Investor advocates raise concerns over reduced clarity, questions around enforcement
Two voices representing investors in Ontario and across Canada are making their thoughts known after the province’s financial services regulator unveiled the latest credentialing body (CB) for advisors under its title protection framework.
On Tuesday, the Financial Services Regulatory Authority of Ontario (FSRA) announced that the Canadian Investment Regulatory Organization (CIRO), Canada’s single self-regulator for the investment industry, has been approved as CB.
With that announcement, CIRO is now officially one of four CBs – including Advocis’ Institute for Advanced Financial Education (IAFE), the Canadian Securities Institute (CSI), and the Canadian Institute of Financial Planning (CIFP) – whose registrants or certificants are allowed to use the financial advisor (FA) title in Ontario.
With CIRO’s new credentialling authority, individuals approved by CIRO as registered representatives, mutual fund dealing representatives, portfolio managers and associate portfolio managers may now hold themselves out as financial advisors in the province, FSRA said.
“Accreditation through CIRO will give investors confidence that they are dealing with highly qualified Financial Advisors,” said CIRO President and CEO Andrew Kriegler in Tuesday’s statement.
Advisor title clarity remains a concern
But in response to the news, FAIR Canada, the country’s only investor-focused non-profit, argued that letting mutual fund dealing reps, registered reps, and portfolio managers all use the financial advisor title would actually muddy the waters for the investing public.
“We know from our research that the vast majority (92%) of Canadian investors expect a financial advisor to be proficient in all core areas of personal finance,” FAIR Canada said, referring to survey research around financial advisor titles it released late last year.
“Similarly, 92% agree job titles should make it clear what the holder is licensed to provide advice about.”
FAIR Canada acknowledged that compared to other CBs in Ontario’s title framework, registrants with CIRO are subject to higher levels of regulation and oversight. Still, it said the individuals approved by CIRO are qualified only to give advice on investments, including some who are just salespeople.
According to its survey research, the areas of personal finance investors expected financial advisors to have proficiency in are:
- Estate planning;
- Tax planning;
- Retirement planning;
- Investment planning and alternatives;
- Finance management; and
- Insurance/risk management.
Questions around CIRO’s CB cred
In an emailed reaction, Ken Kivenko, president at investor advocacy group Kenmar Associates, said it will be interesting to see how CIRO will balance its enforcement and credentialling functions.
He also raised questions about what CIRO’s CB recognition could mean for the Ontario Securities Commission (OSC), which oversees the investment industry in Ontario.
“Does the OSC have the skill set and credibility to oversee an accredited CB?” Kivenko asked. “How will fees, if any, be set?”
He also asked whether individuals sanctioned by CIRO in Ontario would automatically lose their right to use the financial advisor title, and whether investors in the province could expect to see a dedicated site to check on CIRO registrants who are also FA title holders in the province.
“How will dual-licensed cases be handled?” Kivenko added. “Will investors be warned of the limitations of the FSRA FA title?”
In the wake of FSRA’s Tuesday announcement, Advocis said it “remains concerned,” citing previous concerns it had expressed regarding CIRO as a CB.
“CIRO’s licensees are allowed to enter the framework with only a sales license, raising safety concerns for families, businesses, and consumers entrusting their financial future to underqualified sales-focused ‘advisors,’” Advocis said in a statement last October.
“Approving CIRO and its representatives to utilize the Financial Advisor title before conducting a thorough review and updating the financial advisor proficiency standards would effectively cement these lower standards in place,” it said at the time.
To help ensure the effectiveness of Ontario’s Financial Professionals Title Protection Framework, FSRA has pledged to review the framework by the end of the fiscal year. That will include examining how well proficiency standards for the financial planner and financial advisor titles align with consumer expectations, evaluating CB policies and processes, and consultations with key stakeholders as needed.
“FSRA’s ongoing review will be critical to delivering on its consumer protection promise,” FAIR Canada said. “More changes and work are required to better align the framework with consumer expectations. FAIR Canada will continue to advocate and support these needed improvements.”
Advocis, meanwhile, said it “[looks] forward to engaging in FSRA’s stakeholder consultation.”
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