FSRA Financial Professionals Title Protection Rule and Guidance

November 12, 2020

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FSRA Financial Professionals Title Protection Rule and Guidance 

Letter Summary:

FSRA’s proposals consist of a new Rule and Approach Guidance that relate to granting approval to become a FSRA credentialing body and to obtain a Financial Planner or Financial Advisor credential from those bodies, as well as ongoing requirements to keep such approvals. The Approach Guidance sets out FSRA’s proposed administration of and expectations for credentialing body applications and for specific acceptable credentials, all within the framework already set out under the Financial Professionals Title Protection Act, 2019. Once the Act is proclaimed in force, it will restrict the use of these two titles to persons who have obtained a credential issued by an approved FSRA credentialing body. The Rule establishes approval criteria for credentialing bodies, criteria to issue acceptable credentials, sets out the application process and provides transition periods for individuals already using those titles (five years for FPs and three years for FAs). The Rule sets out baseline competency profiles for title users in both categories, and the consultation notes that it focuses on minimum standards instead of trying to build a consistent level of proficiency for all individuals who use either title or hold a license or designation.

Overview of the Council’s Comments:

The CAC agrees with the sentiments expressed by many commentators to the effect that there is much confusion in the marketplace with respect to the use of titles and credentials by persons providing financial advice and financial planning services, along with a wide array of expertise and knowledge in the field. The importance of the design and enforcement of rigorous uniform minimum standards for the use of both the FP and FA titles in the context of a title protection framework cannot be overstated. We are concerned that there is not yet enough guidance on examples of reasonably confusing titles to help industry identify those that would not be permissible, and to clarify the scope of application to titles for consumer and investor advocates. Similarly, the background information preceding the text of the Draft Rule indicates that upon the coming into force of the Draft Rule, no individual will be permitted to use the FP or FA titles without an approved credential. We believe this note should be expanded to refer to the FP, FA or reasonably similar titles (or words to that effect). FSRA currently expects that its supervisory approach will consist of complaints-based enforcement, however, we believe that FSRA’s approach should be more proactive. With respect to conduct requirements, the minimum conduct requirements should be harmonized in the requirements for all credentialing bodies and acceptable credentials, with the importance of a minimum acceptable duty of care to clients being paramount and uniform across both titles and all users of credentials and credentialing bodies. We agree with many of the stated FP and FA baseline competencies and have the following suggested amendments: a client’s risk profile includes both the client’s risk tolerance as well as their risk capacity; it would be helpful to expand upon (through additional guidance and illustrative examples) the expectation of gathering sufficient detailed personal and financial information about a client; when providing either financial planning services or financial advice, an FP and FA respectively should be able to analyze and determine the appropriate asset allocation for their clients, as this is central to making almost any appropriate client recommendation. It will be important for FSRA (and credentialing bodies by extension) to consider whether they should generally prohibit individuals from providing advice in areas or products with which they are not familiar. With respect to disclosure, we believe FP and FA title users should be required to disclose to their clients the recognized credential(s) that they hold, and direct questions to a FSRA-operated website with an FAQ and a public registry of acceptable (and if applicable, exempted) credentials, the corresponding credentialing bodies, and individuals who hold one or more of these. We believe that FSRA should be responsible for any such educational initiatives to avoid potentially misleading, confusing, or inconsistent messaging if direct to consumer or direct to industry information were to be provided by the credentialing bodies themselves.