Implementation of Ontario's Financial Professionals Title Protection Rule, which came into effect in 2022, has pleased no one thus far.Dilok Klaisataporn/iStockPhoto / Getty Images
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Ontario’s provincial government drew praise from both investor advocates and the investment industry alike when it proposed legislation to ensure that anyone who holds themselves out as financial advisors or financial planners are qualified to do so.
Yet, the implementation of the Financial Professionals Title Protection Rule, which came into effect in 2022, has pleased no one thus far. To find out why, Globe Advisor editor Pablo Fuchs asked Jean-Paul Bureaud, executive director of investor rights advocate FAIR Canada. The two spoke in a recent LinkedIn Live webinar to discuss the impact of title protection and other recent investor protection initiatives.
Why are there so many people – investor advocates as well as those in the investment industry – who say Ontario’s title protection framework has fallen well short of expectations?
Everyone I’ve spoken to, whether they’re in the regulatory community or the investment industry, has described it as a bit of a hot mess. What’s become very clear is that we’ve created a framework that permits and encourages multiple sets of minimum standards.
We have vastly different types of credentialing bodies that are obligated to supervise their members. For example, at one end of the spectrum, we have a for-profit organization; at the other, we have a quasi-regulator tasked with protecting the public.
We also have different types of credential holders. Some are selling vastly different products and they’re subject to very different types of regulatory obligations in how they deal with their clients. And yet, they can all hold themselves out to the public as financial advisors.
So, from a consumer’s perspective, it’s incredibly difficult, confusing, and challenging to navigate the system and understand who you’re dealing with. Many of the people using the title are salespeople. Yet, when most Canadians hear the term financial advisor, they’re expecting somebody who’s going to be looking at their interests and giving them broad-based advice that reflects all their financial circumstances.
Is it too late to save title protection in Ontario?
I’m coming to the view that it needs radical surgery to deliver on its promise and intended purpose. We can’t forget this was always intended to protect consumers, and I would argue it’s made things worse for consumers.
There are many challenges. One of them is who’s going to step in when the consumer is harmed. Are we comfortable with the expectation that one of these credentialing bodies, which may be a member-driven organization, is going to take action against one of their members when it’s required to protect the public? Or would we prefer to have a regulator whose mandate is to protect the public? I’m becoming less optimistic that it’s a solvable framework, but I’m hoping that brighter people can come up with some solutions that make sense.
Saskatchewan and New Brunswick have taken their own approaches to title protection. How do they compare?
Saskatchewan has clued into one of the fundamental problems of the existing framework [in Ontario], which is that it creates multiple minimum standards. So, to create a more level playing field among those who are using the [financial advisor] title, Saskatchewan has proposed introducing client-focused reforms elements and making them a requirement for any individual who wants to use the title – irrespective of whether that individual is a registrant under the securities regulatory system or might be an insurance salesperson under a different regulatory scheme.
Saskatchewan has also tried to increase the enforcement powers of the regulator in that province to take action against those who contravene the Title Protection Act, and that’s through more significant fines and even the possibility of [a] jail term in more serious breaches of the act.
New Brunswick is also following suit. It’s coming at it slightly differently in trying to introduce client-focused reform elements more through a code of conduct approach as opposed to a legal obligation. Furthermore, it’s also looking at trying to beef up the powers of the regulatory agency in that province to step in when needed.
– Pablo Fuchs, Globe Advisor editor
This interview has been edited and condensed.
Must-reads from Globe Advisor this week
Triggering a capital gain by June 25? Here are five ideas for what to do with that cash
Investors who have triggered capital gains, or who plan to before the inclusion rate goes up on June 25, have another decision to make: how to invest the sale proceeds. As Brenda Bouw reports, the options range from insurance policies to paying down debt to setting aside money for taxes. “You have to ensure you set aside enough funds so that you’re not scrambling when those taxes come due next year,” says Leanne Scott, principal and portfolio manager at Vancouver-based Leith Wheeler Investment Counsel Ltd. Here are five suggestions from advisors.
More self-employed Canadians are filing taxes earlier to avoid interest charges
Sole proprietors and their spouses may have until June 17 to file their 2023 income taxes, but many advisors encouraged these clients to file by April 30, when tax payments are due. While filing and paying taxes in June gives business owners six more weeks to gather documents and get their affairs in order, delaying is more costly these days with higher rates on overdue taxes. “It’s very expensive to owe the CRA money, especially now that balances due have risen to such high numbers,” says tax expert Evelyn Jacks, president of Knowledge Bureau Inc. in Winnipeg. Deanne Gage reports.
Why Canadian asset managers are teaming with private market giants to launch new funds
Asset managers are finding it difficult to get offering memorandum products approved at investment dealers due to the “reputational risk,” according to a report from Investor Economics, an ISS Market Intelligence business. Those concerns have led dealers to favour in-house funds and large asset managers with strong brand names. “Being able to offer our private market funds with established operators in a format advisors can use with their firm’s framework from a [know-your-product and know-your-client] perspective is very important for us,” says Vlad Tasevski, chief operating officer and head of product for Purpose Investments Inc. Jamie Sturgeon reports.
Global wealth managers embracing AI to improve efficiencies, relationships with clients
While some advisors worry about losing out to the cold efficiency of artificial intelligence, a report from Capgemini SE says the new technology offers advisors a path to more personalized relationships with clients, particularly the very wealthy. The report, released Wednesday, points to ways AI can help with client profiles by digging into psychological traits to understand their decision-making and create more intimate relationships. Elias Ghanem, global head of the Capgemini Research Institute for Financial Services, said wealth managers’ attitudes toward AI are changing. “They passed the phase of saying, ‘It will replace me,’” he says. Mark Burgess reports.
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Crickets chirping is the only sound coming from the Department of Finance these days on the matter of the proposed capital-gains tax changes. We can only hope the proposed changes were just a bad joke, Tim Cestnick writes, because we haven’t seen legislation yet explaining how the rules will work, and the changes are supposed to be effective in less than three weeks – on June 25. Assuming the proposals will become law as the government has promised, what should Canadians do to prepare? As we’re at the ninth hour and heading toward June 25, Mr. Cestnick offers these four ideas.
Women in Capital Markets rebrands as VersaFi to help advance women beyond core Bay Street
Women in Capital Markets, a leading organization for promoting and advancing women’s careers on Bay Street, is rebranding after almost three decades to become VersaFi – a nod to a broader mandate beyond traditional finance. Historically, WCM focused on fields such as equity research as well as corporate and investment banking. Under its new brand and new chief executive officer, Tanya van Biesen, VersaFi will add the likes of financial technology firms to its scope. Tim Kiladze reports.
A guide to what lower rates will mean for mortgages, housing and returns on all those safe parking spots for cash
The long-awaited interest rate U-turn is finally at hand. Rates began rising from pandemic lows in March, 2022, and have been flat since last summer. We are still far from unwinding those recent rate hikes, and it’s unlikely that we get back to the old lows. But the trend is clear: slowly and haltingly, borrowers will pay less and savers will make less following the 0.25-percentage-point drop in the Bank of Canada’s overnight rate on Wednesday. Rob Carrick reports.
Private debt manager Next Edge halts redemptions on flagship credit fund, will wind down portfolio
Private debt manager Next Edge Capital is gating its flagship credit fund after a surge in redemption requests, meaning clients are unable to get their money out and the portfolio will be wound down over the next two years. Created in 2015, the Next Edge Private Debt Fund lends to companies that typically cannot obtain bank financing. Over its first eight years, the fund often posted solid returns between 7 and 9 per cent annually, but performance dipped in 2023 – just as Canadian investors were growing more cautious about private debt. Around this time, a growing number of private debt managers started halting redemptions or reducing their monthly cash distributions. Last week, Ninepoint Partners told investment advisors it would stop paying cash distributions on three of its private debt funds that collectively manage $2-billion in assets. Tim Kiladze reports.
– Globe Advisor Staff