financial advice should be managed by a
4
professional organization, not by a compliance
5
organization.
6
identifying what good advice is.
7
compliance as an enforcement tool to get advisors to toe
8
the company line and not the client's line."
9
Compliance is utterly incompetent at
THE MODERATOR:
10
MR. MURPHY:
The industry uses
One minute left.
It is a cover your ... cover
11
yourself game, and it has been like that for 30 years,
12
since I first got into the business.
13
And the people that support compliance
14
will promote schmucks to heroism based on their production
15
-- product pushing -- and not based on the advice they
16
give to clients.
17
Another advisor offered:
18
advising is similar to the practice of medicine in that
19
there is a judgment issue.
20
anyone outside the profession to know whether advice is
21
good or not."
22
"Financial
It is far too complex for
In two recent Credo studies with more than
23
a thousand advisors, we had more than three quarters of
24
advisors indicating that complying with regulatory and
25
compliance issues was among their top challenges.
In
27
1
fact, only one other item, their time-management
2
challenges, was identified as a greater regulatory issue.
3
The pendulum has swung to a point where
4
the regulatory and compliance environment is making the
5
business of being a financial advisor a more unpalatable
6
occupation than it ever has been, and this is at a point
7
in time where more Canadians are in dire need of financial
8
literacy and guidance than ever before.
9
terrible ...
10
THE MODERATOR:
11
MR. MURPHY:
This is a
Last statement, please.
Yes.
This is a terrible
12
indictment of the current environment, and Credo
13
encourages the Ministry to look for ways to simplify the
14
regulatory framework and afford the financial advisor
15
community greater flexibility and latitude to deliver
16
appropriate guidance to consumers.
17
But, in the same breath, I will yet more
18
strongly encourage the Ministry to ensure that forceful
19
regulations are in place, regulations that fully charge
20
all advisors with accepting and properly respecting their
21
roles as, most importantly, fiduciaries, and secondly as
22
the critical instruments in developing financial literacy
23
among Canadians.
24
consideration.
25
Thank you for your time and
THE MODERATOR:
Thank you.
We have one
28
1
additional presentation from the Independent Financial
2
Brokers of Canada.
3
MS ALLAN:
Thank you.
4
THE MODERATOR:
5
MS ALLAN:
State your name and ...
My name is Nancy Allan.
I am
6
executive director of Independent Financial Brokers of
7
Canada, and I am joined here today by Susan Allemang, our
8
director of policy and regulatory affairs.
9
On behalf of IFB and our 4,000-plus
10
members, we thank the Ministry for inviting us to attend
11
this discussion.
12
the perspective of the people we represent; indeed, they
13
are very engaged on this topic.
14
the Ministry's four questions by e-mail to our members and
15
we have been absolutely deluged with responses ever since.
16
We welcome the opportunity to provide
The other day we sent out
These responses have informed our
17
presentation here today and, through our words, the
18
Ministry is hearing the voices of the province's
19
independent brokers.
20
corporations or Bay Street firms.
21
self-employed and operate small community-based businesses
22
across the province.
23
around the kitchen table over a cup of coffee.
24
livelihoods depend on building trust, and many of the
25
relationships they forge span decades.
At IFB, we don't represent big
Most of our members are
Their meetings typically happen
Their
29
1
Our members help Ontario families plan for
2
the future, save and invest money and better protect their
3
families.
4
motto.
5
all members of IFB are required each and every year to
6
reaffirm their adherence to our code of ethics, which
7
compels them in all instances to place the interest of the
8
client above all others.
9
The client comes first, and that is not just a
Since 2002, it has been a guiding principle, and
The majority of our members are licensed
10
to sell life insurance.
11
mutual funds and other securities and about 20 per cent
12
are certified financial planners.
13
without exception, operate in a financial services
14
industry that is already highly regulated and answer to at
15
least one provincial licensing body.
16
Many are also registered to sell
All of our members,
Suffice to say that our members operate
17
under government and regulatory bodies that have the
18
ability to discipline, to hear and process consumer
19
complaints, to impose sanctions and penalties and to
20
revoke registrations and licences.
21
be.
22
be very complicated.
This is as it should
Financial decisions are important and they can also
23
Our organization and our members believe
24
that the people of Ontario and Canada are best served by
25
duly accredited and licensed professionals.
We support
30
1
regulation and oversight that protects consumers.
2
any Ontarian, however, we question the need for
3
potentially excessive and duplicate regulation that would
4
undermine the ability of our community-based members to
5
run a successful business and help their clients plan for
6
tomorrow.
7
Like
Many of our members are able to hold
8
themselves out as financial planners by virtue of their
9
professional designation.
They create detailed financial
10
plans and specific product recommendations that fit within
11
those plans.
12
comply with in order to maintain their designation and,
13
because they hold one or more financial services licences,
14
they are also regulated by one or more provincial
15
licensing bodies.
16
They have a set of standards they must
Others of our members, indeed the
17
majority, hold a wide variety of other professional
18
designations, but do not hold themselves out to be
19
financial planners.
20
subject to a regulatory framework.
21
serving their clients, they conduct needs analyses and
22
other financial planning-related activities that quite
23
legitimately form a key part of their work as financial
24
advisors.
25
They are licensed and they are
In the course of
IFB welcomes the opportunity to be part of
31
1
these discussions.
2
professionals should be regulated.
3
consistent level of consumer protection, including access
4
to complaint mechanisms and restitution, as well as
5
culling those individuals who bring disrepute to the
6
profession and reduce investor confidence.
7
We believe that financial services
This helps to ensure a
We look forward to participating with the
8
Ministry as it moves through this process of evaluating
9
the merits of regulating financial planners in Ontario.
10
We are hopeful that our comments here today will assist in
11
a better understanding of the regulatory landscape our
12
members already operate in.
13
Our time here today is brief and we will
14
certainly submit a more formal written response addressing
15
the four questions set out by the Ministry, but the key
16
point I would like to leave you with today is that the
17
self-employed Ontarians and small business owners who make
18
up our membership already operate in a regulated
19
environment.
20
to account each and every day, and that is as it should
21
be.
Much is expected of them, and they are held
Thank you.
22
THE MODERATOR:
23
the presentations.
24
discussion.
25
Thank you.
Thank you for
We will now move to the open
The first question, of course, is
32
1
Ontario's current regulatory approach in relation to
2
financial planners appropriate?
3
If you want to participate and to make
4
comments, just have ... establish eye-to-eye contact,
5
raise your hand, and I will do my best to respect the
6
order of the queue.
7
up the floor; we have about 20 minutes per question, and
8
we have to move fairly quickly.
9
your thought is already done, I may ... I will ask you to
And keep in mind that I cannot give
10
share with other attendees.
11
wants to?
Okay, here.
12
So when your comment,
So, there is a ... someone
Please?
MR. SKWAREK:
I am Ed Skwarek, and I am
13
with Advocis.
Just a comment, briefly, on question 1, is
14
the Ontario ... currently, is the regulatory approach
15
appropriate?
First, the financial planning.
16
And I see a bit of a problem in terms of
17
the terms that we are using, and that is a direct result
18
of the lack of definition of what is a financial advisor
19
and what is a financial planner.
20
I think many of us share the same views
21
around this table about the professionalization of the
22
industry, but our perspective is we have to look at it
23
more broadly.
24
licensed financial advisors.
25
picture this as a Venn diagram.
In Ontario, there are approximately 40,000
So if you look at ...
You have the big circle,
33
1
and you have financial advisors.
2
specializations such as financial planning, people with
3
the CFP, CLUs.
4
broader spectrum; that is how we view it.
5
licensed, for the most part, to provide financial advice
6
if they are engaged in the selling of product, that
7
execution.
8
9
Within that, you have
These people are specialists within the
They are also
So I think what we have to talk about
first is let's get these terms defined, what they are, and
10
then determine what is a regulatory outcome that we hope
11
to achieve in bringing a professional standard forward.
12
Once we identify what that role is, we can then determine,
13
do we need to capture all 40,000, or do we just capture
14
financial planners, the 9,000?
15
In our view, if we go too narrow, there is
16
serious risk that consumers will not get the benefit that
17
we hope is going to be the outcome:
18
security, greater confidence in the advice that they are
19
getting, better ... just a better feeling for the
20
financial advisors they are dealing with.
21
greater financial
Now when we talk about is regulation
22
currently appropriate, I think it currently is not, and
23
that is because we have seen an evolution in the industry,
24
and every industry goes through this evolutionary process.
25
And, you know, at one point it was certainly product
34
1
based, the selling of financial product.
And we have seen
2
rules from the MFDA, through IIROC, where you have to do
3
needs analysis, where you have to know what your products
4
are about, you have to know what your clients' needs are.
5
So every financial advisor is involved to
6
some degree in financial planning, but not to the same
7
extent as people who have gone through a specialization
8
process to become financial planners.
9
And in conclusion, then, to draw the
10
analogy that was ... Credo made the point about the
11
medical industry; I would like to just take that a little
12
further.
13
again use a Venn diagram, and the big circle is all
14
doctors, within that you have specializations; you have
15
oncologists, you have thoracic surgeons.
16
regulated those specializations, then the consumers of
17
medical products would be at great risk because people who
18
are MDs, that generalist, would be unregulated, and I
19
don't think any of us would consider for a second
20
regulating that way where we would exclude the
21
generalists.
22
those generalist groups, that is where you get your
23
specialized experts going forward.
24
25
If you were to look at the medical industry, and
If you just
You have to include them, because out of
So we view it as a need to capture
everybody to start with, define what the roles are,
35
1
include the specializations and recognize them, and that
2
would ensure a better consumer outcome down the road.
3
And we do believe in, sort of,
4
professionalization of the industry because the MFDA and
5
IIROC do a great job in regulating what they were brought
6
forward to do, brokers and dealers, but then the
7
delegating the responsibility of the oversight to those
8
broker and dealers to look after, to ensure compliance on
9
the part of the financial advisors is a misalignment of
10
regulatory needs.
11
that understands what you are doing, and there is no
12
better group to regulate financial advisors and planners
13
than financial advisors and planners themselves.
14
15
You need to be regulated by a group
THE MODERATOR:
Thank you.
We have one
...
16
MR. LAWFORD:
My name is John Lawford.
I
17
am the executive director of the Public Interest Advisory
18
Centre.
19
As Jonathan noted, we started studying
20
this issue in earnest in 2008, and looked at it again in
21
2012.
22
consumer work in other areas is that, with much respect,
23
Ed, the approach you are suggesting may work for a mature,
24
regulated profession, but you are not.
25
And our view, from having done regulatory law and
We have a situation here where I think the
36
1
approach of going big to financial advisors here is too
2
big a piece to cut off.
3
your way into regulating financial advisors and defining
4
these terms by starting from defining financial planning
5
and regulating financial planning; that is our conclusion
6
of our two reports.
7
One looks smaller, and then work
That particular area looks a lot like a
8
regulated profession.
There are six planning areas, or
9
five or seven, or whichever way you guys define it, and it
10
is fairly well broken off from the rest of the industry.
11
It is not tainted by compensation structures necessarily.
12
It looks like a place where you can start, and Quebec has
13
approached it in that manner, and then done the larger
14
regulation of the whole industry.
15
It is just too big a piece to cut off, and
16
we are concerned about inertia, so that if the effort
17
becomes stalled because you are starting to roll in all of
18
the other regulators and all the other concerns around the
19
way financial advice in relation to particular products is
20
considered, that will get nowhere.
21
prefer concentrating ... actually, unfortunately, exactly
22
the opposite to what you suggested.
23
24
25
THE MODERATOR:
comment.
So we would much
Thank you, for your
We have one ...
MR. LIST:
Cary List, again.
It is an
37
1
interesting, good, I think, philosophical conversation
2
here, and I want to come back to the question, which is is
3
Ontario's regulatory approach, current regulatory approach
4
appropriate? -- and echo some of the things that Ed said
5
around the approach, which is that historically, the
6
approach to regulation was related to the purchase or sale
7
of product or transactions.
8
The world has changed dramatically.
And
9
to some of the comments that were made also by Hugh at
10
Credo is that what we are facing now, with the current
11
regulatory approach, is an expectation by consumers, by
12
Canadians and Ontarians, that they are getting
13
professional advice.
14
advisor/planner question separately but, whether you call
15
it ... we just talked specifically about the planning or
16
some sort of professional advice, from people who actually
17
have been appropriately licensed and qualified to actually
18
offer a wider range of professional, what we call non-
19
product-specific advice, than perhaps what is required
20
under the licence, the current licensing regime.
21
And I will deal with the
So we would argue that the regulatory
22
approach today for those that are actually licensed to
23
sell products or provide advice regarding securities and
24
mutual funds is fine.
25
to it, but that is not our concern.
Perhaps there could be enhancements
38
1
However, when we get into the provision of
2
professional planning, professional advice that is not
3
tied directly to the relative merits of one product or
4
another, we would echo some of the comments that were said
5
before, that the current regulatory approach doesn't work
6
because you have compliance and oversight being undertaken
7
by organizations or individuals who actually don't
8
understand the complexities of client needs and the
9
complexities, frankly, of what needs to be known, the
10
competencies and knowledge required of the individual
11
serving their clients.
12
With respect to the question of regulating
13
all advice or planning, and I think this is a very
14
challenging one, the approach that we have taken and what
15
I laid out in my very quickly spoken comments is that we
16
would echo, I think, some of what John Lawford said
17
regarding where do you start, that one of the challenges
18
we face is how do you define what a financial advisor is?
19
A financial advisor today in Ontario and Canada and
20
frankly around the world can mean so many different
21
things, and it actually doesn't refer to any specific,
22
clearly articulated set of knowledge, skills, abilities or
23
competencies.
24
25
So should there be work on potentially
reforming that and clearly defining titles definitions?
39
1
Absolutely.
2
proposing this, but could be to outlaw the term "financial
3
advisor" entirely and create titles that mean something
4
very specific where you can put specific knowledge,
5
skills, abilities and competencies attached to them, and
6
have agreement on that.
7
Frankly, one solution, and we are not
The reason, we believe ... well, we are
8
about financial planning, have always been as our
9
coalition; that is one of the reasons we are starting
10
there.
11
development of what are the requisite knowledge, skills
12
and abilities, what does it mean to be a financial
13
planner, what does financial planning mean.
14
understood or necessarily bought yet, by the consumer, but
15
certainly we are a lot further along in defining that
16
space, and we would echo what John said.
17
But we know that there has been a lot more
Not well
If you start there, look at moving from an
18
area where you can actually bite it off, where you maybe
19
can get some consistency of understanding around the
20
table, that may very well grow into something like a
21
regulated financial services professions group, as opposed
22
to a regulated health professions group.
23
THE MODERATOR:
Thank you, Cary, although
24
some of your argumentation was answering question 3, it
25
was very worthwhile.
Yes, sir?
40
1
MR. GOLDHAR:
I am Alan Goldhar.
I am
2
from the Investment Advisory Panel of the Ontario
3
Securities Commission, and I think our stance on the
4
regulatory environment now is obviously it is not
5
adequate; it is designed, as has already been brought up,
6
really to protect the industry and the players in the
7
industry as opposed to the clients.
8
clients, we would have a best-interests type of scenario
9
where advice given is in the best interests of the client
10
and not just suitable for the client, which is a big area
11
of discussion right now, and there is lots of literature
12
on that.
13
If it was for the
I used to be in the regulatory area of a
14
big, large investment firm, and I know what I was looking
15
for and it wasn't in the best interests of the client; it
16
was in the best interests of the company that paid me and
17
hired me.
18
regulations were followed so that the company and the
19
company employees did not get into trouble.
20
alone, that is a major area of concern.
21
That was my core job, to ensure that rules and
Fiduciary duties:
So in that
We don't know, do
22
advisors have it, not have it?
As consumers, they have no
23
idea.
24
advisors do not have a fiduciary duty, and that is
25
something that needs to be discussed around, well, what is
They assume they do but in fact, of course,
41
1
your job?
2
responsibilities and duties come with that, and that is
3
the definitions that we have to work through.
4
Are you a financial advisor and, if so, what
Provide clear distinction, as Cary brought
5
up, about advice versus sales.
I mean, those are
6
completely distinct and they should be clearly distinct to
7
the consumer, and they are not.
8
financial plans are often used as a marketing tool to sell
9
product, and that is really ... it sets an environment,
They are ... obviously,
10
potential for a loss for clients, for ... because the
11
client says, "Well, you told me to do this," and they've
12
got all the documentation to say, "Well, here is my
13
rationale and logic for going that route a year ago so, if
14
you have losses, sorry.
15
didn't work out the way you wanted."
16
I mean, it was logical, it just
It shouldn't be a chance of ... a game of
17
chance like that; it really should be something where
18
financial planning is not supposed to be, "Let's guess,
19
let's take a best guess at what is going to happen next
20
year."
21
the professional sense is about.
22
That is, of course, not what financial planning in
The last is there is a sense of, if we had
23
some regulation here, tougher regulation about who can
24
call themselves what, whatever those names come up with,
25
it is going to create barriers to entry to the profession,
42
1
which is what we want.
2
serious about this profession, that are willing to go
3
through the courses, the exams, the regulatory
4
requirements and maintain their technical knowledge, and
5
not just be a fly by night where you can write, you know,
6
a securities exam and some sort of licensing thing in one
7
day, and then become licensed to call yourself a financial
8
planner.
9
We want people that are very
I think I received my licence to sell at a
10
very young age, and I had no idea what I was doing.
11
just seemed like an interesting thing at the time.
12
actually took it, the exam, for my own interest.
13
actually sold.
14
could have, and I knew very little, and certainly could
15
have caused a lot of damage to clients.
16
wouldn't have lasted in the industry had I done that, but
17
I certainly could have created a fair amount of problems
18
for clients without that, without the regulatory
19
requirement of financial planner.
20
21
It
I
I never
I was always on the finance side, but I
THE MODERATOR:
I mean, I
That's it.
Thank you.
Did you want
to add something?
22
MR. MURPHY:
Yes, I would just like to
23
make the tangential comment that I honestly don't think it
24
is currently the time to be putting up more barriers to
25
entry.
Managing, getting people involved and interested
43
1
in producing and delivering good advice to Canadians right
2
now is critically important.
3
Somehow addressing, creating policy that
4
addresses certainly consumer financial literacy is
5
critical, but creating barriers to entry for people who
6
genuinely want to deliver good advice to Canadians, I
7
would have a problem with that.
8
9
MR. GOLDHAR:
Barriers to entry to those
who don't want to be regulated and don't want to have the
10
professional designations, et cetera, who just want to
11
take the Canadian Securities Course and then call
12
themselves financial advisors.
13
MR. MURPHY:
14
MR. GOLDHAR:
15
Very good.
That is the barriers to
entry that I am referring to.
16
THE MODERATOR:
17
MR. BEYER:
Yes?
I just want to respond.
You
18
probably took the Canadian Securities Course about the
19
same time I did.
20
Institute, by the way.
21
22
I am with the Canadian Securities
MR. GOLDHAR:
course.
Yes, I ... it’s a great
I advise you ...
23
THE MODERATOR:
24
MR. BEYER:
25
Your name is Marshall?
Marshall Beyer, sorry.
The
standards have risen considerably since ... in fact, there
44
1
are five exams and approximately 500 hours of study
2
required to earn your licence, and then maintain your
3
licence over the first 30 months of your career.
4
MR. GOLDHAR:
5
MR. BEYER:
6
No insult intended.
So, I just wanted to make that
point.
7
THE MODERATOR:
8
Securities Courses in 1988, and I ended up in
9
communications.
10
I took my Canadian
So, there is always another side ...
Any other ... if ... or that we can have a
11
subquestion, or we can move to the question no. 2.
12
Yes, okay.
13
No. 2?
No. 2, question no. 2, “How would you
14
improve Ontario's current regulatory approach?”
15
of flirted with this.
16
We sort
Mr. Lawford?
MR. LAWFORD:
I think, from our point of
17
view, and again, working with some consumers in focus
18
groups and on reading the secondary literature and
19
speaking to some financial planners, I think that there is
20
a number of things that could really be done to improve
21
the regulatory approach, and no. 1 is taking the focus off
22
product licensing and putting it more on a professional
23
approach and coming up with standards and standards of
24
care.
25
come back to that.
That is a very tricky issue, but you know, I will
45
1
But, from the bottom line, consumers want
2
to know who they are buying stuff from.
So, they don't
3
know which title means what, and it would be nice, and in
4
fact proper consumer protection to have titles mean
5
something and relate to the service that is being
6
provided.
7
knock off, to be absolutely honest.
8
people in a room to decide what titles mean, you have a
9
pretty structural problem.
So, that is, I think, kind of an easy one to
10
If you can't get
Up from there, consumers need to know what
11
the tensions are, if you will, in their relationship with
12
their advisors.
13
at the moment, people think that financial advice is given
14
by magic.
15
is just given to them, and they don't know how those folks
16
are paid at all.
17
that.
So that means how they get paid because,
They think they walk into a bank and somehow it
18
That is the fact, and we have to undo
Part of financial literacy is just giving
19
people a little dose of reality, and someone has to say to
20
them, "Listen, this is how I get paid."
21
And it happens in many other industries.
22
Mortgage brokers have to tell people how they get paid.
23
Every other industry has to tell people how they get
24
remunerated, and it is just simply not acceptable to let
25
that continue.
Whether people should be disqualified if
46
1
they have a conflict of interest is a different matter,
2
and that has to do with the standard they might make.
3
We also think that at the end of the day
4
you have to get as far down the road as licensing and
5
giving exams that are standard, and preparing people for
6
the industry, and that that is not something that should
7
be done in various routes through whichever designation
8
you choose to come through and whichever product you are
9
choosing to sell; it should be standard, because then
10
people know that they are getting a standard level of
11
service.
12
And then, finally, I think you have to
13
have something of a net, and although it is not super-well
14
funded, it is very nice for people in Quebec to understand
15
that they have a fund for when there are the bad apples.
16
So, I know that fund is often dry because people had ...
17
there is a lot of bad apples, but having a compensation
18
fund which members of this profession and their employers
19
pay into is really of importance to consumers because it
20
all great to try to get money out of a ... blood out of a
21
stone.
22
apple and flown the coop, the consumer is left holding the
23
bag, and there is nothing there.
24
25
But, you know, when someone has been truly a bad
So those are the kinds of improvements
that we would like to have, those specific results out of
47
1
this process.
2
THE MODERATOR:
3
MR. LIST:
Thank you.
Thank you.
Cary?
Improvements to
4
your current regulatory approach, I think that,
5
absolutely, clarity around titles in law is critically
6
important.
7
in Ontario and across Canada, frankly, is such that the
8
regulators, whether it is the SROs or the securities
9
commissions or the insurance commissions, have been built
10
and established on the basis of product or capital markets
11
regulation, not on the provision of professional advice.
12
So we would ... we have to remember that
But the nature of the regulatory environment
13
we are talking about consumer protection, consumer
14
interest and what is going to actually help the clients
15
wade through this whole scenario.
16
securities commission or insurance council or SRO-based
17
regulations and requirements around this is actually going
18
to add additional confusion to consumers because you have
19
... you still have arbitrage within the industry, where
20
people can pick and choose which regulator they want to
21
work under.
22
And creating a
So we would say improve the regulatory
23
approach, again, by taking a look at a professional view
24
of this.
25
securities or insurance can continue to do so under the
Those that want to be licensed to sell
48
1
existing regime, and that should be fine.
2
looking at titles that mean something in terms of
3
proficiency, competence, ethical obligations, knowledge,
4
skills and abilities related to how they are holding
5
themselves out with respect to the client, that should be
6
considered in a professional model, not the existing
7
product regulatory model.
8
But if you are
They can sit nicely beside the licensure
9
as to what products you may have, but that shouldn't be
10
undertaken by existing structures of organizations that
11
don't know or understand the depth and complexities of
12
those professional services.
13
improving professional regulation.
14
15
So that is how we perceive
THE MODERATOR:
Thank you, Cary.
We
have...
16
MR. SKWAREK:
Ed Skwarek, Advocis.
I
17
agree with so much with what I am hearing, consumers being
18
the focus, making sure they are appropriately protected.
19
But when we look at then how do we want to reform our
20
approach we have to make sure we are being both practical
21
and that we are simplifying things for consumers.
22
In my mind, we are not being practical if
23
we are going to further slice and dice what financial
24
advice is.
25
saying some is included, and what it is, both a
Certainly, we need to define it, but then
49
1
profession, and some are excluded, just examine the
2
practical outcome of that.
3
So now we are saying, "Let's introduce a
4
profession, and we will call that financial planning.
5
some financial advisors are in this professional group.
6
Others are outside of this professional group, and the
7
ones that are outside of it, they are going to be
8
regulated, continue to be regulated by the MFDA and
9
IIROC."
10
We are just adding complexity.
And
Consumers
11
are going to get further away ... when we talk about we
12
need financial literacy, if we keep making the product
13
more complex, the way we are going to be regulating it in
14
the oversight, we are going to get further away from
15
making this something that is understandable by the
16
consumer.
17
We have to make sure we are taking a
18
simple approach and, in our view, everybody in the tent to
19
start with, and then removing certain people; it keeps it
20
simpler.
21
advisor, they are going to be a professional.
22
raise the standard.
23
levels, we have to bring it up, but we have to do it in a
24
reasonable fashion.
25
If I am dealing with somebody called a financial
We have to
So we have to enhance the entry
We have to keep in mind that there are
50
1
practical considerations here, and this can't simply be a
2
philosophical discussion on, you know, what is a financial
3
planner, what is a financial advisor?
4
questions, but the outcome won't be very practical.
5
6
THE MODERATOR:
All important
I would go to madam, first
and then you, sir, and then ...
7
MS ALLEMANG:
Okay.
Susan Allemang,
8
Independent Financial Brokers.
9
disagreeing with pieces of things that are going on around
10
I guess I am agreeing and
the table.
11
In terms of the disclosure, there is
12
actually quite a lot of disclosure for financial consumers
13
who deal with regulated entities.
14
of-sale disclosure, which has the fund facts for mutual
15
funds and for segregated funds.
16
requirements for disclosure on ... that includes
17
information on trailing commissions and commissions
18
related.
19
So we have the point-
We have increasing
We have, coming up within the next few
20
years, Phase 2 of the client relationship management
21
process, which will actually require specific compensation
22
information to be disclosed as part of the performance and
23
overall value of an investor's portfolio.
24
25
In terms of continuing to enhance
disclosure, however, I think that does go back very
51
1
fundamentally to the issues around financial literacy.
2
know Ontario has introduced a program within the secondary
3
school system to provide more information and
4
understanding of financial services, and I think that is
5
very valuable.
6
I
Organizations such as ourselves and many
7
others around the table are actively involved in promoting
8
financial literacy to consumers, and there has certainly
9
been a lot of strides made.
I think when you look at
10
something like the CFP, the Financial Planning Standards
11
Council has done a good job of raising awareness of what
12
constitutes a CFP versus people that don't have a CFP.
13
So I think that ... I don't ... we are not
14
really looking at, from our standpoint, that there are
15
huge gaps in the system, and for people that are already
16
regulated.
17
like, we don't support those individuals.
18
support people hanging out a shingle and saying that, "I
19
can do this or this for you."
20
people who may not be subject to the regulation anyway; I
21
mean, you are always going to have a certain element of
22
people who want to work outside the system.
23
vast majority, they are regulated and are accountable.
The people that are not regulated, clearly,
24
THE MODERATOR:
25
MR. GOLDHAR:
We don’t
So those would be the
But, for the
Thank you.
Alan Goldhar from the IAP
52
1
again.
I knew there was quite a bit of information on
2
this, obviously.
3
years.
4
Financial Planning Standards Board, "Regulatory and
5
Oversight of the Financial Planning Profession."
The discussion has been going on for
I did find a document called ... it is from the
6
And, as Advocis just indicated, I think
7
keeping it simple is probably the best route, and that is
8
why I like this document, even though it was 2010 when it
9
was published.
10
starting point.
11
It seems to keep things simple.
It is a
So if I could quickly just go through the
12
four points they make as possible recommendations:
13
the title, "financial planner" should be protected in law
14
or regulation.
15
financial advisors or financial planners but ... yet,
16
until that is in place.
17
Simple.
Use of
So let's not discuss about
The second is financial planners should be
18
held to a fiduciary standard of care in law.
It seems
19
pretty straightforward.
20
and I have been at symposiums where there is some
21
discussion and arguments from lawyers who say, "Well, you
22
know, they don't need to go that far," and some of the
23
arguments have been, "Well, clients already think there is
24
a fiduciary duty with advisors," but there isn't.
25
fact that they find out after the fact, and there is a
You may get arguments on that,
So the
53
1
loss, is of no use.
2
The third one is use of related titles
3
should be covered in law and regulation, also.
4
only the financial advisor but, if there are other titles
5
that are going to confuse the consumer, those need to be
6
discussed more, too.
7
So not
And the last one is oversight of the
8
financial planners should be undertaken by a professional
9
financial planning body.
It would not be the
10
responsibility of the government to do the oversight and
11
regulation; it would be some professional financial
12
planning body, the FPSC, there are others, obviously.
13
So that burden would not fall to the
14
government; it would stay within some association, some
15
bodies, depending on which body you are a member of.
16
Pretty simple, four very simple
17
suggestions that come up, and you work with those, and you
18
can come up with more detail.
19
MR. LIST:
I know you had something, but I
20
want to clarify, because Alan referenced the Financial
21
Planning Standards Board, and I want to make sure that
22
people understand, that wasn't our publication.
23
member of FPSB.
That is our international body that we
24
are a member of.
Stephen Rotstein, our vice president,
25
policy, was on that committee that published that.
We are a
So it
54
1
is not our words.
2
participated in.
3
4
It is our global body that Stephen has
THE MODERATOR:
That is called a point of
privilege, so ...
5
MR. LIST:
Thank you, point of privilege.
6
THE MODERATOR:
7
MR. DE GOEY:
Yes, sir?
My name is John De Goey.
I
8
am a certified financial planner or practitioner, and
9
associate portfolio manager at a firm called Burgeonvest
10
Bick Securities Limited, here in Toronto.
I am one of the
11
relatively few people who is participating today who is
12
actually a practising financial planner.
13
One of the things that I find interesting
14
in the first two questions in listening to the people who
15
go around the table is that they are sort of mixing, as a
16
Venn diagram.
17
certified financial planners in Ontario, and Ed mentioned
18
that there are about 40,000 financial advisors in various
19
capacities.
20
Cary mentioned that there are about 9,000
And listening to people speak, many
21
people, I think, when they are speaking, are speaking to
22
the 40,000 financial advisors question, when in fact the
23
question being asked is with regard to the 9,000 financial
24
planners.
25
talked about this a few times, that people have ... John
And so it is important that, again, we have
55
1
has mentioned this as well, that we need to be clear with
2
the titles, and when even the people who are close to it
3
within the room are unclear as to what we are talking
4
about, there is an obvious concern that we may be biting
5
off more than we can chew.
6
So in the interest of full disclosure, I
7
agree with what John says and with what Cary says, that we
8
should really be ... we are focusing right now on the
9
9,000 certified financial planners, unless we decide to
10
draw the line for financial planning, the line, somewhere
11
else, and, you know, PFPs or whatever, but I think it
12
should be the CFPs.
13
established and the line has been drawn, we can start
14
raising the bar.
15
And then, once that law has been
As it is right now, there is an arbitrage
16
opportunity where you have so many SROs for insurance, for
17
mutual funds, for securities, at least those three, that
18
are setting their own rules with regard to their own
19
internal product sales, you are not really raising the
20
bar.
21
retirement income, the greatest way of having that
22
certitude is to have a clear test that is unambiguous,
23
that people know that the advisor either has it or does
24
not have it.
25
If you want to protect consumers and protect their
So if you have 9,000 people who have
56
1
cleared a certain hurdle and that only those 9,000 people
2
within Ontario are qualified to give financial planning
3
advice, that is what will protect consumers because,
4
otherwise, they will go to other people who they ... but,
5
in the long run, I agree with Ed.
6
the day the objective is to get all 40,000 people in
7
Ontario to a certain level.
8
do, at first.
9
I think that is too hard to
THE MODERATOR:
10
MR. SKWAREK:
I think at the end of
Please?
Ed Skwarek, from Advocis,
11
again.
12
point and that was, you know, in these documents it refers
13
to financial planners.
14
going by memory at this point, started off talking about
15
consideration for how to regulate financial advisors,
16
including financial planners, and then started using the
17
term financial planner through the document.
18
I think John raised a really important question or
The Fall Economic Statement, just
In conversations with the ministerial
19
staff, we said, "Is this what ... what is the objective
20
that the Ministry is trying to achieve?
21
keep this as a narrow discussion on financial planners, or
22
is this a broader discussion about financial advisors
23
inclusive of financial planners?"
24
often, the use of the term may not be ... no offence to
25
communications people at all, the use of the term may not
Are you trying to
And we were told that
57
1
be fully understood by the drafters of the documents and
2
the people in the communications department going forward.
3
I can understand why that mistake happens,
4
or that confusion.
5
why that confusion happens, but I think we have to be
6
careful and really clarify what we are talking about in
7
these consultations, because are we to assume, then, that
8
this is really supposed to be just a narrow discussion
9
about financial planners, or is this supposed to be a
10
It is not a mistake.
I can understand
broader discussion about financial advisors?
11
And I think we need the clarity there
12
before we can move forward.
Absent that, I am concerned
13
that, you know, we may be moving in the wrong direction or
14
other people may be moving in the wrong direction.
15
THE MODERATOR:
16
MR. LIST:
Yes, please, Cary?
I think Ed makes a really good
17
point, and we raised that with the ministerial staff, as
18
well.
19
think we can all agree on that, that there is
20
interchangeable use of terms.
And I think it speaks to consumer confusion, and I
21
However, that doesn't refute the fact that
22
there is ... within the realm of financial planning, there
23
has been a lot more evolution in clarification of what a
24
financial planner is, what financial planning is,
25
standards around that, than this broader notion of
58
1
2
financial advice.
And I would like to go back to the
3
suggestion around what can be done to improve a regulatory
4
approach, is if there is an opportunity to define
5
professional space, you know, as you talked about planning
6
as a specific area, is there a professional space ...
7
throwing out this generic term that everybody is using for
8
everything, including a licensed mutual fund salesperson,
9
and re-establishing terms and titles that consumers are
10
going to understand, that is going to resonate with them,
11
that could actually have clearly defined knowledge,
12
skills, abilities, competencies built around them.
13
not our space, but we would certainly not argue against
14
such a concept if it made sense.
15
MS O'HAGAN:
It is
If I can just interject,
16
because I am from the Minister's Office and I was involved
17
in reviewing many of the drafts that led to the Fall
18
Economic Statement.
19
the negative, really.
20
I would just like to express this in
So the use of the term, in one instance,
21
"financial advisors and planners", and then in subsequent
22
instances, "financial planners" was not intended in any
23
way to limit the scope of this discussion.
24
MR. PRYOR:
25
Just picking up on Cara's
comment, a lot of the discussion has been focused about
59
1
IIROC/MFDA and that regulated channel, the 40,000 advisors
2
and the 9,000 that is specific to financial planners.
3
The question I would ask Cara just on that
4
basis was presumably you are all ... the Ministry, from a
5
policy perspective, will be looking at the person goes
6
into a bank branch, an elderly person, gets advice on
7
their GICs and not in the stocks and bonds, and the bank
8
teller says, or whoever at the bank, says, "Well, you
9
know, this is your income, and this is what you want, so
10
we should buy some GICs that mature at various periods."
11
To me, that is financial planning, too.
12
So is ... if it is the scope of the review
13
of the policy perspective from the Ministry, then I think
14
we have forgotten, we haven't talked a lot about what is
15
going on out there, outside of the IIROC and the MFDA
16
channel, and it could be in the bank channel, the credit
17
union channel, all other sort of channels where financial
18
services are being provided, where it could be financial
19
planning, depending on how you want to define it.
20
So I think that is part of the concern
21
that I have is the concern we have talked about is the
22
regulated channel, but it is on the unregulated channel,
23
the Ministry is ... there is nothing there, so it has to
24
do something.
25
I am not sure what, but ...
MS O'HAGAN:
Well, I think that is one of
60
1
the reasons why we are having these consultations is to,
2
you know, look at all these issues.
3
THE MODERATOR:
Any other comment on this
4
question?
5
“Are there approaches to regulating financial planners
6
which you would recommend, and ... for example, how does
7
your proposal compare to how Ontario regulates other
8
professional services, service providers, and how does it
9
compare to ... how would it compare to what is being done
10
If not, then we can move to question no. 3:
elsewhere?”
11
MR. MURPHY :
A question, to begin?
12
THE MODERATOR:
13
MR. MURPHY:
Yes?
Are we now talking about
14
financial planners or financial advisors?
15
MR. LIST:
16
And it is not a rhetorical
question, right?
17
MR. MURPHY:
Yes, I am afraid it is not.
18
THE MODERATOR:
Sir?
19
MR. McLACHLIN:
Hi, I am Peter McLachlin,
20
also from Advocis.
I guess in terms of question 3, and
21
what sort of a regulatory approach we would like to see,
22
we have been first starting to define that from Advocis's
23
point of view, I guess from a negative position:
24
want to see a regulatory model that is ... leads to a
25
bifurcation of the financial advice sector in Ontario.
We don't
61
1
We don't want to see financial planners,
2
for example, subject to a certain stricter set of
3
regulatory requirements and then a broader set of
4
financial advisors not subject to that because we are
5
fearful that will lead to, inevitably, a race to the
6
bottom, in which individuals and firms, for whatever
7
reason, perhaps some of them will be unscrupulous, most of
8
them will simply be trying to avoid onerous compliance
9
requirements, will decide, "Okay, let's not go the
10
financial planning route.
11
advisory route."
12
We will go the financial
I guess related to that there is also a
13
general concern that there could be at least the
14
appearance of regulatory capture if a smaller group with a
15
higher threshold of standards is regulated, and the rest
16
of the sort of great unwashed advisors are left to simply
17
wander around, adhering to perhaps existing suitability
18
requirements.
19
could perhaps flow fairly quickly from a bifurcated model.
20
So the appearance of regulatory capture
Another problem obviously with a
21
bifurcated model is that we see it as basically
very
22
wasteful of regulatory resources, particularly on the
23
government side.
24
can see that there would now have to be two sets of
25
compliance systems, and that would be very expensive.
And, of course, on the firm's side, one
62
1
Finally, in terms of consumer confusion,
2
we think that there should be a common, uniform set of
3
standards, for example, in terms of what information has
4
to be disclosed in a background check, what ... are there
5
appropriate ways of gathering data from retail
6
intermediaries, what data is to be gathered, how is it to
7
be recorded?
8
mechanisms?
9
What are the appropriate dispute resolution
Are financial planners going to be subject
10
to something more stringent, as opposed to advisors in
11
general?
12
Then, again, we see it is skewing of incentives.
So for all these reasons, we would urge
13
that the Ministry strongly consider a uniform,
14
comprehensive approach to this question.
15
16
THE MODERATOR:
Thank you for your
comment.
17
MR. LAWFORD:
John Lawford again.
It is
18
tempting, it is so tempting to say absolutely right,
19
Advocis, because you are.
20
because everybody should be following standards that are
21
all pretty much the same.
22
looked at this a couple of times over a few years, and I
23
agree that you are in the industry longer than we are, but
24
we are in the consumer protection industry longer than you
25
are.
At the end of the day you are,
It is just, when ... in having
63
1
So we just see this as a situation where
2
starting with the smaller group of financial planners, it
3
is not confusing to consumers to say, "This group has a
4
designation.
5
6."
6
of it is not.
7
may or may not do some of the things that financial
8
planners do, but they don't do them all.
9
them all, and it is very simple, I think, for a consumer
10
to be told by a group like ours, or by the Ministry, or
11
anyone else, you have two choices:
12
money, and you can go and get it all planned out with a
13
provider that has this designation, and there you go, and
14
you can be assured that they have an oversight body, and
15
we have regulations around what they have to do in terms
16
of qualifications.
This group does these things, 1, 2, 3, 4, 5,
Part of it is selling securities, perhaps, but a lot
A lot of it is not.
17
And the other folks
They don't do
You can take your
Or you can go the other route, where the
18
compensation is from a different manner, and they are not
19
doing all of these things and they are not regulated in a
20
professional body sort of way, but there may be
21
regulations around what they sell you.
22
There may be different ways of charging the consumer for
23
those two ones.
24
have a full plan done.
25
and we might recommend, given the way the market shakes
Take your pick.
Somebody may feel that they don't need to
Somebody might think that they do,
64
1
out, that somebody takes one route or the other.
2
The reason why that is efficient is
3
because, at the moment, people are poaching back and
4
forth; at least, that is the way it looks to consumers, I
5
think, is that there are a lot of groups calling
6
themselves financial planners who don't do very much of
7
the other activities.
8
planning side are complaining that they do all this work,
9
and folks are calling them the same thing.
And then the folks on the financial
It is selling
10
two different products, is what it looks like to us;
11
financial planning is not the same thing as financial
12
advice.
13
So at the end of the day, why we would
14
like to have everybody following certain standards ... you
15
know, it really looks like two different products to us.
16
THE MODERATOR:
17
MR. LIST:
Cary?
Two points:
One, they are
18
completely unrelated, so I will address the first one,
19
which was this discussion between John and Ed.
20
sound tempting, and you know, I think a lot of these
21
conversations, we are agreeing on an awful lot of the
22
problem here.
23
It does
Where we really find that right now it is
24
not possible or prudent to try to bring everybody under
25
one umbrella, it would be comparable to, if you look at
65
1
the regulated health professions in Ontario, and you were
2
to imagine that everybody was a professional regulated
3
health provider.
It doesn't mean anything, because it
4
means too much.
There are too many people operating in
5
that realm.
6
skills, abilities, competencies that those individuals are
7
supposed to deliver, all under one title or one umbrella.
8
9
You couldn't create a clear set of knowledge,
And that is in fact why, in Ontario, we
have rules or guidelines around all of the regulated
10
health professions, and then specific, clear knowledge,
11
skills, abilities around a specific, clearly identified
12
profession.
13
was the first point.
14
Might there be overlap?
Absolutely.
So that
The second point, completely unrelated:
15
What approaches should the government consider?
16
Irrespective of that argument, if we are moving to
17
recognizing the importance of professional advice, look at
18
a model that regulates professional advice through a
19
professional model, not through the existing SRO
20
structure, to us, that would be akin to, if you look at
21
opticians, who in most cases
22
mean, do sell eyeglasses, and make money from it, and
23
allowed to offer them, but it would be akin to them being
24
regulated by the ... those that regulate the manufacture
25
and distribution of the eyeglasses; that is ... it is
are allowed to sell ... I
66
1
completely ludicrous.
2
what it is, and allow that to be regulated as a
3
profession.
4
So look at professional advice for
Can they be licensed on the other side?
5
Absolutely, but leave the regulation of product and
6
transactions and specific advice around what products I
7
should buy to the existing regulatory structures and leave
8
professional regulation to a professional one.
9
THE MODERATOR:
10
MR. SKWAREK:
Thank you, Cary.
Ed?
Ed Skwarek, from Advocis.
11
Yes, there is so much common ground, I think, around this
12
room on what the problem is, and I think we all agree that
13
the current system is not working the way it needs to
14
work.
15
end goal of we have consumer protection, enhanced
16
preparation for their financial well being, do we go
17
narrow, or do we go broad?
18
choices we have to make.
So then what approach should we follow to get the
19
I think those are the two
The narrow approach is let's
20
professionalize financial planning.
The broad approach is
21
let's professionalize financial advice.
22
difference?
23
planning, you are going to capture 9,000 out of a group of
24
40,000.
25
protection, with 31,000 outside of the envelope, are you
What is the
The first one, professionalizing financial
Going back to what is the purpose, consumer
67
1
achieving that consumer protection that you are looking
2
for?
I don't think you can.
3
And if the goal is consumer protection, I
4
don't think we have a choice but to say, let's go
5
everybody under the tent.
6
you know, it is tempting to go that route, but it is not
7
necessary.
8
it is mandatory, it is necessary, and I don't think it is
9
biting off more than we can chew.
And I have heard people saying,
I don't think it is tempting at all.
I think
I think what you are
10
saying, the time has come to look at things and set the
11
bar.
12
we are going to be expecting of all 40,000 financial
13
advisors in Canada.
14
This is what the bar is.
These are the requirements
But we have to understand, within that
15
group, they are not all equal either, and that is the
16
specialized people, the CLUs, the CFPs.
17
dedicated themselves to enhancing their professionalism as
18
a specialist would, and people who want to use those
19
people recognize, (a) it is going to cost more.
20
They have
Not everybody needs to be going to that
21
specialist, though, either.
We have to look at who are we
22
trying to serve.
23
There are people who are putting $5,000 a year into their
24
... or $2,500 into their RRSP, and there are other people
25
who are using complex insurance products and tax rules to
The consumer is a very diverse group.
68
1
achieve their goals.
So it is very different.
Those are
2
the people who need the specialists, but everybody needs
3
to have the financial advice to help prepare them for
4
later in life, because the government simply cannot
5
provide the services that they have been doing.
6
We have to tackle the problem now, and if
7
we don't, if we go narrow as opposed to broad, we are not
8
solving any problem at all, and we are not enhancing
9
consumer protection.
10
11
THE MODERATOR:
MS BELL:
Yes, yes, I did.
I just wanted
to ...
14
15
I believe we
have a ... did you raise your ...?
12
13
Thank you.
THE MODERATOR:
Go ahead.
And state your
name.
16
MS BELL:
Sorry, Debbie Bell, I am with
17
the Canadian Securities Institute, and it is not often
18
that I like to agree with Cary, but I am afraid I am going
19
to have to here.
20
MR. LIST:
21
MS BELL:
Oh, come on ...
We certainly agree that there
22
should be some standards for financial advisors, but they
23
shouldn't be the same for all financial advisors;
24
different consumers need different levels of consumer
25
advice.
And so we need to be sure that we look at those
69
1
standards, and not set the bar so high for everybody that
2
not ... that those people who really need the advice at
3
the base levels won't be getting them because the senior
4
advisors won't have time for those individuals.
5
THE MODERATOR:
6
Thank you.
If these are
all the comments, we can move to...
7
MR. MCLACHLIN:
Sorry, I have one, sorry.
8
THE MODERATOR:
Sorry, sorry.
9
MR. MCLACHLIN:
Peter McLachlin, Advocis.
10
Just a couple of follow-up points:
11
agrees that there are concerns over efficiency and inertia
12
regarding potential reform, but we agree also, like most
13
people here, that reform is necessary.
14
Advocis certainly
Several sort of disparate or unconnected
15
points:
16
alphabet-soup problem of titles.
17
somewhat intractable at this stage.
18
necessarily to try to solve that problem if we are willing
19
to bring in a
20
holding out as a financial advisor, a minimum set of
21
requirements.
22
I think most people recognize there is an
That is, perhaps,
I don't think we need
baseline set of standards for anyone who is
And if there are other people who want
23
more a specialized designation, that they feel CFPs should
24
be held to a higher standard, it certainly doesn't
25
conflict with the minimum baseline standards for everybody
70
1
in the retail intermediary sector when it comes to
2
securities.
3
In terms of efficiency, I think the real
4
efficiency concern would be to only regulate a smaller
5
group that perhaps Main Street Canadians can't afford, and
6
then we can see a further skewing of incentives and a
7
larger advice gap, skewing of incentives in terms of who
8
is going to enter the profession and who they plan on
9
serving in the profession, and the growing advice gap for
10
middle-class Canadians.
11
to some extent overseas with the RDR.
12
13
And, of course, this is happening
Anyway, that is all I wanted to say, thank
you.
14
THE MODERATOR:
15
MR. LAWFORD:
Yes?
Yes.
No, I wanted to make
16
our position more clear in the sense that we are not
17
against a two-stage process which could be happening
18
concurrently.
19
to move on this.
20
that we don’t have any ... I don't know if we have anybody
21
from the consumer ministry here, as well, today but a more
22
structural approach would be to knock off, if I can put it
23
that way, the financial planning regulation, while at the
24
same time working towards the regulation of the financial
25
advisors at a certain level.
I just don't know how the government wants
And it is sort of interesting, also,
They are not mutually
71
1
exclusive, and Quebec did that.
2
financial planners with their institute, and they have an
3
overall regulation of their financial advisors, which is
4
higher than Ontario's.
5
And so you have the
And we are just trying to push both
6
things.
It is just ... and I do and don't agree with Ed
7
that it is too big a piece to chew.
8
you have to do the parts you can do, and not ignore the
9
other parts, as well.
It is a big meal.
So
So that is some clarification of
10
our position.
We are not against having all advisors with
11
standards, and we just think that the financial planners
12
is being a little misused, and that that is an easy one to
13
deal with ... not an easy one, but it is a more discrete
14
area that can be handled in a different way, but it fits
15
in with another, larger regulatory scheme for all
16
advisors.
17
So that is...I just want to clarify that.
18
MR. ROTSTEIN:
It is Stephen Rotstein from
19
the Financial Planning Standards Council.
20
pick up on this discussion of who a financial advisor is.
21
And obviously I work in the sector, and I've got to tell
22
you, I have no idea who a financial advisor is.
23
a homogeneous group.
24
25
I just want to
It is not
We are talking about salespeople, mutual
fund salespeople, we are talking about insurance
72
1
salespeople, we are talking about people who truly are
2
financial planners.
3
a financial advisor.
4
advice.
5
financial advisor?
I am not sure if my mother-in-law is
She gives me a lot of financial
So you know, the taxi driver, are they a
6
MR. MURPHY:
How is it working for you?
7
MR. ROTSTEIN:
It is not.
So, you know,
8
that is the problem.
9
this 40,000; I am not even sure where we are getting this
10
40,000 number from.
11
carving it.
12
I mean, we are trying to talk about
And I am not sure where we are
But I do know, in the model that we have
13
talked about today that FPSC has proposed, we are talking
14
about people who are held out as financial planners.
15
is a distinct title.
16
knowledge, skills and ability backing it up.
17
Know what it is.
It
There is
As I say, it is a bite-sized chew as
18
opposed to, I don't know, a buffet or something.
19
think it is a more of a proportional and appropriate model
20
for the government to consider.
21
22
23
THE MODERATOR:
So I
I think we have a point of
privilege.
MR. SKWAREK:
Yes.
It is Ed Skwarek from
24
Advocis, just to provide clarification where the ... well,
25
actually, a point of clarification then maybe a comment on
73
1
where the 40,000 number is coming from.
2
number is the number of people in Ontario licensed to
3
either sell insurance products or securities products,
4
either MFDA licensees or IIROC licensees.
5
where that 40,000 comes from.
6
That 40,000
So that is
We are talking about moving away from
7
financial sales.
I think we have moved away from just ...
8
it is not just the sale of a product anymore.
9
advisor, if they are licensed under IIROC or under the
A financial
10
MFDA, has to do a needs analysis.
So it is not just
11
sales.
12
their needs are, and then trying to identify the
13
appropriate product for them.
It is talking to the client, determining what
14
So it is just not ... I don't think we can
15
say this is a mutual fund salesperson; this is a financial
16
advisor providing advice on mutual funds based on the
17
information that they have gathered in meeting with their
18
client.
19
20
MR. DE GOEY:
A point of personal
privilege, then.
21
THE MODERATOR:
22
MR. DE GOEY:
Yes.
John De Goey.
I just
23
realized that, even what Ed said, I thought I had it all
24
down, and then I realized that maybe not.
25
One of my friends, Cynthia Kett, is one of
74
1
the best financial planners in the country.
2
licensed to sell anything.
3
40,000 that you just mentioned.
4
She is not
So she is not part of that
Just so we are clear...
So again, to the people from the Ministry
5
here, you have to be really clear, because we keep on
6
talking about different things, and every time I think I
7
know what we are talking about, it turns out we are
8
talking about something else.
9
So really, really provide some clarity
10
here, because I thought we were talking about the 9,000
11
financial planners.
12
people who have a licence to sell something, 9,000 of
13
which are planners, 31,000 of which are not, but there
14
might be some people who are financial planners who don't
15
have a licence.
16
diagrams.
17
talking about different things here, people.
Maybe we are talking about the 40,000
It is functions and relations, it is Venn
Get the Venn diagram right, because we are
18
THE MODERATOR:
19
MR. SKWAREK:
Ed, first, and then ...
Ed Skwarek, Advocis.
And
20
you are absolutely right when you talk about, you know,
21
some people aren't even regulated.
22
within the financial planning specialization that are the
23
fee-only group, and they aren’t getting any commission for
24
the product that they ... well, they are not actually
25
giving the product recommendation because you can't give
There is a group
75
1
the product recommendation absent having a licence.
2
So they are outside of the envelope, but
3
they are providing strictly -- correct me if I am
4
misstating this -- financial planning advice, and then
5
they may be directing that person to somebody who can
6
execute it for them.
7
So I think that is a growing group, but I
8
still think it is a small group, but you are absolutely
9
right.
10
The part of the problem is absent having
11
the appropriate definitions and what things mean, we can't
12
say exactly how many people are in the business because,
13
if you can't define it, then you can't do the counting.
14
So what we have done at Advocis is just look at the
15
licensees to get that round number.
16
absolutely right, that there are people outside of the
17
envelope as well.
18
19
THE MODERATOR:
But you are
We will go to Cary and
then Hugh.
20
MR. LIST:
I would like to help in
21
clarification a little bit on this conversation, because
22
John made a very important point that I think got lost on
23
all of us.
24
There absolutely is a number of
25
individuals, and I can share here as a point of
76
1
information, approximately 2,000 individuals across
2
Canada; so you could figure around 1,000-plus in Ontario
3
who are holding themselves out as financial planners
4
through CFP certification that are not licensed to sell
5
any products at all.
6
There are two aspects to that.
I think
7
that it reinforces why any regulation should be on a
8
professional basis, not on a ... through a product
9
regulatory structure, because you would be leaving out a
10
group of individuals.
11
The second point though is, irrespective
12
of that, I think there is less consumer protection concern
13
there because frankly, and I don't have a piece of paper
14
to back this up, but I am sure we could get this
15
information, there are very, very few, if any, individuals
16
in that area that are actually offering financial
17
planning, that have no link to a licence, that don't
18
already have their CFP certification.
19
own assessment, but we can get that information.
20
Again, that is my
So there are already at least some
21
protections there, which doesn't negate the point that is
22
being made, that it is all the more reason for a
23
professional model that supersedes any product sales
24
structures.
25
MR. MURPHY:
Actually, Cary has sort of
77
1
touched on the point that I was going to make, identifying
2
that there are about 2,000 advisors across the country.
3
But I was going to offer that our statistics say that
4
between about 4 and 6 per cent of financial advisors in
5
Canada are unlicensed and make their living off purveying
6
financial advice, professionally.
7
The balance, in some respect, gain at
8
least a portion of their revenues through the use of the
9
integration of financial product.
10
THE MODERATOR:
11
MS BELL:
12
MR. MURPHY:
13
MS BELL:
Okay.
Go ahead.
I am sorry, you were finished?
Yes.
Okay.
I just wanted to point
14
out that there are many other individuals that you may not
15
be thinking of who provide estate or mortgage or tax
16
advice, or GICs, that certainly wouldn't be overseen
17
unless you are a mortgage broker.
18
THE MODERATOR:
19
MR. MURPHY:
Go ahead.
An interesting, related
20
point:
Some of the research we have done simply with the
21
general population of consumers asks consumers whether or
22
not they have a financial advisor or not.
23
clients was very surprised and came back to me when I told
24
him that our statistics say about 43 per cent of Canadians
25
claim that they have financial advisors.
And one of my
But the balance
78
1
of Canadians say, "Yes, well, we get financial advice from
2
our banker or from our mother-in-law, or from," you know,
3
these kinds of things.
4
So, again, this goes back to the whole
5
issue of financial literacy in Canada.
6
specialists, can't agree on the semantics here, so that
7
consumers should have any way of figuring it out is
8
painfully challenging.
9
THE MODERATOR:
We, as a group of
I see we are at the last
10
part of the discussion which has approached the meaning of
11
question 4, which ... and I will just state the question:
12
"Would regulation affect your business model of providing
13
financial planning services?"
14
Now I don't know if I should say financial
15
planning services, financial advising services or
16
financial services!
17
Please.
18
So ... and if so, in what way?
MR. DE GOEY:
My name is John De Goey,
19
once again from BBSL.
I am one of maybe about a thousand
20
people in Canada who is both a portfolio manager and a
21
certified financial planner.
22
something called investment counselling.
23
counselling fees are tax-deductible.
24
someone engages me, I try to do everything I can and call
25
it investment counselling so as to maximize the potential
Portfolio managers engage in
Investment
Therefore, if
79
1
deductibility of the services I provide.
2
If someone contacts me and engages me to
3
do simply financial planning, that fee is not deductible
4
under the Income Tax Act.
5
have a lot of people that I know, I know a few other
6
people that are part of that 1,000 that are both CFPs and
7
investment counsellors, they do all the fee, do all the
8
billing as investment counselling, and give financial
9
planning away as a loss leader.
10
So the way this works, and I
What I think would be much more
11
efficacious, what would be much more purposeful, is if we
12
could actually make it clear that financial planning is at
13
least as valuable and in my opinion, as a person who does
14
both, more valuable than investment counselling.
15
do that, you need to have it enshrined as being deductible
16
in the Income Tax Act.
17
And to
Now that is a federal responsibility, but
18
to the extent that the people in Ontario can actually push
19
for that, to speak with Minister Flaherty, I think that
20
would provide a great deal of continuity, especially as it
21
pertains to consumer protection and retirement income,
22
which is something that Premier Wynne has said is
23
important.
24
25
If you really want to incentivize people
to take control of their personal finances, give them a
80
1
tax break for doing so, but as long as the person they
2
speak with and the person they engage is, in fact,
3
qualified to do the work that is being done.
4
MR. LAWFORD:
I am just going to throw it
5
out there in terms of the way the question was -- John
6
Lawford, again -- was written, and perhaps the reason why
7
we are in the room makes this unnecessary:
8
also say why ... you know, I want to hear from the
9
independents and the other folks about how it is going to
10
but I would
impact your business.
11
I just want to make the point that from
12
looking at other professions, a lot of the time, once you
13
professionalize, your product-specific, if I could put it
14
that way, obligations fade away, because then you just
15
have a standard of care and you meet it, right?
16
you are not regulated by what you are selling; you just
17
have a standard of care and, if you don't meet it, you get
18
disciplined.
19
don't have to fill out a form for every time you meet a
20
client.
And then
And if you do meet it, you are fine, and you
21
And I know we have heard from people that
22
work in the industry that, "Well, yes, I can see that you
23
are concerned about consumers, and they are complaining to
24
you, but don't kill me with forms, because if somebody
25
comes in with, you know, the proverbial $2,000 to invest,
81
1
I can't take half an hour of my time, or an hour of my
2
time if 50 minutes of it is filling out forms."
3
So I get that, and we all ... we get that
4
at our end.
5
last question, just to keep in mind, is there probably
6
will be a necessary change to this area of law because it
7
is happening in other jurisdictions.
8
about it, to be absolutely honest, and so business models
9
will have to change.
10
But, you know, the concern I have with the
Consumers are mad
But it doesn't have to be the end of the
11
world if you are moving towards a professionalization
12
because you should be able to drop off a lot of the
13
paperwork, if I can call it that.
14
hope or the end goal of getting where we are.
15
THE MODERATOR:
16
MR. LIST:
At least that is the
Cary?
Again, I can't speak to it
17
directly with ... it has been 15 years since I have been
18
on the business side, or more.
19
professionalization on the advice side, I think that it
20
can impact business models in a very positive way both for
21
the consumer and, in fact, for the planner or advisor.
22
But to the point of
I think you ... I don't know if you
23
mentioned KYC or know your client, but there was something
24
about filling out forms.
25
know-your-client requirements.
It immediately made me think of
You know, I look at the
82
1
structures today which say the current SROs and product
2
regulators say, "You need to fill out these forms, and
3
there are very strict regulations and rules, and here is
4
the form that you have to use and here is the type of form
5
you have to use, and the compliance department is going to
6
make sure that you are ticking ... you know, crossing your
7
Ts, dotting your Is, and they are going to watch for all
8
of those little things."
9
Yet you have a situation where I go to my
10
advisor, my planner, whatever that individual, who is a
11
professional, and they say "Well, you've got a trust
12
account here, and you've got an RSP account here and you
13
have a cash account here, and we need to make sure for the
14
files these are independent.
15
relationship.
16
knowing your client.
17
client's needs and addressing it.
18
meeting regulatory requirements for the transaction and
19
the sale of the product that does not have anything to do
20
with the advice that you are giving for the person as a
21
whole.
This is under a trustee
We need KYCs, each one."
22
This is not about
This is not about understanding your
It is about fitting and
You know, these individuals are not three
23
or four people.
They are one, and they are a whole, and
24
with standards ... and we can't, at FPSC, we can't do
25
anything about that, because we are not recognized, our
83
1
requirements are not recognized in statute.
2
So if they are ... you know, the only
3
regulations they have is their requirement to fill out
4
whatever number of forms.
5
your obligations are professional to their client, they
6
have to have the due prudence and care to deal with their
7
client and they have to make sure that they can support
8
and defend, that they understand their client, they
9
understand their client's needs to the professional body
10
that is overseeing them, and follow all the rules around
11
the transactions and the product at the same time.
12
that is a win-win.
13
If you professionalize that, if
MR. GOLDHAR:
To us,
Alan Goldhar from the IAP.
14
I have come across this issue before, whether this would
15
impact the business model for the banking sector, and
16
there is no one here, doesn’t appear to be anybody on our
17
list from the banking sector, but their argument has been
18
that the individual at the counter, when you come in with
19
that $2,000 to invest in your RSP, they don’t want them to
20
be ... to have to fall into this whole regulatory thing,
21
just to call themselves something, that you would go to
22
them.
23
It is just not what they are doing.
So, again, this is where we separate the
24
sales from the advice.
Are they giving advice, if they go
25
up to you and say "I've got $2,000," at the bank counter,
84
1
"what do I do with it?"
2
you have to have them regulated, too?
3
Or how do you deal with them?
Do
This is, like, the first-year banking
4
clerk who is just learning their way, and basically they
5
are allowed to sell GICs or term deposits, that is it.
6
by the bank regulation itself, they are very restricted in
7
what they can do, but not by financial advice or planning
8
regulation.
9
are they brought into this 40,000 individuals?
10
So how do they fit into this whole thing, and
That is, again, the distinction between
11
advice and sales has to be made, first.
12
the sales side, they don't need this regulation, that's
13
fine.
14
have to now go through this whole regulatory thing, I
15
think there will be opposition.
16
17
18
So
And they are on
But if the bank ... you are telling the banks they
THE MODERATOR:
We will go to you sir,
first, and then we will go to Ed.
MR. PRYOR:
Okay, I was just picking up on
19
your statement, picking up on your comment, that's right,
20
I mean, is the bank teller saying, "Here, a
21
GIC," or is the bank teller doing more and giving some
22
advice of what their needs may be so you cross the line
23
into financial advice or financial planning.
24
25
five-year
The only other comment I would make is
whatever we do in Ontario, we have to be cognizant that
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... how this will affect national firms who will operate
2
across all jurisdictions, and a lot of them in the
3
securities and, MFDA and IIROC, a lot of the advisors are
4
dually licensed in multiple provinces.
5
So, from a compliance and oversight point
6
of view, whatever we do in Ontario may have significant
7
impacts on other jurisdictions.
8
9
So to the extent ... in a perfect world,
to the extent there was going to be a unified sort of
10
approach across the country, that would be a better
11
solution than a multi-bifurcated.
12
which is separate today, and ... but I am just ... I would
13
raise that as a comment.
14
THE MODERATOR:
15
MR. SKWAREK:
We do have Quebec,
Ed.
Ed Skwarek, from Advocis,
16
just following up on that point.
17
about looking at ... you can't just look at Ontario in
18
isolation.
19
are taking a leadership role on this issue.
20
I think you are right
But I think Ontario has signalled that they
Advocis has been talking to other
21
jurisdictions across Canada about these issues.
So I
22
think there is an appetite in multiple jurisdictions for
23
reform, yet you said Ontario is taking the initial step in
24
that leadership role, and I really ... well, my
25
understanding from conversations is other jurisdictions
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are watching very closely to see what Ontario does because
2
I think there is a desire to move in a more harmonious
3
fashion because of the nature of securities and insurance
4
regulation.
5
And I would also add, sorry, when we talk
6
about the model and the impact that it could have on the
7
business model, by professionalizing, we would really ...
8
and when I say professionalizing, I am talking about,
9
again, that broader group of financial advisors, we are
10
addressing a very real constitutional law issue in Canada,
11
where you have the separation of responsibilities from
12
federal and provincial jurisdictions.
13
We are also addressing the separation
14
between insurance regulation and securities regulation;
15
they are both very different.
16
and set the standards, that is going to address what
17
hasn’t been able to ... we have not been able to address
18
in Ontario or in Canada, that difference when we see, you
19
know, products are increasingly similar on the insurance
20
side and on the securities side, but they are regulated
21
differently.
22
But if we professionalize
And we are not going to be able to get
23
harmonized regulations between those various sectors, but
24
we can harmonize the regulation of the financial advisor
25
to address things that have not been able to be ... that
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we have not been able to address because of that divide
2
that exists.
3
THE MODERATOR:
4
MR. LIST:
Cary?
Yes, we would completely agree
5
with the issue of multi-bifurcation and the challenge in
6
the regulatory system, both provincial jurisdiction as
7
well as the jurisdiction within various regulatory
8
structures.
9
So again, that would support a different
10
model that could not necessarily ... you know, the federal
11
government doesn't have jurisdiction over professions, so
12
you couldn't have a single unified national profession,
13
but you can have a model where the lead of one province
14
does not actually interfere with the ability to take that
15
out across multiple provinces.
16
And I think the comment was Quebec is
17
different.
Quebec is different; however, we know that
18
national firms are challenged with this differentiation,
19
and one of the things that, both in the financial planning
20
arena, the Quebec Institute of Financial Planning, which
21
sets the standard and certifies the individuals in Quebec,
22
and our organization that does not interfere with the
23
Quebec regulatory system, but we have individuals across
24
the country, we ... both of our organizations recognized
25
that very early on and have been working now, over a
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period of about eight to 10 years, and it is slow and it
2
is difficult, especially when we are dealing with Quebec,
3
but to this notion of unifying ... and we are very, very
4
close.
5
have already got a draft right here, a set of unified
6
Canadian financial planning definitions, standards and
7
competencies, jointly published by the Quebec Institute of
8
Financial Planning and FPSC.
9
In fact, we are about to publish this year.
I
So there are ways of overcoming that, and
10
I think we need to continue and move in that direction
11
towards ... and I think it is a lot easier in a
12
professional model to get the professions, or the
13
regulated professions from province to province together,
14
and join under a single set of national standards.
15
It has happened in many other regulated
16
professions, whether it is allied health, whether it is
17
accounting or any other profession; it is still seen as a
18
single profession across Canada, but there actually are,
19
really, cooperation agreements amongst the provinces.
20
21
22
THE MODERATOR:
comments, ideas, suggestions?
MS ALLAN:
Thank you.
Are there more
Yes, please ...
I guess I would just like to
23
say something in defence of financial advisors that aren't
24
planners, which does form the bulk of our membership, and
25
they are not scraping the bottom of the barrel.
They are
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not sinking to the bottom in doing what they do; they are
2
just choosing a different model.
3
really built on trust and providing good advice and good
4
service to their clients.
5
And their businesses are
So I just want to make sure that we don't
6
lose sight of that in this whole discussion, that, you
7
know, it is not that the planners are the good guys and
8
the advisors are the ones that are sneaking and trying to
9
get around the system, because that is not who our members
10
are.
11
And obviously I don't know all of our
12
members personally, but I know a lot of them.
13
lot of them, and they really care about their clients.
14
am saddened to hear how upset consumers are, and I think
15
part of the problem is that advisors aren't telling their
16
story well.
17
I know a
I
And I think Hugh, you mentioned that in
18
your initial comments, is that advisors really need to
19
educate their clients better on what they do and how they
20
are paid.
21
commission, and our members do disclose that in client
22
meetings if they are paid that way.
23
thing.
24
person selling them the car is going to get a commission
25
on the sale, and it is not inherently wrong.
There is nothing wrong with being paid by
It is not a bad
I think everyone who buys a car knows that the
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But I think that is one thing that we as
2
an organization are trying to do, is to help our members
3
speak to their clients about what they do, and I think
4
that is the thing I am taking away from this, is that we
5
need to support them more in that regard.
6
MR. MURPHY:
Can I ask a quick question of
7
Jonathan:
In fact, you referred to an OSC study that
8
suggested that Canadian consumers don't trust financial
9
... or at least that is what I took from what you said ...
10
MR. BISHOP:
11
that didn't trust their financial advisor.
12
that was released in March of 2013.
13
MR. MURPHY:
No, no, Ontario consumers,
It was a study
That is very interesting to
14
me, and I will have to ... you don’t mind me following up
15
with you on it?
Because ...
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MR. BISHOP:
No, absolutely, I would be...
17
MR. MURPHY:
... my research shows quite
18
the opposite, quite the opposite ...
19
20
21
MR. GOLDHAR:
The OSC site, it is right
there.
MR. MURPHY:
... and that financial
22
advisors, whether they be ... whether they hold a CFP
23
designation or not, are generally tremendously well
24
trusted by consumers.
25
MR. GOLDHAR:
That was an initiative from
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2
3
our group, and it is on the website.
MR. MURPHY:
Okay.
It often comes down to
the nature of the question, so ...
4
MR. GOLDHAR:
Absolutely.
5
MR. LAWFORD:
Absolutely.
I mean, just
6
from our focus groups, it was pretty obvious that
7
everybody thought that their particular advisor was great,
8
but they had all heard stories that were trouble, and they
9
didn't really trust the industry, but their person was
10
actually really good.
I mean, so, you know, that is maybe
11
a problem, maybe not.
I don't know.
12
THE MODERATOR:
13
MS SPEED:
Yes?
Lindsay Speed from FAIR Canada.
14
just wanted to make a quick point:
15
significant amount of research and I think that this will
16
kind of follow and evolve with the consultation, but with
17
respect to professionalism, I think that that is another
18
issue in terms of semantics, and your definitions and that
19
sort of thing, because I think there are a lot of things
20
... and I guess I am tying this directly to commissions
21
and to your point about that, because I think it is really
22
important to be cognizant and to understand the different
23
models in terms of compensation of professionals.
24
25
I know Cary has done a
To my mind, a true professional is not
going to be driven by a compensation model.
And as much
I
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as people like to think that they are acting independently
2
and in the best interests of the client, you hear that
3
over and over again, but I think a lot of ... there is a
4
lot of other discussions going on in the securities realm
5
about whether the industry believes it acts in the best
6
interests of the client and whether they have a legal duty
7
to do so.
And currently, they don't.
8
9
And I think that this is a really
important issue that comes into play when you are talking
10
about financial planners, about financial advice and about
11
the rest of it.
12
I mean, to John's point, I don't know how
13
you get to a professional model of all advisors, as Ed is
14
suggesting, with the current compensation structure.
15
think there is a lot of issues and there is a lot of
16
underlying issues.
17
you are getting paid trailing commissions, but what does
18
disclosure mean?
19
or does it mean, I guess, teaching them what that means
20
and how the whole system drives?
21
I
You can disclose to your clients that
Does it mean giving them a percentage,
So I think it is just something to be
22
cognizant of going down the road in terms of examining
23
what a profession is and what financial planning means, if
24
you are going forward with regulating it in any fashion.
25
THE MODERATOR:
Thank you.
So we are
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2
about finished now, if there are no other comments.
I will thank you for taking part in this
3
debate and consultation.
4
suggestions and comments to make, you have until January
5
31st to send your submission/comments.
6
And if you have other
And if you need to be reminded of the
7
address and e-mail address of the Ministry of Finance,
8
just come and talk to me, and I will provide it to you.
9
10
11
And I would like to invite Frank to
provide a few ... some wrap-up comments.
MR. ALLEN:
Fine.
Thank you, Christian.
12
I want to thank everyone for your contributions; it has
13
been a very helpful session.
14
I would just echo Christian's comments
15
about the desirability of providing written submissions.
16
I think some of the semantic discussion that we have
17
benefitted from today, it would be helpful to have that
18
amplified in writing, and get the benefit of the expertise
19
and experience and industry familiarity that is in this
20
room, and we will make the same request on Tuesday.
21
It is very important that we have the
22
benefit of your insights into what you think we should be
23
looking at, how you think we should be proceeding, why and
24
how we could best work in the interests of all Ontarians.
25
In terms of moving forward, these two
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consultations are our preliminary step in this review
2
process.
3
transcripts and also reviewing the submissions that are
4
filed by the end of the month.
5
Staff in the coming weeks will be reviewing the
And our objective will be to be able to
6
provide an update to the Minister's Office, hopefully in a
7
timely fashion so that it can be at least considered in
8
terms of the process leading up to this year's spring
9
budget.
10
But this is a very important topic, it is
11
a very complex and nuanced topic.
12
viewpoints and opinions that have been shared with us, and
13
really would benefit tremendously if you would take the
14
time and effort to reflect your concerns and your
15
suggestions in written submissions by the end of the
16
month.
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18
19
20
21
22
23
24
25
THE MODERATOR:
We appreciate the
Thank you.
--- Whereupon the roundtable concluded at 12:56 p.m.
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I HEREBY CERTIFY THE FOREGOING
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to be a true and accurate transcription
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of my stenomask recordings
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to the best of my skill and ability
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__________________________
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ROBERT LEE
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Certified Stenomask Reporter
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