Advocis

Update on regulation: the OSC, IIROC & the MFDA

Advocis — Fri, 27 Feb 2009 21:50:54 GMT

Advocis standing firm on behalf of financial advisors and planners

The Ontario Securities Commission (OSC) has been garnering a lot of attention in the financial press lately, much of which is not particularly complimentary. And the recent request by the Ontario Legislative Assembly's Standing Committee on Government Agencies for submissions on how to improve services means that the level of buzz is climbing fast.

You can be sure that many submissions focus on introducing better policing power to deal with securities crime, including stronger methods of both detecting and deterring fraud. Indeed, the concept of expanded investigative and enforcement powers has been strongly advocated for at the national level, with much op-ed commentary calling for the introduction of a properly funded and independent Canadian securities crime regime, to tackle both the occasional rogue individual as well as systemic, larger-scale investment fraud.

What's behind this drive for a stricter regulatory regime? Many high-profile observers and analysts have concluded that self-regulatory organizations (SROs) like the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) cannot adequately monitor for illegal activities, much less provide either the OSC or the police with the information they need in order to act effectively.

Another body of critical comment asserts that the OSC and SROs like IIROC and the MFDA—both of which fall under the aegis of the OSC—are guilty of unilaterally introducing rules and regulations which wrongly penalize your typical financial advisor or planner.

That's why, in its submission to the Standing Committee on Government Agencies, Advocis recommended that the OSC and SROs adopt a uniform and consistent procedure before introducing new regulation, to better understand and lessen the impact of their actions on compliant individual advisors and planners:

We recommend the government impose requirements on the OSC and the SROs to ensure that before implementing any new major regulatory requirement that it develop a clearly articulated statement of the problem that the regulation is meant to address... Failure to identify problems that clearly require intervention, and failure to assess the impact on market participants and consumers in relation to the likely benefits, has led to ill-conceived regulatory initiatives.

In regard to IIROC's implementation of the financial planning rule, Advocis submitted that:

The proposed IIROC rule is an example of SRO regulation that is skewed in favour of large dealers with an employer–employee business model and is severely prejudicial to smaller, professional financial planners. This is also an example of an inadequate consultation process. The proposed rule was issued for comment in the summer of 2008 with a very short response turnaround timeline and without prior consultation with financial advisors.

At a time when consumers of financial services so obviously require the widest possible range of choice in selecting qualified financial advice, the OSC, the MFDA and IIROC are moving ahead with tighter and tighter rules-based regulatory initiatives. Their commitment to prescriptive, rules-based regulation tends to favour larger organizations which have the deep pockets needed to comply with such regulations. However, it is the consumer-responsive and fully compliant but smaller advisory practices which will increasingly pay the price for this style of regulation.

The paradox is that such a regulatory approach ignores or even conflicts with the basic principles which underwrite the mandates of organizations like the MFDA and the OSC. In specific, some of these basic principles which are now in harm's way include foundational concepts such as ease and security of consumer access to necessary services and the ability of the individual to freely choose from the widest range of competent service providers. What's more, in their broadest sense, these principles inform not just the raison d'êtreof our financial regulatory regimes, but also underpin the very basis of our system of political economy. At time when the ability of these organizations to enforce rules and ensure compliance are being called into question by experts near and far, it seems both impolitic and even short-sighted to introduce yet more rules and regulations until enough of the stakeholders arrive at a consensus of what's broken, what needs to be fixed—and, most important of all—what we are certain that we can and should fix.

How do you want the future of the CLU to look?

Advocis — Fri, 23 Jan 2009 20:49:09 GMT

A Mack truck is closing in on you quickly and you can now count the number of bugs on the grill.

Here’s the question you have a split-second to ask yourself: Is it too soon to get out of the way, or should I stand fast?

Now let’s freeze that Mack truck for a moment.

Stephen Covey, author of The Seven Habits of Highly Effective People, offers the following insight: “Don’t engage the research if you are not prepared to go where it leads.”

The CLU Institute has a Mack truck closing in on the CLU designation. The marketing research we’ve conducted within Advocis’ demographic data tells us that—as of June 2008—there were 761 members who are eligible to register for CLU program courses.

Now some will argue “That is not possible?” (They may be some of the same folks who may argue that the earth is flat).

As we all know, Advocis membership is a necessary condition for obtaining and maintaining the CLU designation.

When Advocis membership was a condition of employment in the agency system, there was no membership problem. But Advocis has not had a similar source of membership growth for the last decade. Within Advocis the number of CLU members and CLU designees holding the CLU has remained strong, constant and consistent.

The average age of the CLU designate is 61. This means no new market opportunities have emerged, which leaves the current market niche disabled, retired, successioned or dying.

What does this mean? Well, there is a possibility of 10 or so years of life left in the CLU brand. But there also exists the possibility that the brand as we know could eventually be vapourized.

What if the Institute could market the CLU designation to non-members of Advocis?

Doing so would require changing the pricing, licensing and membership rules—to name just a few of the speed bumps.

Right now in this country there are some 14,500 CFP designates who are not members of Advocis. This represents a lucrative niche market that would immediately be eligible for the CLU Designation.

That’s why, throughout 2009, the CLU Institute will conduct research which will include analysis, price modeling, legal requirements and further investigate the members/non-member issue.

This is your blog. The CLU Institute would love to hear your thoughts, pros and cons.

Ask yourself this: How do you want the future of the CLU to unfold? What should it stand for?

That Mack truck is bearing down on us.

I welcome your feedback.

Richard McKenster, CFP, CLU, CH.F.C., RHU

Advocis, advisors & planners, and Dwight Duncan

Advocis — Tue, 20 Jan 2009 19:51:17 GMT

Regulation and the upcoming provincial budget

The current issue of Investment Executive has an article by Megan Harman which outlines Advocis’ position on the need to reduce the regulatory burden faced by advisors and planners in Ontario.

You’re probably aware that Advocis is urging Ontario Finance Minister Dwight Duncan to use this year’s provincial budget as a platform to deal with the regulatory hurdles advisors and planners face.

Advocis’ pre-budget submission to Duncan made the case for the Ministry of Finance to increase its oversight of provincial regulators, especially in regard to the regulation financial advisors and planners routinely experience, as well as the need to protect Ontario consumers with regulation that does not adversely affect their ability to access competent and efficacious financial planning and advice.

Greg Pollock, Advocis president and CEO, is quoted at length in the article:

We are not asking for a handout or a subsidy… Our members simply want to do business in a regulatory environment that not only protects the public, but also ensures that advisors and planners are not hampered by unnecessary and inefficient regulation…

In addition to smart regulation—not one-size-fits-all regulation, we need to see more and better proof of the need for additional regulation. Our members see the regulation but seldom see any indication of an understanding of the size of the problem the regulation is intended to address. A cost-benefit analysis from the regulator about the benefits of protecting the consumer against the increased burden of compliance costs to the financial advisor or planner would go a long way.

Smarter regulation that’s backed by a convincing cost-benefit analysis in the consumer interest: we can think of no better time that the right now for this concept to gain purchase in the Ministry of Finance’s offices. For the moment, we will await Duncan’s budget and see what he does.

Click here for to read the entire article online at Investment Executive.