Closing the Loopholes, Raising Standards, Protecting Consumers
TORONTO, Feb. 18, 2014 /CNW/ - Today, one of the most important bills to protect consumers was introduced in the Ontario Legislature. It is a ground-breaking Act to regulate who can practise as a financial advisor and the quality of advice.
Currently, anyone can hold themselves out as a financial advisor in the province without having to meet consistent standards of proficiency or ethical conduct. This lack of oversight leaves consumers exposed to possible fraud or bad advice from unqualified advisors.
The Financial Advisors Act 2014 - a Private Member's Bill introduced by Liberal MPP Rick Bartolucci - will change all that. When enacted, it will put in place the first legislation in Ontario to directly govern the profession.
"Doctors, lawyers, engineers, accountants and many other groups are regulated as a profession. It's time for those who are critical to the financial well-being of so many Ontarians to be regulated as well," said Greg Pollock, President and CEO of Advocis, The Financial Advisors Association of Canada.
Advocis is the largest voluntary association of financial advisors with more than 5,000 members in Ontario (more than 11,000 nationally). It has been championing enhanced consumer protection for more than a decade. "We want to maintain the highest level of trust and confidence in our profession," Pollock noted. "We want to prevent the unqualified from practising, and put the unscrupulous out of business."
Existing regulation is focused on the sale and distribution of financial products, and is fragmented by sector - insurance and securities are regulated by different entities. This makes the system vulnerable to "sector hopping." For example, an advisor found guilty of misconduct in the insurance sector can continue selling mutual funds.
The proposed legislation focuses on protecting the consumer by governing all financial advisors regardless of the products they sell. It would close the current loopholes in the system. Unethical advisors would no longer be able to operate by moving from one product sector to another.
This harmonized approach will require anyone practising as a financial advisor in Ontario, or serving Ontario clients, to register with the new self-regulatory body. For the first time, consumers in the province will have:
- Assurance they are dealing with financial advisors who meet consistent proficiency standards, adhere to a code of conduct, satisfy continuing education requirements, and maintain errors and omissions insurance;
- a single system that can deal with their complaints and has the power to suspend or revoke an advisor's registration; and
- Advocis envisions that consumers will also have access to a one-stop database where they can check if their financial advisor is registered with the self-governing body.
There are many different kinds of financial advisors. Some work in a single sector, others are multi-licensed. Some charge fees, others receive commissions, and still others are compensated through a blend of the two. Some are specialists with advanced certification, others are generalists.
"It would be a mistake to try to regulate by allowing only certain kinds of advisors to practise," Pollock noted. "This would restrict their numbers and reduce access." Studies have shown that consumers who receive professional financial advice accumulate significantly more wealth. A report from the Centre for Interuniversity Research and Analysis on Organizations (CIRANO) in Montreal, for example, found that those who work with an advisor have two to three times more financial assets.
"A far better way to protect consumers is to regulate all advisors. This will preserve choice, ensure that the millions of Ontarians now benefiting from financial advice will continue to have access, and it will establish industry-wide standards for all financial advisors."
Pollock said Advocis will support the Bill, and he expects it will receive the backing of other stakeholders as well. "Consumers need this enhanced protection, and so we think it will be widely supported by all parties at Queen's Park, consumer advocacy groups, financial advisors, and consumers alike."
Advocis, The Financial Advisors Association of Canada, is the association of choice for financial advisors and planners. With more than 11,000 members in 40 chapters across the country, Advocis is the definitive voice of the profession, advocating for professionalism and consumer protection. Professional financial advisors and planners are critical to the economy, helping consumers make sound financial decisions that ultimately lead to greater financial stability and independence. Advocis works with decision-makers and the public, stressing the value of financial advice and striving for an environment in which all Canadians have access to the advice they need.
SOURCE: Advocis, The Financial Advisors Association of Canada
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