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1
ONTARIO MINISTRY OF FINANCE 1
2
3
4
ROUNDTABLE SESSION I 5
RE: INVESTIGATING THE MERITS OF MORE TAILORED REGULATION 6
OF FINANCIAL PLANNERS IN ONTARIO 7
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9
----------------------- 10
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DATE: Friday, January 10, 2014 13
HELD AT: Ontario Ministry of Finance 14
900 Bay Street, Macdonald Block, 15
Humber Room 16
Toronto, Ontario 17
18
BEFORE: 19
Christian Bode Moderator 20
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PARTICIPANTS: 1
2
Alan Goldhar Investor Advisory Panel 3
Cary List Financial Planning Standards Council 4
Daniel Ongaro Financial Planning Standards Council 5
Debra Bell Canadian Securities Institute 6
Ed Skwarek Financial Advisors Association of 7
Canada 8
Guy Armstrong Investor Economics 9
Hasan Khan MD Management Limited 10
Hugh Murphy Credo Consulting Inc. 11
Joe Rosati Independent Mortgage Brokers 12
Association of Ontario 13
John J. De Goey Burgeonvest Bick Securities Limited 14
John Lawford Public Interest Advocacy Centre 15
John Novachis Investment Planning Counsel 16
Jon Cockerline The Investment Funds Institute of 17
Canada 18
Jonathan Bishop Public Interest Advocacy Centre 19
Kevin Bandelow Sun Life Assurance Company of 20
Canada 21
Leanne Winter Sun Life Assurance Company of 22
Canada 23
Lee Bennett TD Wealth Financial Planning 24
25
3
PARTICIPANTS: 1
2
Lindsay Speed The Canadian Foundation for 3
Advancement of Investor Rights 4
Marshall Beyer Canadian Securities Institute 5
Maye Mouftah Ontario Securities Commission 6
Nancy Allen Independent Financial Brokers of 7
Canada 8
Peter Goldthorpe Canadian Life and Health Insurance 9
Association Inc. 10
Peter McLachlin Financial Advisors Association of 11
Canada 12
Stacey Shein Mutual Fund Dealers Association 13
of Canada 14
Stephen Rotstein Financial Planning Standards Council 15
Susan Allemang Independant Financial Brokers of 16
Canada 17
Tim Pryor Mackenzie Financial Corporation 18
Trish Tervit Environics Comminications 19
Vince Linsley AGF Mangement Limited 20
Whitney Bell Borden Ladner Gervais LLP 21
Cara O'Hagan Ministry of Finance 22
Christian Bode 23
Clemencia Cimbron 24
Frank Allen 25
4
PARTICIPANTS: 1
2
Luba Mycak Ministry of Finance 3
Mayya Mukhamedyarova 4
Paul Braithwaite 5
Sadruddin Salman 6
Shameez Rabdi 7
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--- Upon commencing at 11:03 a.m. 1
THE MODERATOR: Good morning, welcome, and 2
thank you, everyone, for attending the consultation on the 3
merits with proceeding with more tailored regulation of 4
financial planners in Ontario. 5
My name is Christian Bode. I am with the 6
Ministry of Finance, Communications Services Branch. We 7
appreciate that you are taking part of your workday to 8
contribute your expertise, experience and ideas to a 9
consultation that is important to the Ontario Ministry of 10
Finance. 11
You have been invited by the Securities 12
Reform Division to provide your input about the merits of 13
more tailored regulation of financial planners. 14
As you can see by the number of attendees, 15
this invitation has elicited great interest. Your 16
comments and ideas are important to the Ministry as we 17
seek better understanding of the current structure and 18
regulatory oversight of financial planning. This includes 19
whether there will be merit in proceeding with more 20
tailored regulation of financial planners and, if so, to 21
what type of regulatory framework. 22
Representatives from the Ministry of 23
Finance are in attendance this morning to listen to your 24
comments. We have Frank Allen, Assistant Deputy Minister25
6
in the Securities Reform Division, and we have also staff 1
from the Insurance and Deposit-taking Policy area. 2
I will say a few words about the protocol 3
for discussion. With your invitation, you were provided 4
with four questions that we would like to explore. First, 5
is Ontario's current regulatory approach in relation to 6
financial planning appropriate? 7
Second, how would you improve Ontario's 8
current regulatory approach? 9
Third, are there approaches to regulating 10
financial planners which you would recommend? 11
And finally, would regulation affect your 12
business model of providing financial planning services 13
and, if so, in what way? 14
With your invitation, you were also 15
provided the opportunity to make an oral presentation and 16
some of you have elected to deliver comments in that 17
format. We will start with each presentation before 18
moving on to the questions and discussion. 19
I would like to remind you that in the 20
interest of facilitating an opportunity for as many 21
attendees as possible to comment, each presentation will 22
be limited to five minutes. And fortunately, for all the 23
attendees, I will be very strict about this rule. 24
Once the presentations are completed, we25
7
will direct our attention to the questions and your 1
comments. We are having the discussion of today's session 2
transcribed. So, I would ask that before you speak, 3
please state fully your name and the name of your 4
organization, if applicable. 5
I will be moderating the discussion, 6
again, to ensure that we listen to as many of you as 7
possible. I would like that you limit your comment to the 8
subject of the particular question under discussion, so we 9
move in an orderly fashion. If your comments stray to 10
another question, I will ask you to conserve your thought 11
for the appropriate moment. 12
Also, if there are any members of the 13
media in attendance today, I would ask you to identify 14
yourself and your organization. 15
And finally, last but not least, before I 16
introduce Cara O'Hagan, Director of Policy, Minister's 17
Office, and last but not least, if you have a mobile phone 18
or any other transmitting device, we kindly ask that you 19
turn it on silent now for the duration of the session. 20
With this being said, I would like to invite Frank to say 21
a few introductory remarks. 22
MR. ALLEN: Thank you, Christian. I would 23
like to echo Christian's welcome, and express our 24
appreciation for your taking time to join us today. We25
8
have another session scheduled on Tuesday; both of them 1
will be well attended, and reflect the great interest in 2
this topic. 3
The impetus for these two sessions was the 4
Government's commitment in the 2013 Fall Statement to 5
investigate the merits of proceeding with more tailored 6
regulation of financial planners. In order to maximize 7
the time available for the presentations and discussions, 8
I will really just touch on a few points in the 9
consultation paper that underscore the importance to the 10
Ministry of this issue, and why this consideration is 11
being done at this time. 12
Financial decisions confronting 13
individuals, families, Ontarians in general are becoming 14
increasingly complex and very important for their 15
livelihood. Consumers need access to informed, 16
trustworthy, professional financial advice to better allow 17
them to achieve their financial goals. 18
For careful readers of the Fall Economic 19
Statement, you will have noted that the comments about 20
considering and investigating the merits of proceeding 21
with more tailored regulation appeared in two places in 22
the document. It was under a consumer protection 23
discussion in the jobs and growth chapter of the Fall 24
Economic Statement, and it was also in the retirement25
9
income strategy section of the statement, which is a very 1
important reflection of the impact that financial planners 2
have on Ontarians in general. 3
Currently in Ontario, as you are well 4
aware, there is no general regulatory framework in place 5
to regulate the activities of individuals who offer the 6
broad range of financial advice and planning services. 7
The absence of a general regulatory framework has provoked 8
some questions about proficiency, quality standards and 9
potential conflicts of interest. 10
The Government and the Ministry of Finance 11
in particular is seeking to obtain a better understanding 12
of these issues and to gain a fuller appreciation of the 13
current structure and state of the financial planning 14
marketplace. We are undertaking this preliminary review - 15
- I would characterize it as a high-level review -- in 16
order to determine the merits of developing more tailored 17
regulation and, if there were to be more tailored 18
regulation, what form that might take. 19
As part of the review, we must understand 20
whether regulation would be advantageous for consumers in 21
terms of investor or consumer choice, promoting more 22
informed decision making and generally enhancing consumer 23
and investor protection. 24
At the same time, we are mindful of the25
10
necessary balance for industry participants in terms of 1
consequences such as regulatory burden, complexity of 2
regulation and the cost. And, in proceeding today and on 3
Tuesday and in the course of reviewing the written 4
submissions, we will be trying to move in a balanced way 5
in considering what is best for Ontario and Ontarians in 6
this important area. So we look forward to today's 7
discussion and, once again, thank you for joining us. 8
THE MODERATOR: Thank you. I will now be 9
proceeding. I will invite the presenters: the first 10
place, Financial Planning Standards Council, if you ... 11
you can sit or you can ... 12
MR. LIST: I am good here, if everybody 13
can hear me. 14
THE MODERATOR: If everybody can hear, 15
you can stay the remainder of the day. 16
MR. LIST: Great. Thank you, Christian, 17
and thanks, Frank, for setting the stage, and I do have 18
some prepared remarks. I am going to talk faster than I 19
would like to because I know that there are time limits, 20
and I hope you don't start my time until my first word of 21
my prepared remarks, so ... 22
The Financial Planning Standards Council 23
is a not-for-profit organization that develops, promotes 24
and enforces professional standards in financial planning25
11
through the granting and enforcement of the certified 1
financial planner's certification. Those who achieve this 2
distinction are trained to provide financial planning at 3
the highest level of competence expected of the 4
profession. 5
In Canada, there are over 17,000 certified 6
financial planning professionals in good standing, over 7
9,000 of them in Ontario. Further, through our membership 8
in the International Financial Planning Standards Board 9
and corresponding network, which spans 24 territories, 10
there are over 150,000 certified financial planning 11
professionals worldwide. 12
Certification granted by FPSC provides 13
assurance to Canadians that the design of their financial 14
future rests with a competent and qualified professional 15
who will put clients' interests ahead of their own. FPSC, 16
together with our partners in Quebec, institut Quebecois 17
de planification finanicier, IQPF, continually develop, 18
promote and enforce the highest standards of competence, 19
practice and ethics for the profession. 20
I currently chair the Coalition for 21
Professional Standards for Financial Planners, a group of 22
four organizations which has developed and published a 23
statement of principles by which we believe financial 24
planners should be bound. In addition to FPSC, the25
12
coalition members include the Canadian Institute of 1
Financial Planners, the Institute of Advanced Financial 2
Planners and the IQPF. 3
We are encouraged by the Ontario 4
Government's interest in this topic, and are pleased to 5
offer our expertise in the development of a solution for 6
Ontario. 7
There has recently been much discussion on 8
a number of regulatory matters regarding existing 9
regulation related to product-based advice and 10
transactions. However, we are concerned that the 11
continued focus related solely to product-based advice and 12
transactions, at the expense of discussion regarding 13
requisite standards and oversight related to the 14
professional non-product-specific advice, that is, 15
financial planning, is doing the public a disservice. 16
We have identified two fundamental 17
problems: First, studies clearly demonstrate that 18
Canadians are not getting the financial planning help they 19
need from qualified professional financial planners. This 20
is partially the result of a lack of understanding of how 21
to identify a qualified financial planner and of what they 22
should expect of a financial planner and/or a financial 23
plan. 24
Second, today's unregulated financial25
13
planning environment leaves consumers vulnerable and at 1
risk of receiving advice from individuals holding 2
themselves out as planners who would have not had to meet 3
any qualifications based on accepted unified standards of 4
ethics, competence or practice. The term "financial 5
planning" is too often used as a sales pitch to sell 6
product, and the title "financial planner" is used 7
haphazardly throughout the industry. 8
The majority of those people in Canada who 9
imply through title and/or advertising that they are 10
financial planners are in fact licensed and qualified only 11
to give advice related to product recommendations or 12
purchase, and expertise in product advice gained from 13
licensure does not equate to competence in financial 14
planning. Nevertheless, our studies have shown that 15
consumers believe it does. 16
There is no doubt that Canadians need the 17
guidance of competent professional financial planners. 18
Study after study reveals the current societal challenges 19
we face. An aging population has put great strain on our 20
social safety nets. In fact, Premier Wynne recently 21
highlighted this issue as it relates to retirement 22
security. Consumer debt levels continue to escalate and 23
gaps in workplace wellness programs have left our 24
population in the most financially vulnerable and25
14
precarious positions that we have experienced in decades. 1
The time is clearly right for financial 2
planning. However, during these times of societal 3
vulnerability, it is important that consumers are 4
appropriately served and protected by qualified and 5
competent financial planners. Clear, singular standards 6
of competence, ethics and practice must be accepted and 7
permitted to be enforced. 8
We are pleased that the Ontario government 9
has identified that further regulation regarding the 10
purchase of investment insurance products or advice 11
therein may not be the answer when it comes to consumer 12
protection regarding financial planning. It is our view 13
that, one, there must be a single unified set of standards 14
for financial planners and financial plans so that 15
consumers will be protected by knowing their financial 16
planner has the necessary professional competencies and 17
will act ethically and with due prudence and 18
professionalism. 19
Two, there must be a unified definition of 20
what is a financial planner and financial planning and 21
what constitutes a financial plan so that consumers 22
understand their importance and know what to expect when 23
seeking out a financial planner. 24
Three, the government should create title25
15
and holding-out restrictions. Only those who have 1
demonstrated their competence by meeting a single unified 2
qualification standard and ongoing professional ethics and 3
continuous professional development requirements should be 4
permitted to call themselves financial planners. As a 5
result, consumers will cease to be at risk of poor or 6
inappropriate planning by those who have not met minimum 7
competency standards. 8
Four, financial planner accountability 9
should be to a professional oversight body that 10
understands financial planning and professional 11
obligations and that represents the public interest. 12
Standard-setting for and oversight of financial planners 13
should not be placed on a piecemeal basis through product 14
and product-advice-based regulation. A professional model 15
for financial planners will provide confidence to 16
consumers that their interests are represented and 17
protected by a cross-sector body that is expert in 18
financial planning and expert in the establishment and 19
enforcement of the financial planning profession. 20
THE MODERATOR: One minute left. 21
MR. LIST: Okay, thank you. FPSC and its 22
coalition partners have been working diligently to bring 23
forward a single unified set of minimum standards required 24
to hold out as a financial planner and unified definitions25
16
of what constitutes a financial planner. These standards 1
and definitions are based on those already enforced and 2
accepted by over 22,000 licensed or certified financial 3
planners in Canada. These standards and principles that 4
our coalition is proposing form the basis of a 5
professional model for financial planning, not only in 6
Ontario but for all of Canada. 7
The solution we propose is simple: Codify 8
in law professional certification structure, governance 9
and oversight mechanisms that already exist in practice 10
but that are currently voluntary, and make them a 11
requirement for all who wish to claim financial planning 12
as their own. Such a model remains self-funded by 13
professional planners, establishes no additional 14
regulatory burden other than to require that all who claim 15
to be professional planners meet and continue to meet the 16
competency and ethical requirements expected of those who 17
have stepped up to and continue to adhere to the unified 18
standards already in place. 19
THE MODERATOR: One more thought, and we 20
will continue ... 21
MR. LIST: The benefits to all 22
stakeholders: The government will benefit from the 23
adoption of greater consumer protection through simple 24
proof and no added cost model. Industry will benefit25
17
through reduced compliance risk, assurance of consistency 1
of quality, delivery of financial planning and clear and 2
simple direction regarding qualification requirements. 3
The profession will benefit from increased confidence 4
placed on financial planners and added credibility and 5
clarity of their role as critical players in helping guide 6
Ontarians to a better future. 7
And finally and most importantly, 8
consumers will benefit as they will have greater 9
protections and clarity around what they should expect 10
from a financial planner, and through participation in the 11
planning process only with a duly qualified individual, 12
consumers will gain greater control of their financial 13
futures and will be protected from the potentially 14
devastating damage that can be done by the advice provided 15
by individuals holding themselves out as financial 16
planners who are neither certified nor competent to do so. 17
I will cut it off there. 18
THE MODERATOR: Thank you. 19
MR. LIST: We will be distributing our 20
comments ... 21
THE MODERATOR: And your name? 22
MR. LIST: I am sorry, Cary List, 23
president and CEO. 24
THE MODERATOR: Cary List? I didn’t get25
18
that. Thank you, thank you for your presentation. We 1
will now move to, I think, to the Public Interest Advocacy 2
Centre. Yes? 3
MR. BISHOP: Good morning. Thank you for 4
the ... 5
THE MODERATOR: And state your name? 6
MR. BISHOP: My name is Jonathan Bishop. 7
I am a research analyst for the Public Interest Advocacy 8
Centre, or PIAC. 9
PIAC is pleased to participate in any 10
dialogue within the financial planning industry that will 11
ultimately benefit consumers in Ontario. We were 12
established in 1976 as a non-profit, charitable, non- 13
governmental organization. We provide legal 14
representation, research and advocacy for consumers and 15
delivery of important public services, such as telecom, 16
energy, financial services and transportation, and we also 17
provide advice surrounding issues arising from this work, 18
namely competition law, privacy law, e-commerce and 19
general consumer protection. 20
This morning we would like to raise two 21
points with you. The first is the perceived conflict of 22
interest inherent in the current compensation model for 23
financial advice providers operating in Ontario. 24
The second is the need for a standardized25
19
use and application of titles for those who provide 1
financial services advice to consumers also located in 2
Ontario. 3
These views have been developed through 4
consulting with Ontario consumers through PIAC's two 5
studies of the financial advice industry in 2008 and 2012. 6
Copies of these studies can be found in our website at 7
www.piac.ca. 8
During these investigations we found, 9
through focus groups, that few participants mentioned an 10
obligation to disclose fees and commissions, conflicts of 11
interest or the obligations of financial planners to their 12
clients. Most were not sure whether financial planners 13
were, in fact, obligated to make such disclosures. A few 14
believed that disclosure of these issues was a legal 15
obligation or that changes in regulation were in place to 16
ensure that it soon would be, and only a few were aware 17
that disclosure was actually not a legal obligation. 18
In addition, few were also aware that most 19
planners receive the majority of their income from third- 20
party commissions, trailers or other benefits. Most 21
assume that any commissions received vary directly with 22
the growth of the portfolios being managed, thus providing 23
the planner with an incentive to choose the best possible 24
investment vehicles for their clients.25
20
Many participants had not received full 1
disclosure of fees and commissions and did not understand 2
how their planners were being remunerated. Thus, many did 3
not understand the potential conflict of interest stemming 4
from third-party commissions. 5
Turning to the second issue, the need for 6
a standardized use of titles, our research found that both 7
consumers and planners themselves were confused about how 8
financial planning, the titles worked and how it was 9
regulated. They were confused by the designations. There 10
was a near consensus that financial plans was only a 11
teaser to sell securities, those claiming to be planners 12
when they were doing investments only and not providing 13
the independent, expert financial advice in all six areas 14
generally defined as financial planning. 15
As a result of our 2012 examination, PIAC 16
concluded that Canadian consumers remain in need of 17
increased protection when engaged in the financial advice 18
and planning industry. 19
The Ministry, unfortunately, has a problem 20
on its hands. It knows that a majority of Ontarians don't 21
trust the advice they receive from financial service 22
providers, as per an OSC survey done in March. It is well 23
aware that only 20 per cent of investors strongly agree 24
they generally trust their financial advisor's advice.25
21
The Government is also aware that 64 per 1
cent of respondents in the same survey either agree or 2
strongly agree that how a financial advisor is paid 3
impacts the recommendations they are going to receive as a 4
consumer. 5
Consumers have told us they want 6
strengthened regulation of financial service providers, 7
including clearer professional standards on the use of 8
title, rigourous educational requirements, ethics training 9
and stricter regulatory enforcement of the rules. In 10
short, they want to be able to trust the service that is 11
being provided to them. 12
We believe a positive development would be 13
the employment of a uniform standard of care for 14
investors, complete with a full disclosure of how 15
financial planners are being compensated. 16
The Ministry of Finance may be also 17
receiving an unknown amount of political pressure to 18
provide movement on this file in the lead-up to the next 19
provincial election. The "X" factor of political interest 20
could be a great benefit to the resolution of concerns 21
expressed by consumers regarding this industry. However, 22
it could also spell the rushed introduction of regulations 23
or legislation containing a host of unintended 24
consequences that will further confuse both consumers and25
22
financial service providers. 1
Some actors in the financial planning 2
industry have had a few opportunities to reform themselves 3
over the past few decades, and have largely taken what we 4
consider a 3-D approach, deny, delay, debate, instead of 5
being truly proactive as we have seen in other 6
jurisdictions. 7
THE MODERATOR: One minute left. 8
MR. BISHOP: The industry has been warned 9
repeatedly that if no progress is made, they can expect 10
the regulation of investment advice and possibly the 11
regulation of financial planning. 12
In this spirit, PIAC encourages industry 13
leaders to promote policy solutions beneficial to both 14
consumers and the industry. 15
We are very pleased the Ministry has 16
turned its attention to this important policy debate, and 17
I want to thank you folks once again for the opportunity 18
to present PIAC's views, and we look forward to 19
participating in this debate this morning. Thank you. 20
THE MODERATOR: Thank you, very much. We 21
will now move to Credo Consulting. 22
MR. MURPHY: My name is Hugh Murphy, and I 23
am the president of Credo Consulting. Thanks very much, 24
first of all, for inviting me to make this presentation --25
23
and I didn't recognize it was going to be a debate. It's 1
going to be a debate? I see. 2
I am offering my comments -- and I hope I 3
don't speak as quickly as Cary. I am offering my comments 4
because of the tremendous potential value that regulatory 5
reform related to financial planning and advice might 6
create, because of the growing need for financial advice 7
at a time when the financial advice industry is under 8
tremendous and arguably increasing stress. 9
Reforms to regulations have the potential 10
to affect Canadians greatly. My research firm specializes 11
in studying financial advisors. We spent the last decade 12
conducting research almost solely with Canada's retail 13
financial advisors. Occasionally, Credo was asked to 14
conduct research with consumers. We wince when we are 15
asked to do. 16
We have conducted enough research with 17
investors to know how incredibly, how astonishingly 18
ignorant consumers are with respect to matters financial. 19
If I found one thing in the last decade, one thing that I 20
have found in the last decade is that consumers don't 21
generally need protection from very, very few corrupt 22
financial advisors who are simply bound to exist somewhere 23
in the marketplace. Rather, consumers need protection 24
from themselves. And the protection should come directly25
24
from the guidance and knowledge the financial advisor 1
community helps to deliver. 2
I call them all financial advisors 3
because, whether they hold the CFP designation or the PFP 4
or the CLU or any other designation or certification, 5
consumers who depend on the financial advisors simply 6
don't have the financial literacy to distinguish between 7
these. 8
Anyone that hangs their shield out as a 9
financial advisor -- anyone can hang their shield out as a 10
financial advisor. And anyone who speaks the language of 11
money has the potential to do real good or real harm to 12
the vast body of consumers who simply don't have the 13
financial literacy to help themselves effectively. 14
Must standards exist for the very broad 15
range of competencies in the realm of financial advice? 16
Certainly. And whether they hold the CFP designation that 17
is made available by financial planners or the Financial 18
Planning Standards Council, or not, the majority of 19
financial advisors indicate that the FPSC is moving in the 20
right direction and is at the leading edge of the delivery 21
of these standards. 22
Many are equally concerned or equally 23
certain, rather, that there are other valid pathways to 24
becoming extremely competent and valued financial guides. 25
25
What is critical is that these advisors must assume a 1
fiduciary role with their clients. 2
In a recent focus group that Credo 3
conducted, an advisor explained, "If I were the finance 4
minister, I would look at the CFP and the CFA types of 5
standards of fiduciary responsibility. There are 6
financial salespeople, and there are professional 7
fiduciary financial advisors, and there is a huge 8
distinction between the two." 9
I believe the financial advice industry 10
is, in some respect, in peril. We have a population of 11
financial advisors that are heading towards retirement at 12
the same pace as the rest of us. And when my firm speaks, 13
or when my firm asks advisors what guidance they would 14
give to younger people who aspire to be financial 15
advisors, they often laugh -- financial advisors, that is. 16
They almost invariably tell that, given the current 17
regulatory environment and the degree to which oversight, 18
compliance and administrative matters have become so 19
painfully onerous, they would not encourage people to 20
follow in their footsteps. 21
Advisors simply tolerate compliance audits 22
that they feel are conducted by officers who don't have 23
the knowledge, skills or ability to judge the suitability 24
of the guidance that is being purveyed by advisors whose25
26
work they are examining. 1
In another interview with an advisor, she 2
explained: "Financial advice should be managed by a 3
professional organization, not by a compliance 4
organization. Compliance is utterly incompetent at 5
identifying what good advice is. The industry uses 6
compliance as an enforcement tool to get advisors to toe 7
the company line and not the client's line." 8
THE MODERATOR: One minute left. 9
MR. MURPHY: It is a cover your ... cover 10
yourself game, and it has been like that for 30 years, 11
since I first got into the business. 12
And the people that support compliance 13
will promote schmucks to heroism based on their production 14
-- product pushing -- and not based on the advice they 15
give to clients. 16
Another advisor offered: "Financial 17
advising is similar to the practice of medicine in that 18
there is a judgment issue. It is far too complex for 19
anyone outside the profession to know whether advice is 20
good or not." 21
In two recent Credo studies with more than 22
a thousand advisors, we had more than three quarters of 23
advisors indicating that complying with regulatory and 24
compliance issues was among their top challenges. In25
27
fact, only one other item, their time-management 1
challenges, was identified as a greater regulatory issue. 2
The pendulum has swung to a point where 3
the regulatory and compliance environment is making the 4
business of being a financial advisor a more unpalatable 5
occupation than it ever has been, and this is at a point 6
in time where more Canadians are in dire need of financial 7
literacy and guidance than ever before. This is a 8
terrible ... 9
THE MODERATOR: Last statement, please. 10
MR. MURPHY: Yes. This is a terrible 11
indictment of the current environment, and Credo 12
encourages the Ministry to look for ways to simplify the 13
regulatory framework and afford the financial advisor 14
community greater flexibility and latitude to deliver 15
appropriate guidance to consumers. 16
But, in the same breath, I will yet more 17
strongly encourage the Ministry to ensure that forceful 18
regulations are in place, regulations that fully charge 19
all advisors with accepting and properly respecting their 20
roles as, most importantly, fiduciaries, and secondly as 21
the critical instruments in developing financial literacy 22
among Canadians. Thank you for your time and 23
consideration. 24
THE MODERATOR: Thank you. We have one25
28
additional presentation from the Independent Financial 1
Brokers of Canada. 2
MS ALLAN: Thank you. 3
THE MODERATOR: State your name and ... 4
MS ALLAN: My name is Nancy Allan. I am 5
executive director of Independent Financial Brokers of 6
Canada, and I am joined here today by Susan Allemang, our 7
director of policy and regulatory affairs. 8
On behalf of IFB and our 4,000-plus 9
members, we thank the Ministry for inviting us to attend 10
this discussion. We welcome the opportunity to provide 11
the perspective of the people we represent; indeed, they 12
are very engaged on this topic. The other day we sent out 13
the Ministry's four questions by e-mail to our members and 14
we have been absolutely deluged with responses ever since. 15
These responses have informed our 16
presentation here today and, through our words, the 17
Ministry is hearing the voices of the province's 18
independent brokers. At IFB, we don't represent big 19
corporations or Bay Street firms. Most of our members are 20
self-employed and operate small community-based businesses 21
across the province. Their meetings typically happen 22
around the kitchen table over a cup of coffee. Their 23
livelihoods depend on building trust, and many of the 24
relationships they forge span decades.25
29
Our members help Ontario families plan for 1
the future, save and invest money and better protect their 2
families. The client comes first, and that is not just a 3
motto. Since 2002, it has been a guiding principle, and 4
all members of IFB are required each and every year to 5
reaffirm their adherence to our code of ethics, which 6
compels them in all instances to place the interest of the 7
client above all others. 8
The majority of our members are licensed 9
to sell life insurance. Many are also registered to sell 10
mutual funds and other securities and about 20 per cent 11
are certified financial planners. All of our members, 12
without exception, operate in a financial services 13
industry that is already highly regulated and answer to at 14
least one provincial licensing body. 15
Suffice to say that our members operate 16
under government and regulatory bodies that have the 17
ability to discipline, to hear and process consumer 18
complaints, to impose sanctions and penalties and to 19
revoke registrations and licences. This is as it should 20
be. Financial decisions are important and they can also 21
be very complicated. 22
Our organization and our members believe 23
that the people of Ontario and Canada are best served by 24
duly accredited and licensed professionals. We support25
30
regulation and oversight that protects consumers. Like 1
any Ontarian, however, we question the need for 2
potentially excessive and duplicate regulation that would 3
undermine the ability of our community-based members to 4
run a successful business and help their clients plan for 5
tomorrow. 6
Many of our members are able to hold 7
themselves out as financial planners by virtue of their 8
professional designation. They create detailed financial 9
plans and specific product recommendations that fit within 10
those plans. They have a set of standards they must 11
comply with in order to maintain their designation and, 12
because they hold one or more financial services licences, 13
they are also regulated by one or more provincial 14
licensing bodies. 15
Others of our members, indeed the 16
majority, hold a wide variety of other professional 17
designations, but do not hold themselves out to be 18
financial planners. They are licensed and they are 19
subject to a regulatory framework. In the course of 20
serving their clients, they conduct needs analyses and 21
other financial planning-related activities that quite 22
legitimately form a key part of their work as financial 23
advisors. 24
IFB welcomes the opportunity to be part of25
31
these discussions. We believe that financial services 1
professionals should be regulated. This helps to ensure a 2
consistent level of consumer protection, including access 3
to complaint mechanisms and restitution, as well as 4
culling those individuals who bring disrepute to the 5
profession and reduce investor confidence. 6
We look forward to participating with the 7
Ministry as it moves through this process of evaluating 8
the merits of regulating financial planners in Ontario. 9
We are hopeful that our comments here today will assist in 10
a better understanding of the regulatory landscape our 11
members already operate in. 12
Our time here today is brief and we will 13
certainly submit a more formal written response addressing 14
the four questions set out by the Ministry, but the key 15
point I would like to leave you with today is that the 16
self-employed Ontarians and small business owners who make 17
up our membership already operate in a regulated 18
environment. Much is expected of them, and they are held 19
to account each and every day, and that is as it should 20
be. Thank you. 21
THE MODERATOR: Thank you. Thank you for 22
the presentations. We will now move to the open 23
discussion. 24
The first question, of course, is25
32
Ontario's current regulatory approach in relation to 1
financial planners appropriate? 2
If you want to participate and to make 3
comments, just have ... establish eye-to-eye contact, 4
raise your hand, and I will do my best to respect the 5
order of the queue. And keep in mind that I cannot give 6
up the floor; we have about 20 minutes per question, and 7
we have to move fairly quickly. So when your comment, 8
your thought is already done, I may ... I will ask you to 9
share with other attendees. So, there is a ... someone 10
wants to? Okay, here. Please? 11
MR. SKWAREK: I am Ed Skwarek, and I am 12
with Advocis. Just a comment, briefly, on question 1, is 13
the Ontario ... currently, is the regulatory approach 14
appropriate? First, the financial planning. 15
And I see a bit of a problem in terms of 16
the terms that we are using, and that is a direct result 17
of the lack of definition of what is a financial advisor 18
and what is a financial planner. 19
I think many of us share the same views 20
around this table about the professionalization of the 21
industry, but our perspective is we have to look at it 22
more broadly. In Ontario, there are approximately 40,000 23
licensed financial advisors. So if you look at ... 24
picture this as a Venn diagram. You have the big circle,25
33
and you have financial advisors. Within that, you have 1
specializations such as financial planning, people with 2
the CFP, CLUs. These people are specialists within the 3
broader spectrum; that is how we view it. They are also 4
licensed, for the most part, to provide financial advice 5
if they are engaged in the selling of product, that 6
execution. 7
So I think what we have to talk about 8
first is let's get these terms defined, what they are, and 9
then determine what is a regulatory outcome that we hope 10
to achieve in bringing a professional standard forward. 11
Once we identify what that role is, we can then determine, 12
do we need to capture all 40,000, or do we just capture 13
financial planners, the 9,000? 14
In our view, if we go too narrow, there is 15
serious risk that consumers will not get the benefit that 16
we hope is going to be the outcome: greater financial 17
security, greater confidence in the advice that they are 18
getting, better ... just a better feeling for the 19
financial advisors they are dealing with. 20
Now when we talk about is regulation 21
currently appropriate, I think it currently is not, and 22
that is because we have seen an evolution in the industry, 23
and every industry goes through this evolutionary process. 24
And, you know, at one point it was certainly product25
34
based, the selling of financial product. And we have seen 1
rules from the MFDA, through IIROC, where you have to do 2
needs analysis, where you have to know what your products 3
are about, you have to know what your clients' needs are. 4
So every financial advisor is involved to 5
some degree in financial planning, but not to the same 6
extent as people who have gone through a specialization 7
process to become financial planners. 8
And in conclusion, then, to draw the 9
analogy that was ... Credo made the point about the 10
medical industry; I would like to just take that a little 11
further. If you were to look at the medical industry, and 12
again use a Venn diagram, and the big circle is all 13
doctors, within that you have specializations; you have 14
oncologists, you have thoracic surgeons. If you just 15
regulated those specializations, then the consumers of 16
medical products would be at great risk because people who 17
are MDs, that generalist, would be unregulated, and I 18
don't think any of us would consider for a second 19
regulating that way where we would exclude the 20
generalists. You have to include them, because out of 21
those generalist groups, that is where you get your 22
specialized experts going forward. 23
So we view it as a need to capture 24
everybody to start with, define what the roles are,25
35
include the specializations and recognize them, and that 1
would ensure a better consumer outcome down the road. 2
And we do believe in, sort of, 3
professionalization of the industry because the MFDA and 4
IIROC do a great job in regulating what they were brought 5
forward to do, brokers and dealers, but then the 6
delegating the responsibility of the oversight to those 7
broker and dealers to look after, to ensure compliance on 8
the part of the financial advisors is a misalignment of 9
regulatory needs. You need to be regulated by a group 10
that understands what you are doing, and there is no 11
better group to regulate financial advisors and planners 12
than financial advisors and planners themselves. 13
THE MODERATOR: Thank you. We have one 14
... 15
MR. LAWFORD: My name is John Lawford. I 16
am the executive director of the Public Interest Advisory 17
Centre. 18
As Jonathan noted, we started studying 19
this issue in earnest in 2008, and looked at it again in 20
2012. And our view, from having done regulatory law and 21
consumer work in other areas is that, with much respect, 22
Ed, the approach you are suggesting may work for a mature, 23
regulated profession, but you are not. 24
We have a situation here where I think the25
36
approach of going big to financial advisors here is too 1
big a piece to cut off. One looks smaller, and then work 2
your way into regulating financial advisors and defining 3
these terms by starting from defining financial planning 4
and regulating financial planning; that is our conclusion 5
of our two reports. 6
That particular area looks a lot like a 7
regulated profession. There are six planning areas, or 8
five or seven, or whichever way you guys define it, and it 9
is fairly well broken off from the rest of the industry. 10
It is not tainted by compensation structures necessarily. 11
It looks like a place where you can start, and Quebec has 12
approached it in that manner, and then done the larger 13
regulation of the whole industry. 14
It is just too big a piece to cut off, and 15
we are concerned about inertia, so that if the effort 16
becomes stalled because you are starting to roll in all of 17
the other regulators and all the other concerns around the 18
way financial advice in relation to particular products is 19
considered, that will get nowhere. So we would much 20
prefer concentrating ... actually, unfortunately, exactly 21
the opposite to what you suggested. 22
THE MODERATOR: Thank you, for your 23
comment. We have one ... 24
MR. LIST: Cary List, again. It is an25
37
interesting, good, I think, philosophical conversation 1
here, and I want to come back to the question, which is is 2
Ontario's regulatory approach, current regulatory approach 3
appropriate? -- and echo some of the things that Ed said 4
around the approach, which is that historically, the 5
approach to regulation was related to the purchase or sale 6
of product or transactions. 7
The world has changed dramatically. And 8
to some of the comments that were made also by Hugh at 9
Credo is that what we are facing now, with the current 10
regulatory approach, is an expectation by consumers, by 11
Canadians and Ontarians, that they are getting 12
professional advice. And I will deal with the 13
advisor/planner question separately but, whether you call 14
it ... we just talked specifically about the planning or 15
some sort of professional advice, from people who actually 16
have been appropriately licensed and qualified to actually 17
offer a wider range of professional, what we call non- 18
product-specific advice, than perhaps what is required 19
under the licence, the current licensing regime. 20
So we would argue that the regulatory 21
approach today for those that are actually licensed to 22
sell products or provide advice regarding securities and 23
mutual funds is fine. Perhaps there could be enhancements 24
to it, but that is not our concern.25
38
However, when we get into the provision of 1
professional planning, professional advice that is not 2
tied directly to the relative merits of one product or 3
another, we would echo some of the comments that were said 4
before, that the current regulatory approach doesn't work 5
because you have compliance and oversight being undertaken 6
by organizations or individuals who actually don't 7
understand the complexities of client needs and the 8
complexities, frankly, of what needs to be known, the 9
competencies and knowledge required of the individual 10
serving their clients. 11
With respect to the question of regulating 12
all advice or planning, and I think this is a very 13
challenging one, the approach that we have taken and what 14
I laid out in my very quickly spoken comments is that we 15
would echo, I think, some of what John Lawford said 16
regarding where do you start, that one of the challenges 17
we face is how do you define what a financial advisor is? 18
A financial advisor today in Ontario and Canada and 19
frankly around the world can mean so many different 20
things, and it actually doesn't refer to any specific, 21
clearly articulated set of knowledge, skills, abilities or 22
competencies. 23
So should there be work on potentially 24
reforming that and clearly defining titles definitions? 25
39
Absolutely. Frankly, one solution, and we are not 1
proposing this, but could be to outlaw the term "financial 2
advisor" entirely and create titles that mean something 3
very specific where you can put specific knowledge, 4
skills, abilities and competencies attached to them, and 5
have agreement on that. 6
The reason, we believe ... well, we are 7
about financial planning, have always been as our 8
coalition; that is one of the reasons we are starting 9
there. But we know that there has been a lot more 10
development of what are the requisite knowledge, skills 11
and abilities, what does it mean to be a financial 12
planner, what does financial planning mean. Not well 13
understood or necessarily bought yet, by the consumer, but 14
certainly we are a lot further along in defining that 15
space, and we would echo what John said. 16
If you start there, look at moving from an 17
area where you can actually bite it off, where you maybe 18
can get some consistency of understanding around the 19
table, that may very well grow into something like a 20
regulated financial services professions group, as opposed 21
to a regulated health professions group. 22
THE MODERATOR: Thank you, Cary, although 23
some of your argumentation was answering question 3, it 24
was very worthwhile. Yes, sir?25
40
MR. GOLDHAR: I am Alan Goldhar. I am 1
from the Investment Advisory Panel of the Ontario 2
Securities Commission, and I think our stance on the 3
regulatory environment now is obviously it is not 4
adequate; it is designed, as has already been brought up, 5
really to protect the industry and the players in the 6
industry as opposed to the clients. If it was for the 7
clients, we would have a best-interests type of scenario 8
where advice given is in the best interests of the client 9
and not just suitable for the client, which is a big area 10
of discussion right now, and there is lots of literature 11
on that. 12
I used to be in the regulatory area of a 13
big, large investment firm, and I know what I was looking 14
for and it wasn't in the best interests of the client; it 15
was in the best interests of the company that paid me and 16
hired me. That was my core job, to ensure that rules and 17
regulations were followed so that the company and the 18
company employees did not get into trouble. So in that 19
alone, that is a major area of concern. 20
Fiduciary duties: We don't know, do 21
advisors have it, not have it? As consumers, they have no 22
idea. They assume they do but in fact, of course, 23
advisors do not have a fiduciary duty, and that is 24
something that needs to be discussed around, well, what is25
41
your job? Are you a financial advisor and, if so, what 1
responsibilities and duties come with that, and that is 2
the definitions that we have to work through. 3
Provide clear distinction, as Cary brought 4
up, about advice versus sales. I mean, those are 5
completely distinct and they should be clearly distinct to 6
the consumer, and they are not. They are ... obviously, 7
financial plans are often used as a marketing tool to sell 8
product, and that is really ... it sets an environment, 9
potential for a loss for clients, for ... because the 10
client says, "Well, you told me to do this," and they've 11
got all the documentation to say, "Well, here is my 12
rationale and logic for going that route a year ago so, if 13
you have losses, sorry. I mean, it was logical, it just 14
didn't work out the way you wanted." 15
It shouldn't be a chance of ... a game of 16
chance like that; it really should be something where 17
financial planning is not supposed to be, "Let's guess, 18
let's take a best guess at what is going to happen next 19
year." That is, of course, not what financial planning in 20
the professional sense is about. 21
The last is there is a sense of, if we had 22
some regulation here, tougher regulation about who can 23
call themselves what, whatever those names come up with, 24
it is going to create barriers to entry to the profession,25
42
which is what we want. We want people that are very 1
serious about this profession, that are willing to go 2
through the courses, the exams, the regulatory 3
requirements and maintain their technical knowledge, and 4
not just be a fly by night where you can write, you know, 5
a securities exam and some sort of licensing thing in one 6
day, and then become licensed to call yourself a financial 7
planner. 8
I think I received my licence to sell at a 9
very young age, and I had no idea what I was doing. It 10
just seemed like an interesting thing at the time. I 11
actually took it, the exam, for my own interest. I never 12
actually sold. I was always on the finance side, but I 13
could have, and I knew very little, and certainly could 14
have caused a lot of damage to clients. I mean, I 15
wouldn't have lasted in the industry had I done that, but 16
I certainly could have created a fair amount of problems 17
for clients without that, without the regulatory 18
requirement of financial planner. That's it. 19
THE MODERATOR: Thank you. Did you want 20
to add something? 21
MR. MURPHY: Yes, I would just like to 22
make the tangential comment that I honestly don't think it 23
is currently the time to be putting up more barriers to 24
entry. Managing, getting people involved and interested25
43
in producing and delivering good advice to Canadians right 1
now is critically important. 2
Somehow addressing, creating policy that 3
addresses certainly consumer financial literacy is 4
critical, but creating barriers to entry for people who 5
genuinely want to deliver good advice to Canadians, I 6
would have a problem with that. 7
MR. GOLDHAR: Barriers to entry to those 8
who don't want to be regulated and don't want to have the 9
professional designations, et cetera, who just want to 10
take the Canadian Securities Course and then call 11
themselves financial advisors. 12
MR. MURPHY: Very good. 13
MR. GOLDHAR: That is the barriers to 14
entry that I am referring to. 15
THE MODERATOR: Yes? 16
MR. BEYER: I just want to respond. You 17
probably took the Canadian Securities Course about the 18
same time I did. I am with the Canadian Securities 19
Institute, by the way. 20
MR. GOLDHAR: Yes, I ... it’s a great 21
course. I advise you ... 22
THE MODERATOR: Your name is Marshall? 23
MR. BEYER: Marshall Beyer, sorry. The 24
standards have risen considerably since ... in fact, there25
44
are five exams and approximately 500 hours of study 1
required to earn your licence, and then maintain your 2
licence over the first 30 months of your career. 3
MR. GOLDHAR: No insult intended. 4
MR. BEYER: So, I just wanted to make that 5
point. 6
THE MODERATOR: I took my Canadian 7
Securities Courses in 1988, and I ended up in 8
communications. So, there is always another side ... 9
Any other ... if ... or that we can have a 10
subquestion, or we can move to the question no. 2. No. 2? 11
Yes, okay. 12
No. 2, question no. 2, “How would you 13
improve Ontario's current regulatory approach?” We sort 14
of flirted with this. Mr. Lawford? 15
MR. LAWFORD: I think, from our point of 16
view, and again, working with some consumers in focus 17
groups and on reading the secondary literature and 18
speaking to some financial planners, I think that there is 19
a number of things that could really be done to improve 20
the regulatory approach, and no. 1 is taking the focus off 21
product licensing and putting it more on a professional 22
approach and coming up with standards and standards of 23
care. That is a very tricky issue, but you know, I will 24
come back to that.25
45
But, from the bottom line, consumers want 1
to know who they are buying stuff from. So, they don't 2
know which title means what, and it would be nice, and in 3
fact proper consumer protection to have titles mean 4
something and relate to the service that is being 5
provided. So, that is, I think, kind of an easy one to 6
knock off, to be absolutely honest. If you can't get 7
people in a room to decide what titles mean, you have a 8
pretty structural problem. 9
Up from there, consumers need to know what 10
the tensions are, if you will, in their relationship with 11
their advisors. So that means how they get paid because, 12
at the moment, people think that financial advice is given 13
by magic. They think they walk into a bank and somehow it 14
is just given to them, and they don't know how those folks 15
are paid at all. That is the fact, and we have to undo 16
that. 17
Part of financial literacy is just giving 18
people a little dose of reality, and someone has to say to 19
them, "Listen, this is how I get paid." 20
And it happens in many other industries. 21
Mortgage brokers have to tell people how they get paid. 22
Every other industry has to tell people how they get 23
remunerated, and it is just simply not acceptable to let 24
that continue. Whether people should be disqualified if25
46
they have a conflict of interest is a different matter, 1
and that has to do with the standard they might make. 2
We also think that at the end of the day 3
you have to get as far down the road as licensing and 4
giving exams that are standard, and preparing people for 5
the industry, and that that is not something that should 6
be done in various routes through whichever designation 7
you choose to come through and whichever product you are 8
choosing to sell; it should be standard, because then 9
people know that they are getting a standard level of 10
service. 11
And then, finally, I think you have to 12
have something of a net, and although it is not super-well 13
funded, it is very nice for people in Quebec to understand 14
that they have a fund for when there are the bad apples. 15
So, I know that fund is often dry because people had ... 16
there is a lot of bad apples, but having a compensation 17
fund which members of this profession and their employers 18
pay into is really of importance to consumers because it 19
all great to try to get money out of a ... blood out of a 20
stone. But, you know, when someone has been truly a bad 21
apple and flown the coop, the consumer is left holding the 22
bag, and there is nothing there. 23
So those are the kinds of improvements 24
that we would like to have, those specific results out of25
47
this process. 1
THE MODERATOR: Thank you. Cary? 2
MR. LIST: Thank you. Improvements to 3
your current regulatory approach, I think that, 4
absolutely, clarity around titles in law is critically 5
important. But the nature of the regulatory environment 6
in Ontario and across Canada, frankly, is such that the 7
regulators, whether it is the SROs or the securities 8
commissions or the insurance commissions, have been built 9
and established on the basis of product or capital markets 10
regulation, not on the provision of professional advice. 11
So we would ... we have to remember that 12
we are talking about consumer protection, consumer 13
interest and what is going to actually help the clients 14
wade through this whole scenario. And creating a 15
securities commission or insurance council or SRO-based 16
regulations and requirements around this is actually going 17
to add additional confusion to consumers because you have 18
... you still have arbitrage within the industry, where 19
people can pick and choose which regulator they want to 20
work under. 21
So we would say improve the regulatory 22
approach, again, by taking a look at a professional view 23
of this. Those that want to be licensed to sell 24
securities or insurance can continue to do so under the25
48
existing regime, and that should be fine. But if you are 1
looking at titles that mean something in terms of 2
proficiency, competence, ethical obligations, knowledge, 3
skills and abilities related to how they are holding 4
themselves out with respect to the client, that should be 5
considered in a professional model, not the existing 6
product regulatory model. 7
They can sit nicely beside the licensure 8
as to what products you may have, but that shouldn't be 9
undertaken by existing structures of organizations that 10
don't know or understand the depth and complexities of 11
those professional services. So that is how we perceive 12
improving professional regulation. 13
THE MODERATOR: Thank you, Cary. We 14
have... 15
MR. SKWAREK: Ed Skwarek, Advocis. I 16
agree with so much with what I am hearing, consumers being 17
the focus, making sure they are appropriately protected. 18
But when we look at then how do we want to reform our 19
approach we have to make sure we are being both practical 20
and that we are simplifying things for consumers. 21
In my mind, we are not being practical if 22
we are going to further slice and dice what financial 23
advice is. Certainly, we need to define it, but then 24
saying some is included, and what it is, both a25
49
profession, and some are excluded, just examine the 1
practical outcome of that. 2
So now we are saying, "Let's introduce a 3
profession, and we will call that financial planning. And 4
some financial advisors are in this professional group. 5
Others are outside of this professional group, and the 6
ones that are outside of it, they are going to be 7
regulated, continue to be regulated by the MFDA and 8
IIROC." 9
We are just adding complexity. Consumers 10
are going to get further away ... when we talk about we 11
need financial literacy, if we keep making the product 12
more complex, the way we are going to be regulating it in 13
the oversight, we are going to get further away from 14
making this something that is understandable by the 15
consumer. 16
We have to make sure we are taking a 17
simple approach and, in our view, everybody in the tent to 18
start with, and then removing certain people; it keeps it 19
simpler. If I am dealing with somebody called a financial 20
advisor, they are going to be a professional. We have to 21
raise the standard. So we have to enhance the entry 22
levels, we have to bring it up, but we have to do it in a 23
reasonable fashion. 24
We have to keep in mind that there are25
50
practical considerations here, and this can't simply be a 1
philosophical discussion on, you know, what is a financial 2
planner, what is a financial advisor? All important 3
questions, but the outcome won't be very practical. 4
THE MODERATOR: I would go to madam, first 5
and then you, sir, and then ... 6
MS ALLEMANG: Okay. Susan Allemang, 7
Independent Financial Brokers. I guess I am agreeing and 8
disagreeing with pieces of things that are going on around 9
the table. 10
In terms of the disclosure, there is 11
actually quite a lot of disclosure for financial consumers 12
who deal with regulated entities. So we have the point- 13
of-sale disclosure, which has the fund facts for mutual 14
funds and for segregated funds. We have increasing 15
requirements for disclosure on ... that includes 16
information on trailing commissions and commissions 17
related. 18
We have, coming up within the next few 19
years, Phase 2 of the client relationship management 20
process, which will actually require specific compensation 21
information to be disclosed as part of the performance and 22
overall value of an investor's portfolio. 23
In terms of continuing to enhance 24
disclosure, however, I think that does go back very25
51
fundamentally to the issues around financial literacy. I 1
know Ontario has introduced a program within the secondary 2
school system to provide more information and 3
understanding of financial services, and I think that is 4
very valuable. 5
Organizations such as ourselves and many 6
others around the table are actively involved in promoting 7
financial literacy to consumers, and there has certainly 8
been a lot of strides made. I think when you look at 9
something like the CFP, the Financial Planning Standards 10
Council has done a good job of raising awareness of what 11
constitutes a CFP versus people that don't have a CFP. 12
So I think that ... I don't ... we are not 13
really looking at, from our standpoint, that there are 14
huge gaps in the system, and for people that are already 15
regulated. The people that are not regulated, clearly, 16
like, we don't support those individuals. We don’t 17
support people hanging out a shingle and saying that, "I 18
can do this or this for you." So those would be the 19
people who may not be subject to the regulation anyway; I 20
mean, you are always going to have a certain element of 21
people who want to work outside the system. But, for the 22
vast majority, they are regulated and are accountable. 23
THE MODERATOR: Thank you. 24
MR. GOLDHAR: Alan Goldhar from the IAP25
52
again. I knew there was quite a bit of information on 1
this, obviously. The discussion has been going on for 2
years. I did find a document called ... it is from the 3
Financial Planning Standards Board, "Regulatory and 4
Oversight of the Financial Planning Profession." 5
And, as Advocis just indicated, I think 6
keeping it simple is probably the best route, and that is 7
why I like this document, even though it was 2010 when it 8
was published. It seems to keep things simple. It is a 9
starting point. 10
So if I could quickly just go through the 11
four points they make as possible recommendations: Use of 12
the title, "financial planner" should be protected in law 13
or regulation. Simple. So let's not discuss about 14
financial advisors or financial planners but ... yet, 15
until that is in place. 16
The second is financial planners should be 17
held to a fiduciary standard of care in law. It seems 18
pretty straightforward. You may get arguments on that, 19
and I have been at symposiums where there is some 20
discussion and arguments from lawyers who say, "Well, you 21
know, they don't need to go that far," and some of the 22
arguments have been, "Well, clients already think there is 23
a fiduciary duty with advisors," but there isn't. So the 24
fact that they find out after the fact, and there is a25
53
loss, is of no use. 1
The third one is use of related titles 2
should be covered in law and regulation, also. So not 3
only the financial advisor but, if there are other titles 4
that are going to confuse the consumer, those need to be 5
discussed more, too. 6
And the last one is oversight of the 7
financial planners should be undertaken by a professional 8
financial planning body. It would not be the 9
responsibility of the government to do the oversight and 10
regulation; it would be some professional financial 11
planning body, the FPSC, there are others, obviously. 12
So that burden would not fall to the 13
government; it would stay within some association, some 14
bodies, depending on which body you are a member of. 15
Pretty simple, four very simple 16
suggestions that come up, and you work with those, and you 17
can come up with more detail. 18
MR. LIST: I know you had something, but I 19
want to clarify, because Alan referenced the Financial 20
Planning Standards Board, and I want to make sure that 21
people understand, that wasn't our publication. We are a 22
member of FPSB. That is our international body that we 23
are a member of. Stephen Rotstein, our vice president, 24
policy, was on that committee that published that. So it25
54
is not our words. It is our global body that Stephen has 1
participated in. 2
THE MODERATOR: That is called a point of 3
privilege, so ... 4
MR. LIST: Thank you, point of privilege. 5
THE MODERATOR: Yes, sir? 6
MR. DE GOEY: My name is John De Goey. I 7
am a certified financial planner or practitioner, and 8
associate portfolio manager at a firm called Burgeonvest 9
Bick Securities Limited, here in Toronto. I am one of the 10
relatively few people who is participating today who is 11
actually a practising financial planner. 12
One of the things that I find interesting 13
in the first two questions in listening to the people who 14
go around the table is that they are sort of mixing, as a 15
Venn diagram. Cary mentioned that there are about 9,000 16
certified financial planners in Ontario, and Ed mentioned 17
that there are about 40,000 financial advisors in various 18
capacities. 19
And listening to people speak, many 20
people, I think, when they are speaking, are speaking to 21
the 40,000 financial advisors question, when in fact the 22
question being asked is with regard to the 9,000 financial 23
planners. And so it is important that, again, we have 24
talked about this a few times, that people have ... John25
55
has mentioned this as well, that we need to be clear with 1
the titles, and when even the people who are close to it 2
within the room are unclear as to what we are talking 3
about, there is an obvious concern that we may be biting 4
off more than we can chew. 5
So in the interest of full disclosure, I 6
agree with what John says and with what Cary says, that we 7
should really be ... we are focusing right now on the 8
9,000 certified financial planners, unless we decide to 9
draw the line for financial planning, the line, somewhere 10
else, and, you know, PFPs or whatever, but I think it 11
should be the CFPs. And then, once that law has been 12
established and the line has been drawn, we can start 13
raising the bar. 14
As it is right now, there is an arbitrage 15
opportunity where you have so many SROs for insurance, for 16
mutual funds, for securities, at least those three, that 17
are setting their own rules with regard to their own 18
internal product sales, you are not really raising the 19
bar. If you want to protect consumers and protect their 20
retirement income, the greatest way of having that 21
certitude is to have a clear test that is unambiguous, 22
that people know that the advisor either has it or does 23
not have it. 24
So if you have 9,000 people who have25
56
cleared a certain hurdle and that only those 9,000 people 1
within Ontario are qualified to give financial planning 2
advice, that is what will protect consumers because, 3
otherwise, they will go to other people who they ... but, 4
in the long run, I agree with Ed. I think at the end of 5
the day the objective is to get all 40,000 people in 6
Ontario to a certain level. I think that is too hard to 7
do, at first. 8
THE MODERATOR: Please? 9
MR. SKWAREK: Ed Skwarek, from Advocis, 10
again. I think John raised a really important question or 11
point and that was, you know, in these documents it refers 12
to financial planners. The Fall Economic Statement, just 13
going by memory at this point, started off talking about 14
consideration for how to regulate financial advisors, 15
including financial planners, and then started using the 16
term financial planner through the document. 17
In conversations with the ministerial 18
staff, we said, "Is this what ... what is the objective 19
that the Ministry is trying to achieve? Are you trying to 20
keep this as a narrow discussion on financial planners, or 21
is this a broader discussion about financial advisors 22
inclusive of financial planners?" And we were told that 23
often, the use of the term may not be ... no offence to 24
communications people at all, the use of the term may not25
57
be fully understood by the drafters of the documents and 1
the people in the communications department going forward. 2
I can understand why that mistake happens, 3
or that confusion. It is not a mistake. I can understand 4
why that confusion happens, but I think we have to be 5
careful and really clarify what we are talking about in 6
these consultations, because are we to assume, then, that 7
this is really supposed to be just a narrow discussion 8
about financial planners, or is this supposed to be a 9
broader discussion about financial advisors? 10
And I think we need the clarity there 11
before we can move forward. Absent that, I am concerned 12
that, you know, we may be moving in the wrong direction or 13
other people may be moving in the wrong direction. 14
THE MODERATOR: Yes, please, Cary? 15
MR. LIST: I think Ed makes a really good 16
point, and we raised that with the ministerial staff, as 17
well. And I think it speaks to consumer confusion, and I 18
think we can all agree on that, that there is 19
interchangeable use of terms. 20
However, that doesn't refute the fact that 21
there is ... within the realm of financial planning, there 22
has been a lot more evolution in clarification of what a 23
financial planner is, what financial planning is, 24
standards around that, than this broader notion of25
58
financial advice. 1
And I would like to go back to the 2
suggestion around what can be done to improve a regulatory 3
approach, is if there is an opportunity to define 4
professional space, you know, as you talked about planning 5
as a specific area, is there a professional space ... 6
throwing out this generic term that everybody is using for 7
everything, including a licensed mutual fund salesperson, 8
and re-establishing terms and titles that consumers are 9
going to understand, that is going to resonate with them, 10
that could actually have clearly defined knowledge, 11
skills, abilities, competencies built around them. It is 12
not our space, but we would certainly not argue against 13
such a concept if it made sense. 14
MS O'HAGAN: If I can just interject, 15
because I am from the Minister's Office and I was involved 16
in reviewing many of the drafts that led to the Fall 17
Economic Statement. I would just like to express this in 18
the negative, really. 19
So the use of the term, in one instance, 20
"financial advisors and planners", and then in subsequent 21
instances, "financial planners" was not intended in any 22
way to limit the scope of this discussion. 23
MR. PRYOR: Just picking up on Cara's 24
comment, a lot of the discussion has been focused about25
59
IIROC/MFDA and that regulated channel, the 40,000 advisors 1
and the 9,000 that is specific to financial planners. 2
The question I would ask Cara just on that 3
basis was presumably you are all ... the Ministry, from a 4
policy perspective, will be looking at the person goes 5
into a bank branch, an elderly person, gets advice on 6
their GICs and not in the stocks and bonds, and the bank 7
teller says, or whoever at the bank, says, "Well, you 8
know, this is your income, and this is what you want, so 9
we should buy some GICs that mature at various periods." 10
To me, that is financial planning, too. 11
So is ... if it is the scope of the review 12
of the policy perspective from the Ministry, then I think 13
we have forgotten, we haven't talked a lot about what is 14
going on out there, outside of the IIROC and the MFDA 15
channel, and it could be in the bank channel, the credit 16
union channel, all other sort of channels where financial 17
services are being provided, where it could be financial 18
planning, depending on how you want to define it. 19
So I think that is part of the concern 20
that I have is the concern we have talked about is the 21
regulated channel, but it is on the unregulated channel, 22
the Ministry is ... there is nothing there, so it has to 23
do something. I am not sure what, but ... 24
MS O'HAGAN: Well, I think that is one of25
60
the reasons why we are having these consultations is to, 1
you know, look at all these issues. 2
THE MODERATOR: Any other comment on this 3
question? If not, then we can move to question no. 3: 4
“Are there approaches to regulating financial planners 5
which you would recommend, and ... for example, how does 6
your proposal compare to how Ontario regulates other 7
professional services, service providers, and how does it 8
compare to ... how would it compare to what is being done 9
elsewhere?” 10
MR. MURPHY : A question, to begin? 11
THE MODERATOR: Yes? 12
MR. MURPHY: Are we now talking about 13
financial planners or financial advisors? 14
MR. LIST: And it is not a rhetorical 15
question, right? 16
MR. MURPHY: Yes, I am afraid it is not. 17
THE MODERATOR: Sir? 18
MR. McLACHLIN: Hi, I am Peter McLachlin, 19
also from Advocis. I guess in terms of question 3, and 20
what sort of a regulatory approach we would like to see, 21
we have been first starting to define that from Advocis's 22
point of view, I guess from a negative position: We don't 23
want to see a regulatory model that is ... leads to a 24
bifurcation of the financial advice sector in Ontario.25
61
We don't want to see financial planners, 1
for example, subject to a certain stricter set of 2
regulatory requirements and then a broader set of 3
financial advisors not subject to that because we are 4
fearful that will lead to, inevitably, a race to the 5
bottom, in which individuals and firms, for whatever 6
reason, perhaps some of them will be unscrupulous, most of 7
them will simply be trying to avoid onerous compliance 8
requirements, will decide, "Okay, let's not go the 9
financial planning route. We will go the financial 10
advisory route." 11
I guess related to that there is also a 12
general concern that there could be at least the 13
appearance of regulatory capture if a smaller group with a 14
higher threshold of standards is regulated, and the rest 15
of the sort of great unwashed advisors are left to simply 16
wander around, adhering to perhaps existing suitability 17
requirements. So the appearance of regulatory capture 18
could perhaps flow fairly quickly from a bifurcated model. 19
Another problem obviously with a 20
bifurcated model is that we see it as basically very 21
wasteful of regulatory resources, particularly on the 22
government side. And, of course, on the firm's side, one 23
can see that there would now have to be two sets of 24
compliance systems, and that would be very expensive.25
62
Finally, in terms of consumer confusion, 1
we think that there should be a common, uniform set of 2
standards, for example, in terms of what information has 3
to be disclosed in a background check, what ... are there 4
appropriate ways of gathering data from retail 5
intermediaries, what data is to be gathered, how is it to 6
be recorded? What are the appropriate dispute resolution 7
mechanisms? 8
Are financial planners going to be subject 9
to something more stringent, as opposed to advisors in 10
general? Then, again, we see it is skewing of incentives. 11
So for all these reasons, we would urge 12
that the Ministry strongly consider a uniform, 13
comprehensive approach to this question. 14
THE MODERATOR: Thank you for your 15
comment. 16
MR. LAWFORD: John Lawford again. It is 17
tempting, it is so tempting to say absolutely right, 18
Advocis, because you are. At the end of the day you are, 19
because everybody should be following standards that are 20
all pretty much the same. It is just, when ... in having 21
looked at this a couple of times over a few years, and I 22
agree that you are in the industry longer than we are, but 23
we are in the consumer protection industry longer than you 24
are.25
63
So we just see this as a situation where 1
starting with the smaller group of financial planners, it 2
is not confusing to consumers to say, "This group has a 3
designation. This group does these things, 1, 2, 3, 4, 5, 4
6." Part of it is selling securities, perhaps, but a lot 5
of it is not. A lot of it is not. And the other folks 6
may or may not do some of the things that financial 7
planners do, but they don't do them all. They don't do 8
them all, and it is very simple, I think, for a consumer 9
to be told by a group like ours, or by the Ministry, or 10
anyone else, you have two choices: You can take your 11
money, and you can go and get it all planned out with a 12
provider that has this designation, and there you go, and 13
you can be assured that they have an oversight body, and 14
we have regulations around what they have to do in terms 15
of qualifications. 16
Or you can go the other route, where the 17
compensation is from a different manner, and they are not 18
doing all of these things and they are not regulated in a 19
professional body sort of way, but there may be 20
regulations around what they sell you. Take your pick. 21
There may be different ways of charging the consumer for 22
those two ones. Somebody may feel that they don't need to 23
have a full plan done. Somebody might think that they do, 24
and we might recommend, given the way the market shakes25
64
out, that somebody takes one route or the other. 1
The reason why that is efficient is 2
because, at the moment, people are poaching back and 3
forth; at least, that is the way it looks to consumers, I 4
think, is that there are a lot of groups calling 5
themselves financial planners who don't do very much of 6
the other activities. And then the folks on the financial 7
planning side are complaining that they do all this work, 8
and folks are calling them the same thing. It is selling 9
two different products, is what it looks like to us; 10
financial planning is not the same thing as financial 11
advice. 12
So at the end of the day, why we would 13
like to have everybody following certain standards ... you 14
know, it really looks like two different products to us. 15
THE MODERATOR: Cary? 16
MR. LIST: Two points: One, they are 17
completely unrelated, so I will address the first one, 18
which was this discussion between John and Ed. It does 19
sound tempting, and you know, I think a lot of these 20
conversations, we are agreeing on an awful lot of the 21
problem here. 22
Where we really find that right now it is 23
not possible or prudent to try to bring everybody under 24
one umbrella, it would be comparable to, if you look at25
65
the regulated health professions in Ontario, and you were 1
to imagine that everybody was a professional regulated 2
health provider. It doesn't mean anything, because it 3
means too much. There are too many people operating in 4
that realm. You couldn't create a clear set of knowledge, 5
skills, abilities, competencies that those individuals are 6
supposed to deliver, all under one title or one umbrella. 7
And that is in fact why, in Ontario, we 8
have rules or guidelines around all of the regulated 9
health professions, and then specific, clear knowledge, 10
skills, abilities around a specific, clearly identified 11
profession. Might there be overlap? Absolutely. So that 12
was the first point. 13
The second point, completely unrelated: 14
What approaches should the government consider? 15
Irrespective of that argument, if we are moving to 16
recognizing the importance of professional advice, look at 17
a model that regulates professional advice through a 18
professional model, not through the existing SRO 19
structure, to us, that would be akin to, if you look at 20
opticians, who in most cases are allowed to sell ... I 21
mean, do sell eyeglasses, and make money from it, and 22
allowed to offer them, but it would be akin to them being 23
regulated by the ... those that regulate the manufacture 24
and distribution of the eyeglasses; that is ... it is25
66
completely ludicrous. So look at professional advice for 1
what it is, and allow that to be regulated as a 2
profession. 3
Can they be licensed on the other side? 4
Absolutely, but leave the regulation of product and 5
transactions and specific advice around what products I 6
should buy to the existing regulatory structures and leave 7
professional regulation to a professional one. 8
THE MODERATOR: Thank you, Cary. Ed? 9
MR. SKWAREK: Ed Skwarek, from Advocis. 10
Yes, there is so much common ground, I think, around this 11
room on what the problem is, and I think we all agree that 12
the current system is not working the way it needs to 13
work. So then what approach should we follow to get the 14
end goal of we have consumer protection, enhanced 15
preparation for their financial well being, do we go 16
narrow, or do we go broad? I think those are the two 17
choices we have to make. 18
The narrow approach is let's 19
professionalize financial planning. The broad approach is 20
let's professionalize financial advice. What is the 21
difference? The first one, professionalizing financial 22
planning, you are going to capture 9,000 out of a group of 23
40,000. Going back to what is the purpose, consumer 24
protection, with 31,000 outside of the envelope, are you25
67
achieving that consumer protection that you are looking 1
for? I don't think you can. 2
And if the goal is consumer protection, I 3
don't think we have a choice but to say, let's go 4
everybody under the tent. And I have heard people saying, 5
you know, it is tempting to go that route, but it is not 6
necessary. I don't think it is tempting at all. I think 7
it is mandatory, it is necessary, and I don't think it is 8
biting off more than we can chew. I think what you are 9
saying, the time has come to look at things and set the 10
bar. This is what the bar is. These are the requirements 11
we are going to be expecting of all 40,000 financial 12
advisors in Canada. 13
But we have to understand, within that 14
group, they are not all equal either, and that is the 15
specialized people, the CLUs, the CFPs. They have 16
dedicated themselves to enhancing their professionalism as 17
a specialist would, and people who want to use those 18
people recognize, (a) it is going to cost more. 19
Not everybody needs to be going to that 20
specialist, though, either. We have to look at who are we 21
trying to serve. The consumer is a very diverse group. 22
There are people who are putting $5,000 a year into their 23
... or $2,500 into their RRSP, and there are other people 24
who are using complex insurance products and tax rules to25
68
achieve their goals. So it is very different. Those are 1
the people who need the specialists, but everybody needs 2
to have the financial advice to help prepare them for 3
later in life, because the government simply cannot 4
provide the services that they have been doing. 5
We have to tackle the problem now, and if 6
we don't, if we go narrow as opposed to broad, we are not 7
solving any problem at all, and we are not enhancing 8
consumer protection. 9
THE MODERATOR: Thank you. I believe we 10
have a ... did you raise your ...? 11
MS BELL: Yes, yes, I did. I just wanted 12
to ... 13
THE MODERATOR: Go ahead. And state your 14
name. 15
MS BELL: Sorry, Debbie Bell, I am with 16
the Canadian Securities Institute, and it is not often 17
that I like to agree with Cary, but I am afraid I am going 18
to have to here. 19
MR. LIST: Oh, come on ... 20
MS BELL: We certainly agree that there 21
should be some standards for financial advisors, but they 22
shouldn't be the same for all financial advisors; 23
different consumers need different levels of consumer 24
advice. And so we need to be sure that we look at those25
69
standards, and not set the bar so high for everybody that 1
not ... that those people who really need the advice at 2
the base levels won't be getting them because the senior 3
advisors won't have time for those individuals. 4
THE MODERATOR: Thank you. If these are 5
all the comments, we can move to... 6
MR. MCLACHLIN: Sorry, I have one, sorry. 7
THE MODERATOR: Sorry, sorry. 8
MR. MCLACHLIN: Peter McLachlin, Advocis. 9
Just a couple of follow-up points: Advocis certainly 10
agrees that there are concerns over efficiency and inertia 11
regarding potential reform, but we agree also, like most 12
people here, that reform is necessary. 13
Several sort of disparate or unconnected 14
points: I think most people recognize there is an 15
alphabet-soup problem of titles. That is, perhaps, 16
somewhat intractable at this stage. I don't think we need 17
necessarily to try to solve that problem if we are willing 18
to bring in a baseline set of standards for anyone who is 19
holding out as a financial advisor, a minimum set of 20
requirements. 21
And if there are other people who want 22
more a specialized designation, that they feel CFPs should 23
be held to a higher standard, it certainly doesn't 24
conflict with the minimum baseline standards for everybody25
70
in the retail intermediary sector when it comes to 1
securities. 2
In terms of efficiency, I think the real 3
efficiency concern would be to only regulate a smaller 4
group that perhaps Main Street Canadians can't afford, and 5
then we can see a further skewing of incentives and a 6
larger advice gap, skewing of incentives in terms of who 7
is going to enter the profession and who they plan on 8
serving in the profession, and the growing advice gap for 9
middle-class Canadians. And, of course, this is happening 10
to some extent overseas with the RDR. 11
Anyway, that is all I wanted to say, thank 12
you. 13
THE MODERATOR: Yes? 14
MR. LAWFORD: Yes. No, I wanted to make 15
our position more clear in the sense that we are not 16
against a two-stage process which could be happening 17
concurrently. I just don't know how the government wants 18
to move on this. And it is sort of interesting, also, 19
that we don’t have any ... I don't know if we have anybody 20
from the consumer ministry here, as well, today but a more 21
structural approach would be to knock off, if I can put it 22
that way, the financial planning regulation, while at the 23
same time working towards the regulation of the financial 24
advisors at a certain level. They are not mutually25
71
exclusive, and Quebec did that. And so you have the 1
financial planners with their institute, and they have an 2
overall regulation of their financial advisors, which is 3
higher than Ontario's. 4
And we are just trying to push both 5
things. It is just ... and I do and don't agree with Ed 6
that it is too big a piece to chew. It is a big meal. So 7
you have to do the parts you can do, and not ignore the 8
other parts, as well. So that is some clarification of 9
our position. We are not against having all advisors with 10
standards, and we just think that the financial planners 11
is being a little misused, and that that is an easy one to 12
deal with ... not an easy one, but it is a more discrete 13
area that can be handled in a different way, but it fits 14
in with another, larger regulatory scheme for all 15
advisors. 16
So that is...I just want to clarify that. 17
MR. ROTSTEIN: It is Stephen Rotstein from 18
the Financial Planning Standards Council. I just want to 19
pick up on this discussion of who a financial advisor is. 20
And obviously I work in the sector, and I've got to tell 21
you, I have no idea who a financial advisor is. It is not 22
a homogeneous group. 23
We are talking about salespeople, mutual 24
fund salespeople, we are talking about insurance25
72
salespeople, we are talking about people who truly are 1
financial planners. I am not sure if my mother-in-law is 2
a financial advisor. She gives me a lot of financial 3
advice. So you know, the taxi driver, are they a 4
financial advisor? 5
MR. MURPHY: How is it working for you? 6
MR. ROTSTEIN: It is not. So, you know, 7
that is the problem. I mean, we are trying to talk about 8
this 40,000; I am not even sure where we are getting this 9
40,000 number from. And I am not sure where we are 10
carving it. 11
But I do know, in the model that we have 12
talked about today that FPSC has proposed, we are talking 13
about people who are held out as financial planners. It 14
is a distinct title. Know what it is. There is 15
knowledge, skills and ability backing it up. 16
As I say, it is a bite-sized chew as 17
opposed to, I don't know, a buffet or something. So I 18
think it is a more of a proportional and appropriate model 19
for the government to consider. 20
THE MODERATOR: I think we have a point of 21
privilege. 22
MR. SKWAREK: Yes. It is Ed Skwarek from 23
Advocis, just to provide clarification where the ... well, 24
actually, a point of clarification then maybe a comment on25
73
where the 40,000 number is coming from. That 40,000 1
number is the number of people in Ontario licensed to 2
either sell insurance products or securities products, 3
either MFDA licensees or IIROC licensees. So that is 4
where that 40,000 comes from. 5
We are talking about moving away from 6
financial sales. I think we have moved away from just ... 7
it is not just the sale of a product anymore. A financial 8
advisor, if they are licensed under IIROC or under the 9
MFDA, has to do a needs analysis. So it is not just 10
sales. It is talking to the client, determining what 11
their needs are, and then trying to identify the 12
appropriate product for them. 13
So it is just not ... I don't think we can 14
say this is a mutual fund salesperson; this is a financial 15
advisor providing advice on mutual funds based on the 16
information that they have gathered in meeting with their 17
client. 18
MR. DE GOEY: A point of personal 19
privilege, then. 20
THE MODERATOR: Yes. 21
MR. DE GOEY: John De Goey. I just 22
realized that, even what Ed said, I thought I had it all 23
down, and then I realized that maybe not. 24
One of my friends, Cynthia Kett, is one of25
74
the best financial planners in the country. She is not 1
licensed to sell anything. So she is not part of that 2
40,000 that you just mentioned. Just so we are clear... 3
So again, to the people from the Ministry 4
here, you have to be really clear, because we keep on 5
talking about different things, and every time I think I 6
know what we are talking about, it turns out we are 7
talking about something else. 8
So really, really provide some clarity 9
here, because I thought we were talking about the 9,000 10
financial planners. Maybe we are talking about the 40,000 11
people who have a licence to sell something, 9,000 of 12
which are planners, 31,000 of which are not, but there 13
might be some people who are financial planners who don't 14
have a licence. It is functions and relations, it is Venn 15
diagrams. Get the Venn diagram right, because we are 16
talking about different things here, people. 17
THE MODERATOR: Ed, first, and then ... 18
MR. SKWAREK: Ed Skwarek, Advocis. And 19
you are absolutely right when you talk about, you know, 20
some people aren't even regulated. There is a group 21
within the financial planning specialization that are the 22
fee-only group, and they aren’t getting any commission for 23
the product that they ... well, they are not actually 24
giving the product recommendation because you can't give25
75
the product recommendation absent having a licence. 1
So they are outside of the envelope, but 2
they are providing strictly -- correct me if I am 3
misstating this -- financial planning advice, and then 4
they may be directing that person to somebody who can 5
execute it for them. 6
So I think that is a growing group, but I 7
still think it is a small group, but you are absolutely 8
right. 9
The part of the problem is absent having 10
the appropriate definitions and what things mean, we can't 11
say exactly how many people are in the business because, 12
if you can't define it, then you can't do the counting. 13
So what we have done at Advocis is just look at the 14
licensees to get that round number. But you are 15
absolutely right, that there are people outside of the 16
envelope as well. 17
THE MODERATOR: We will go to Cary and 18
then Hugh. 19
MR. LIST: I would like to help in 20
clarification a little bit on this conversation, because 21
John made a very important point that I think got lost on 22
all of us. 23
There absolutely is a number of 24
individuals, and I can share here as a point of25
76
information, approximately 2,000 individuals across 1
Canada; so you could figure around 1,000-plus in Ontario 2
who are holding themselves out as financial planners 3
through CFP certification that are not licensed to sell 4
any products at all. 5
There are two aspects to that. I think 6
that it reinforces why any regulation should be on a 7
professional basis, not on a ... through a product 8
regulatory structure, because you would be leaving out a 9
group of individuals. 10
The second point though is, irrespective 11
of that, I think there is less consumer protection concern 12
there because frankly, and I don't have a piece of paper 13
to back this up, but I am sure we could get this 14
information, there are very, very few, if any, individuals 15
in that area that are actually offering financial 16
planning, that have no link to a licence, that don't 17
already have their CFP certification. Again, that is my 18
own assessment, but we can get that information. 19
So there are already at least some 20
protections there, which doesn't negate the point that is 21
being made, that it is all the more reason for a 22
professional model that supersedes any product sales 23
structures. 24
MR. MURPHY: Actually, Cary has sort of25
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touched on the point that I was going to make, identifying 1
that there are about 2,000 advisors across the country. 2
But I was going to offer that our statistics say that 3
between about 4 and 6 per cent of financial advisors in 4
Canada are unlicensed and make their living off purveying 5
financial advice, professionally. 6
The balance, in some respect, gain at 7
least a portion of their revenues through the use of the 8
integration of financial product. 9
THE MODERATOR: Okay. Go ahead. 10
MS BELL: I am sorry, you were finished? 11
MR. MURPHY: Yes. 12
MS BELL: Okay. I just wanted to point 13
out that there are many other individuals that you may not 14
be thinking of who provide estate or mortgage or tax 15
advice, or GICs, that certainly wouldn't be overseen 16
unless you are a mortgage broker. 17
THE MODERATOR: Go ahead. 18
MR. MURPHY: An interesting, related 19
point: Some of the research we have done simply with the 20
general population of consumers asks consumers whether or 21
not they have a financial advisor or not. And one of my 22
clients was very surprised and came back to me when I told 23
him that our statistics say about 43 per cent of Canadians 24
claim that they have financial advisors. But the balance25
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of Canadians say, "Yes, well, we get financial advice from 1
our banker or from our mother-in-law, or from," you know, 2
these kinds of things. 3
So, again, this goes back to the whole 4
issue of financial literacy in Canada. We, as a group of 5
specialists, can't agree on the semantics here, so that 6
consumers should have any way of figuring it out is 7
painfully challenging. 8
THE MODERATOR: I see we are at the last 9
part of the discussion which has approached the meaning of 10
question 4, which ... and I will just state the question: 11
"Would regulation affect your business model of providing 12
financial planning services?" 13
Now I don't know if I should say financial 14
planning services, financial advising services or 15
financial services! So ... and if so, in what way? 16
Please. 17
MR. DE GOEY: My name is John De Goey, 18
once again from BBSL. I am one of maybe about a thousand 19
people in Canada who is both a portfolio manager and a 20
certified financial planner. Portfolio managers engage in 21
something called investment counselling. Investment 22
counselling fees are tax-deductible. Therefore, if 23
someone engages me, I try to do everything I can and call 24
it investment counselling so as to maximize the potential25
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deductibility of the services I provide. 1
If someone contacts me and engages me to 2
do simply financial planning, that fee is not deductible 3
under the Income Tax Act. So the way this works, and I 4
have a lot of people that I know, I know a few other 5
people that are part of that 1,000 that are both CFPs and 6
investment counsellors, they do all the fee, do all the 7
billing as investment counselling, and give financial 8
planning away as a loss leader. 9
What I think would be much more 10
efficacious, what would be much more purposeful, is if we 11
could actually make it clear that financial planning is at 12
least as valuable and in my opinion, as a person who does 13
both, more valuable than investment counselling. And to 14
do that, you need to have it enshrined as being deductible 15
in the Income Tax Act. 16
Now that is a federal responsibility, but 17
to the extent that the people in Ontario can actually push 18
for that, to speak with Minister Flaherty, I think that 19
would provide a great deal of continuity, especially as it 20
pertains to consumer protection and retirement income, 21
which is something that Premier Wynne has said is 22
important. 23
If you really want to incentivize people 24
to take control of their personal finances, give them a25
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tax break for doing so, but as long as the person they 1
speak with and the person they engage is, in fact, 2
qualified to do the work that is being done. 3
MR. LAWFORD: I am just going to throw it 4
out there in terms of the way the question was -- John 5
Lawford, again -- was written, and perhaps the reason why 6
we are in the room makes this unnecessary: but I would 7
also say why ... you know, I want to hear from the 8
independents and the other folks about how it is going to 9
impact your business. 10
I just want to make the point that from 11
looking at other professions, a lot of the time, once you 12
professionalize, your product-specific, if I could put it 13
that way, obligations fade away, because then you just 14
have a standard of care and you meet it, right? And then 15
you are not regulated by what you are selling; you just 16
have a standard of care and, if you don't meet it, you get 17
disciplined. And if you do meet it, you are fine, and you 18
don't have to fill out a form for every time you meet a 19
client. 20
And I know we have heard from people that 21
work in the industry that, "Well, yes, I can see that you 22
are concerned about consumers, and they are complaining to 23
you, but don't kill me with forms, because if somebody 24
comes in with, you know, the proverbial $2,000 to invest,25
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I can't take half an hour of my time, or an hour of my 1
time if 50 minutes of it is filling out forms." 2
So I get that, and we all ... we get that 3
at our end. But, you know, the concern I have with the 4
last question, just to keep in mind, is there probably 5
will be a necessary change to this area of law because it 6
is happening in other jurisdictions. Consumers are mad 7
about it, to be absolutely honest, and so business models 8
will have to change. 9
But it doesn't have to be the end of the 10
world if you are moving towards a professionalization 11
because you should be able to drop off a lot of the 12
paperwork, if I can call it that. At least that is the 13
hope or the end goal of getting where we are. 14
THE MODERATOR: Cary? 15
MR. LIST: Again, I can't speak to it 16
directly with ... it has been 15 years since I have been 17
on the business side, or more. But to the point of 18
professionalization on the advice side, I think that it 19
can impact business models in a very positive way both for 20
the consumer and, in fact, for the planner or advisor. 21
I think you ... I don't know if you 22
mentioned KYC or know your client, but there was something 23
about filling out forms. It immediately made me think of 24
know-your-client requirements. You know, I look at the25
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structures today which say the current SROs and product 1
regulators say, "You need to fill out these forms, and 2
there are very strict regulations and rules, and here is 3
the form that you have to use and here is the type of form 4
you have to use, and the compliance department is going to 5
make sure that you are ticking ... you know, crossing your 6
Ts, dotting your Is, and they are going to watch for all 7
of those little things." 8
Yet you have a situation where I go to my 9
advisor, my planner, whatever that individual, who is a 10
professional, and they say "Well, you've got a trust 11
account here, and you've got an RSP account here and you 12
have a cash account here, and we need to make sure for the 13
files these are independent. This is under a trustee 14
relationship. We need KYCs, each one." This is not about 15
knowing your client. This is not about understanding your 16
client's needs and addressing it. It is about fitting and 17
meeting regulatory requirements for the transaction and 18
the sale of the product that does not have anything to do 19
with the advice that you are giving for the person as a 20
whole. 21
You know, these individuals are not three 22
or four people. They are one, and they are a whole, and 23
with standards ... and we can't, at FPSC, we can't do 24
anything about that, because we are not recognized, our25
83
requirements are not recognized in statute. 1
So if they are ... you know, the only 2
regulations they have is their requirement to fill out 3
whatever number of forms. If you professionalize that, if 4
your obligations are professional to their client, they 5
have to have the due prudence and care to deal with their 6
client and they have to make sure that they can support 7
and defend, that they understand their client, they 8
understand their client's needs to the professional body 9
that is overseeing them, and follow all the rules around 10
the transactions and the product at the same time. To us, 11
that is a win-win. 12
MR. GOLDHAR: Alan Goldhar from the IAP. 13
I have come across this issue before, whether this would 14
impact the business model for the banking sector, and 15
there is no one here, doesn’t appear to be anybody on our 16
list from the banking sector, but their argument has been 17
that the individual at the counter, when you come in with 18
that $2,000 to invest in your RSP, they don’t want them to 19
be ... to have to fall into this whole regulatory thing, 20
just to call themselves something, that you would go to 21
them. It is just not what they are doing. 22
So, again, this is where we separate the 23
sales from the advice. Are they giving advice, if they go 24
up to you and say "I've got $2,000," at the bank counter,25
84
"what do I do with it?" Or how do you deal with them? Do 1
you have to have them regulated, too? 2
This is, like, the first-year banking 3
clerk who is just learning their way, and basically they 4
are allowed to sell GICs or term deposits, that is it. So 5
by the bank regulation itself, they are very restricted in 6
what they can do, but not by financial advice or planning 7
regulation. So how do they fit into this whole thing, and 8
are they brought into this 40,000 individuals? 9
That is, again, the distinction between 10
advice and sales has to be made, first. And they are on 11
the sales side, they don't need this regulation, that's 12
fine. But if the bank ... you are telling the banks they 13
have to now go through this whole regulatory thing, I 14
think there will be opposition. 15
THE MODERATOR: We will go to you sir, 16
first, and then we will go to Ed. 17
MR. PRYOR: Okay, I was just picking up on 18
your statement, picking up on your comment, that's right, 19
I mean, is the bank teller saying, "Here, a five-year 20
GIC," or is the bank teller doing more and giving some 21
advice of what their needs may be so you cross the line 22
into financial advice or financial planning. 23
The only other comment I would make is 24
whatever we do in Ontario, we have to be cognizant that25
85
... how this will affect national firms who will operate 1
across all jurisdictions, and a lot of them in the 2
securities and, MFDA and IIROC, a lot of the advisors are 3
dually licensed in multiple provinces. 4
So, from a compliance and oversight point 5
of view, whatever we do in Ontario may have significant 6
impacts on other jurisdictions. 7
So to the extent ... in a perfect world, 8
to the extent there was going to be a unified sort of 9
approach across the country, that would be a better 10
solution than a multi-bifurcated. We do have Quebec, 11
which is separate today, and ... but I am just ... I would 12
raise that as a comment. 13
THE MODERATOR: Ed. 14
MR. SKWAREK: Ed Skwarek, from Advocis, 15
just following up on that point. I think you are right 16
about looking at ... you can't just look at Ontario in 17
isolation. But I think Ontario has signalled that they 18
are taking a leadership role on this issue. 19
Advocis has been talking to other 20
jurisdictions across Canada about these issues. So I 21
think there is an appetite in multiple jurisdictions for 22
reform, yet you said Ontario is taking the initial step in 23
that leadership role, and I really ... well, my 24
understanding from conversations is other jurisdictions25
86
are watching very closely to see what Ontario does because 1
I think there is a desire to move in a more harmonious 2
fashion because of the nature of securities and insurance 3
regulation. 4
And I would also add, sorry, when we talk 5
about the model and the impact that it could have on the 6
business model, by professionalizing, we would really ... 7
and when I say professionalizing, I am talking about, 8
again, that broader group of financial advisors, we are 9
addressing a very real constitutional law issue in Canada, 10
where you have the separation of responsibilities from 11
federal and provincial jurisdictions. 12
We are also addressing the separation 13
between insurance regulation and securities regulation; 14
they are both very different. But if we professionalize 15
and set the standards, that is going to address what 16
hasn’t been able to ... we have not been able to address 17
in Ontario or in Canada, that difference when we see, you 18
know, products are increasingly similar on the insurance 19
side and on the securities side, but they are regulated 20
differently. 21
And we are not going to be able to get 22
harmonized regulations between those various sectors, but 23
we can harmonize the regulation of the financial advisor 24
to address things that have not been able to be ... that25
87
we have not been able to address because of that divide 1
that exists. 2
THE MODERATOR: Cary? 3
MR. LIST: Yes, we would completely agree 4
with the issue of multi-bifurcation and the challenge in 5
the regulatory system, both provincial jurisdiction as 6
well as the jurisdiction within various regulatory 7
structures. 8
So again, that would support a different 9
model that could not necessarily ... you know, the federal 10
government doesn't have jurisdiction over professions, so 11
you couldn't have a single unified national profession, 12
but you can have a model where the lead of one province 13
does not actually interfere with the ability to take that 14
out across multiple provinces. 15
And I think the comment was Quebec is 16
different. Quebec is different; however, we know that 17
national firms are challenged with this differentiation, 18
and one of the things that, both in the financial planning 19
arena, the Quebec Institute of Financial Planning, which 20
sets the standard and certifies the individuals in Quebec, 21
and our organization that does not interfere with the 22
Quebec regulatory system, but we have individuals across 23
the country, we ... both of our organizations recognized 24
that very early on and have been working now, over a25
88
period of about eight to 10 years, and it is slow and it 1
is difficult, especially when we are dealing with Quebec, 2
but to this notion of unifying ... and we are very, very 3
close. In fact, we are about to publish this year. I 4
have already got a draft right here, a set of unified 5
Canadian financial planning definitions, standards and 6
competencies, jointly published by the Quebec Institute of 7
Financial Planning and FPSC. 8
So there are ways of overcoming that, and 9
I think we need to continue and move in that direction 10
towards ... and I think it is a lot easier in a 11
professional model to get the professions, or the 12
regulated professions from province to province together, 13
and join under a single set of national standards. 14
It has happened in many other regulated 15
professions, whether it is allied health, whether it is 16
accounting or any other profession; it is still seen as a 17
single profession across Canada, but there actually are, 18
really, cooperation agreements amongst the provinces. 19
THE MODERATOR: Thank you. Are there more 20
comments, ideas, suggestions? Yes, please ... 21
MS ALLAN: I guess I would just like to 22
say something in defence of financial advisors that aren't 23
planners, which does form the bulk of our membership, and 24
they are not scraping the bottom of the barrel. They are25
89
not sinking to the bottom in doing what they do; they are 1
just choosing a different model. And their businesses are 2
really built on trust and providing good advice and good 3
service to their clients. 4
So I just want to make sure that we don't 5
lose sight of that in this whole discussion, that, you 6
know, it is not that the planners are the good guys and 7
the advisors are the ones that are sneaking and trying to 8
get around the system, because that is not who our members 9
are. 10
And obviously I don't know all of our 11
members personally, but I know a lot of them. I know a 12
lot of them, and they really care about their clients. I 13
am saddened to hear how upset consumers are, and I think 14
part of the problem is that advisors aren't telling their 15
story well. 16
And I think Hugh, you mentioned that in 17
your initial comments, is that advisors really need to 18
educate their clients better on what they do and how they 19
are paid. There is nothing wrong with being paid by 20
commission, and our members do disclose that in client 21
meetings if they are paid that way. It is not a bad 22
thing. I think everyone who buys a car knows that the 23
person selling them the car is going to get a commission 24
on the sale, and it is not inherently wrong.25
90
But I think that is one thing that we as 1
an organization are trying to do, is to help our members 2
speak to their clients about what they do, and I think 3
that is the thing I am taking away from this, is that we 4
need to support them more in that regard. 5
MR. MURPHY: Can I ask a quick question of 6
Jonathan: In fact, you referred to an OSC study that 7
suggested that Canadian consumers don't trust financial 8
... or at least that is what I took from what you said ... 9
MR. BISHOP: No, no, Ontario consumers, 10
that didn't trust their financial advisor. It was a study 11
that was released in March of 2013. 12
MR. MURPHY: That is very interesting to 13
me, and I will have to ... you don’t mind me following up 14
with you on it? Because ... 15
MR. BISHOP: No, absolutely, I would be... 16
MR. MURPHY: ... my research shows quite 17
the opposite, quite the opposite ... 18
MR. GOLDHAR: The OSC site, it is right 19
there. 20
MR. MURPHY: ... and that financial 21
advisors, whether they be ... whether they hold a CFP 22
designation or not, are generally tremendously well 23
trusted by consumers. 24
MR. GOLDHAR: That was an initiative from25
91
our group, and it is on the website. 1
MR. MURPHY: Okay. It often comes down to 2
the nature of the question, so ... 3
MR. GOLDHAR: Absolutely. 4
MR. LAWFORD: Absolutely. I mean, just 5
from our focus groups, it was pretty obvious that 6
everybody thought that their particular advisor was great, 7
but they had all heard stories that were trouble, and they 8
didn't really trust the industry, but their person was 9
actually really good. I mean, so, you know, that is maybe 10
a problem, maybe not. I don't know. 11
THE MODERATOR: Yes? 12
MS SPEED: Lindsay Speed from FAIR Canada. I 13
just wanted to make a quick point: I know Cary has done a 14
significant amount of research and I think that this will 15
kind of follow and evolve with the consultation, but with 16
respect to professionalism, I think that that is another 17
issue in terms of semantics, and your definitions and that 18
sort of thing, because I think there are a lot of things 19
... and I guess I am tying this directly to commissions 20
and to your point about that, because I think it is really 21
important to be cognizant and to understand the different 22
models in terms of compensation of professionals. 23
To my mind, a true professional is not 24
going to be driven by a compensation model. And as much25
92
as people like to think that they are acting independently 1
and in the best interests of the client, you hear that 2
over and over again, but I think a lot of ... there is a 3
lot of other discussions going on in the securities realm 4
about whether the industry believes it acts in the best 5
interests of the client and whether they have a legal duty 6
to do so. And currently, they don't. 7
And I think that this is a really 8
important issue that comes into play when you are talking 9
about financial planners, about financial advice and about 10
the rest of it. 11
I mean, to John's point, I don't know how 12
you get to a professional model of all advisors, as Ed is 13
suggesting, with the current compensation structure. I 14
think there is a lot of issues and there is a lot of 15
underlying issues. You can disclose to your clients that 16
you are getting paid trailing commissions, but what does 17
disclosure mean? Does it mean giving them a percentage, 18
or does it mean, I guess, teaching them what that means 19
and how the whole system drives? 20
So I think it is just something to be 21
cognizant of going down the road in terms of examining 22
what a profession is and what financial planning means, if 23
you are going forward with regulating it in any fashion. 24
THE MODERATOR: Thank you. So we are25
93
about finished now, if there are no other comments. 1
I will thank you for taking part in this 2
debate and consultation. And if you have other 3
suggestions and comments to make, you have until January 4
31st to send your submission/comments. 5
And if you need to be reminded of the 6
address and e-mail address of the Ministry of Finance, 7
just come and talk to me, and I will provide it to you. 8
And I would like to invite Frank to 9
provide a few ... some wrap-up comments. 10
MR. ALLEN: Fine. Thank you, Christian. 11
I want to thank everyone for your contributions; it has 12
been a very helpful session. 13
I would just echo Christian's comments 14
about the desirability of providing written submissions. 15
I think some of the semantic discussion that we have 16
benefitted from today, it would be helpful to have that 17
amplified in writing, and get the benefit of the expertise 18
and experience and industry familiarity that is in this 19
room, and we will make the same request on Tuesday. 20
It is very important that we have the 21
benefit of your insights into what you think we should be 22
looking at, how you think we should be proceeding, why and 23
how we could best work in the interests of all Ontarians. 24
In terms of moving forward, these two25
94
consultations are our preliminary step in this review 1
process. Staff in the coming weeks will be reviewing the 2
transcripts and also reviewing the submissions that are 3
filed by the end of the month. 4
And our objective will be to be able to 5
provide an update to the Minister's Office, hopefully in a 6
timely fashion so that it can be at least considered in 7
terms of the process leading up to this year's spring 8
budget. 9
But this is a very important topic, it is 10
a very complex and nuanced topic. We appreciate the 11
viewpoints and opinions that have been shared with us, and 12
really would benefit tremendously if you would take the 13
time and effort to reflect your concerns and your 14
suggestions in written submissions by the end of the 15
month. 16
THE MODERATOR: Thank you. 17
--- Whereupon the roundtable concluded at 12:56 p.m. 18
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to be a true and accurate transcription 4
of my stenomask recordings 5
to the best of my skill and ability 6
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__________________________ 8
ROBERT LEE 9
Certified Stenomask Reporter 10
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