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ONTARIO MINISTRY OF FINANCE 1

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ROUNDTABLE SESSION I 5

RE: INVESTIGATING THE MERITS OF MORE TAILORED REGULATION 6

OF FINANCIAL PLANNERS IN ONTARIO 7

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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

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BEFORE: 19

Christian Bode Moderator 20

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PARTICIPANTS: 1

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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

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PARTICIPANTS: 1

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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

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PARTICIPANTS: 1

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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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ROBERT LEE 9

Certified Stenomask Reporter 10

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