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Virtually anyone can call themselves a financial planner. With the bar set very low, there are many unqualified advisors in the marketplace creating confusion and irreversible damage. Many unsuspecting investors engage salespeople and / or “financial advisors” who are only paid when they sell a product. Salespeople on commission (regardless of their title) rarely have your best interests at heart and the investments they sell are often less than stellar investments precisely because of the percentage of your investment that goes directly to commissions.
The sad reality in Canada is that anyone can call themselves a financial planner and even the “legitimate” advisors are not mandated to provide any kind of standardized services and or deliverables to a client. Further, advisors are not held to a fiduciary standard, meaning that legally, they are not required to put your interests ahead of their own at this point in time.
There are over 18,000 individuals formally qualified to call themselves financial planners and tens of thousands more calling themselves financial advisors, financial consultants, investment advisors or wealth managers. Today in Canada, outside of Quebec, anyone can call themselves a financial planner. There is no regulation that restricts the use of that title. Just like any other profession, there are some great people who work as advisors and some not-so-great people.
Here is a quote directly from the organization that develops, promotes and enforces professional standards in financial planning, The Financial Planning Standards Council:
Financial planning is not regulated in most Canadian provinces. This means that anyone can call themselves a "financial planner". However, not everyone who refers to themselves as a planner is indeed qualified; many so-called financial planners are licensed to sell products but have no financial planning training or expertise.
In the absence of government regulation, consumers must ensure their planner is indeed trained, certified, and held accountable in providing professional financial planning.
Allowing anyone to hold themselves out as a financial planner leaves Canadians confused and at risk. Half of Canadians believe financial planners are regulated. They are not. The need for unbiased financial advice has never been more urgent.
While many financial planners voluntarily seek out rigorous education and certifications, some people who call themselves financial planners don’t have the skills or qualifications to provide financial planning and are not accountable to any oversight body or subject to government regulations. This is a pretty scary reality, especially when you consider the importance of finances in one’s life and that money and financial issues are one of the single biggest sources of stress for most people.
Yet, few consumers ever question what sort of education or experience their advisors possess, or the professional standards their advisors are held to. Most people just assume that their financial advisors have their best interests at heart unfortunately that it is generally NOT the case.
Can anyone call themselves a surgeon, accountant or dentist? No. Why then, is an industry so critical to your survival so lightly regulated?
Canada’s regulators must require a fiduciary standard. They currently do not.
A fiduciary duty is defined as a legal duty to act solely in another party’s best interests. Fiduciaries have a duty to avoid conflicts of interest between themselves and their principals, and may not profit from their relationship with a principal without their express consent. The concept of a fiduciary duty has been in society for centuries, and is central to the English common law system, as well as modern securities regulation.
Currently, financial advisors in Canada are held to a “suitability” standard that does not require them to act in the best interests of their clients, instead, they must simply ensure that any investment recommendations are suitable given a client’s risk tolerance and return objectives. The implementation of a fiduciary standard would have widespread implications for the financial industry, as advisors would be required to ensure that all recommendations were in the best interest of their clients, including the minimization of all fees and expenses, which is typically at odds with the advisor’s goal of maximizing revenue from a client account. This would involve a shift towards the client’s goals and objectives ahead of the advisors. Buyer Beware!!
Generic Advice
Too many of these so called “advisors” sell investment products without truly understanding your values, goals or objectives. They have no idea of the larger landscape of your situation. Without understanding the entire picture, how could they possibly give you proper advice? In these circumstances the advisor’s value promise is generally very product centered with a focus on sales tactics such as risk avoidance, supposedly superior past performance, rates of return, and hope. Most advisors are guilty of practising prescription before diagnosis.
Product Focus
We need to clarify what we mean by a financial product vs. a financial service because products are generally speaking “the root of all evil.” A financial “product” is a pre-packaged investment, insurance policy or other financial instrument. The reason products are suspect is that they generally are packed with hidden fees. They are sold at a given “price” or “rate” or “charge,” but there are many hidden fees not easily discovered without some real due diligence on your part. These products are often the perfect vehicle for hidden fees and they often hide conflicts of interest for the advisors who sell them.
A financial “service,” on the other hand, might include drafting a will or estate plan or creating a financial plan. Generally these are billed on an hourly basis or are charged at a flat fee for a given outcome or deliverable. These can be easily comparison shopped and the fees are generally transparent to the investor.
Myth – I am safe with big brand names
Many people have a false sense of security trusting some of the big brand-name financial institutions. They somehow feel that there is an additional layer of security or protection with these big brand name institutions. They rarely ask any questions and simply assume with confidence they are in good hands. These beliefs could not be farther from the truth. These institutions have deep pockets, massive marketing budgets, and brand awareness, but these characteristics are not the proper metric for professional competency or service levels delivered to the client. Big brand names do not protect you, there is no additional level of security because of their brand name. You are just a number to them being provided generic product solutions.
It is clear from a Marketplace report that some of Canada’s largest institutions are failing to operate in their client’s best interest.
Smoke and Mirrors
Time and time again when I interview new clients all they have ever received from many of these so called reputable firms and advisors was money management and possibly a few other peripheral services of little value to the client. There are generally discussions around the markets, economy or the world – all discussions that the advisor has absolutely no control over but pretends to know.
As a result there is a lot smoke and mirrors, classic sales tactics (selling fear and greed), inaccurate crystal ball forecasting and industry jargon.
Many complacent Canadians continue to put up with advisors providing little or no service. The vast majority of advisors are under delivering and overcharging. As long as people are happy working with an advisor who does essentially nothing for them other than money management, the madness will continue.
Many people say they are happy with their financial planner but they could be so much happier. You can become better informed, discover new opportunities and make much better choices. It’s up to you to consider these new possibilities and move forward. The fact that you are reading this article is an excellent first step. It is easy to learn how not to get ripped off. You just have to know where to look and what questions to ask.
Dean Kendall is a Financial Organizer in Calgary, handling all of the financial affairs for a select group of clients who value unbiased quality advice for one simple flat fee.
His latest book is Stop Paying Hidden Investment Fees! Click here for more information https://www.ideallifeexperience.com/Stop-Paying-Hidden-Investment-Fees
In addition, Dean is a 3X Canadian National # 1 Amateur, a 5X Canadian National #1 Professional BMX rider, downhill mountain biker and an avid snowboarder. He is an expert at winning. Let him show you how to win the money game. You can reach Dean at dean@ideal-life-experience.ca or Phone 403-543 -7226
Copyright 2008 – 2019 by Dean Kendall. All rights reserved. 403 543 7226 dean@ideal-life-experience.ca