Most people working in the industry agree that one of the biggest challenges for financial advisers is the issue of trust and nowhere is this more evident than the baffling range of adviser titles consumers are confronted with. This needs to change if consumer trust is to improve because it is too hard at present in the UK for consumers to choose who to trust.
If you are a consumer in the UK looking for a financial adviser you are faced with a plethora of titles, none of them protected in law. You would have to choose between an IFA, Financial Planner, Chartered Financial Planner, Certified Financial Planner, Financial Adviser, Financial Consultant, Wealth Manager and so on. No wonder savers are baffled when none of these are protected in law and they cannot evaluate easily the value of each one.
In Canada things are changing. The government of Canada's most populous province, Ontario, has moved a step closer this week to protecting the status of ‘Financial Planners’ in law and is consulting widely on moving forward with what it considers to be a consumer protection issue for its 13m people. It's not unlikely legislation will be introduced to protect 'Financial Planner' status.
The Ontario Ministry of Finance, which has been looking at the issue since 2015, is seeking public views on the regulation of Financial Planners in the province.
The consultation paper includes proposals to:
1. Restrict the use of the title ‘Financial Planner’ to those individuals holding a recognised Financial Planning credential;
2. Prohibit the use of titles similar to ‘Financial Planner’; and
3. Create a central database of Financial Planners.
One of the most sweeping proposals is to ban titles ‘similar’ to ‘Financial Planner.’
The word ‘Planner’ in combination with any of the following words, for use in titles, could be expressly prohibited: Wealth, Portfolio, Asset Management, Securities, Insurance, Money, Retirement, Asset, Investment, Mutual Fund, Mortgage.The use of other titles that could mislead a consumer into reasonably believing that an individual is a Financial Planner would be prohibited.
The government is also seeking views on the unregulated use of the “Financial Adviser” or “Financial Advisor” title, considered both in Canada and here to be the generic title for someone offering financial advice to the public.
In the UK the issue is a little more complicated but not insurmountable. We have rival qualifications in Chartered Financial Planner and Certified Financial Planner as well as other professional bodies who can award advisers professional adviser status.
It would be a mistake to lose all this progress but the present system of numerous, confusing, often overlapping titles is not sustainable in the long term as it simply doesn't work in the public interest.
Savers will only trust financial advisers in the same way they trust solicitors and surgeons if they know for certain their adviser has a status protected in the law. In other words the full weight of the law should underpin the title.
The FCA, I suspect, has ducked this thorny issue for a long time, wanting to concentrate on other aspects of consumer protection with higher priorities. The Canadians have shown the lead, however, and I believe other jurisdictions will follow including the UK as it should. It could be among the world leaders in this.
As the financial advisory profession matures around the world it is sensible that legal protection for Financial Planner status is implemented and all advisers are given the time and encouragement to seek this designation to improve consumer trust in the profession.
Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with over 20 years of experience