Canadians have been abuzz with the news of shady bank practices and the “what’s in a name?” controversy over advisors vs advisers instigated by the CBC. But the real problem is how the entire financial industry is regulated.
Provincial regulators need to overhaul the requirements for the financial industry to better protect investors. Sure, they’ve recently nibbled around the edges by requiring investment companies to disclose the fees they are being paid, and advise the investor of his or her personalized rate of return – but they still have a long way to go.
Let’s call a spade a spade – and a salesperson a salesperson
In Quebec, the finance industry is more tightly regulated. But in the rest of Canada, financial representatives can call themselves any number of professional sounding designations.
Does your financial adviser provide advice that’s in your best interest – or do they just sell a product? Investors can’t be blamed for failing to recognize the difference.
There’s nothing wrong with being in sales – even commissioned sales. We deal with salespeople every day. And, some are very good. When I’m buying a duvet for my bed, a washing machine, or a new car, and my sales person spends some time determining my needs, gives me a few choices that could meet those needs, and outlines the benefits of each choice, it ensures I’m happy with my product as I head out the door. But there is no mistaking that they are, in fact, sales people (or associates as they prefer to be called). When someone is a financial sales associate, you know exactly who you are dealing with.
CFP – The Gold Standard in Financial Planning
For the past several years the media has trained the public to choose financial advisers with the CFP designation. This credential is known as the “definitive professional designation for financial planners and advisers”.
The Canadian Institute of Financial Planners offers a four-course web-based certification program with a brutal six-hour final exam.
Before receiving the certification, students must have at least three years of relevant experience in the financial industry and submit a comprehensive sample financial plan for review.
Many people in the financial industry have already earned other designations such as Chartered Professional Accountants (CPA) and Chartered Life Underwriter (CLU), and CFP courses can be a component of degrees in business, finance or economics.
CFP certification is held by many employees in banking, insurance and mutual fund sales.
It’s time to up the ante
The financial world has changed astronomically in the past few decades. People’s situations have become more complex and the amount of financial information and products can be overwhelming.
As well, there are so many separate certifications held by financial professionals such as:
- CFA – Chartered Financial Analyst
- CHFC – Chartered Financial Consultant
- CIM – Chartered Investment Manager
- RFP – Registered Financial Planner
- TEP – Trust and Estate Practitioner
These might look good filling out a business card but they are confusing to the general public who don’t know who exactly they should turn to for help and advice.
I propose that going forward all the various financial and investment planning courses become consolidated into a proper four-year university degree. These professionals can then have an encompassing regulatory body that ensures they act in the best interests of their clients – rather like CPAs or lawyers.
Canadians who need investment management and advice and financial, estate, and/or business succession planning will then know exactly who to turn to and exactly what it will cost them
I think investors deserve so much better than what’s available to them now.