Big Changes Coming for “Financial Planners” and “Financial Advisors”
In its new budget, the Ontario government has created a framework that will hopefully give consumers more guidance about the credentials of financial professionals. There seems to be no dispute that consumers do not generally understand the various titles used by financial professionals. Various organizations have expressed concern that anyone, regardless of their knowledge or experience, could offer their services as a financial advisor or planner. Members of the public, not realizing that these titles are not regulated, would implicitly trust and take advice from these advisors without any investigation of their qualifications.
Bill 100, which received Royal Assent on May 29, 2019, amongst other things, is aimed at correcting this problem by creating the Financial Professionals Title Protection Act (“the Act”).
The Act, to date, is sparse and only provides a bare bones framework, which is going to need the be fleshed out by regulations and policies.
Most relevant are sections 2 and 3 of the Act, which prohibit anyone from using the titles “Financial Planner” or “Financial Advisor” (or any abbreviation or title that could be mistaken for them) unless that person has obtained approval from an approved credentialing body. The approved credentialing bodies will also be responsible for overseeing the professionals that they qualify. At this point we do not know who the approved credentialing bodies will be, only that they will be chosen by the Financial Services Regulatory Authority of Ontario (“FSRA”). The FSRA was created after an expert panel submitted a recommendation to the government that an independent and self-funded regulator with sufficient power and authority could better perform many of the functions that were previously within the jurisdiction of the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO).
Once changes in Bill 100 are in force, the FSRA will have the power to create the terms and conditions that the approved credentialing bodies will need to comply with. However, it is the credentialing bodies that will be responsible for overseeing the people they credential and for collecting any fees that the FSRA requires the individuals to pay. As the FSRA is a “self-funded regulator”, it is likely that financial professionals who obtain these credentials will be responsible for paying regular fees to the FSRA.
The Act creates consequence for the misuse of these titles, and sets out that the FSRA will have the power to address the unlawful use of these titles and to revoke the title if the professional is not in compliance with the requirements (most of which are unknown at this time).
Given that this is merely the framework that will be fleshed out by the regulations, the FSRA’s policies, and the policies of the approved credentialing bodies it is difficult to know to what extent this law will change things for financial professionals. Certainly, the credentialing bodies will not just be educational institutions handing out diplomas or certificates and then walking away. They will have continued oversight, more like a regulatory college. However, to what extent they will regulate the professionals, we cannot yet say. We expect that there will be increased detail and clarity as this Act gets closer to coming into force.
In the meantime, what is certain is that, anyone who is currently calling themselves a financial planner or financial advisor will soon be required to either obtain credentials from an approved credentialing body or cease to use either of these titles.
