Developing Trust in the Financial Advice Sector: Education and Enforcement Demanded

Is more regulation needed to protect consumers from unscrupulous tax and financial advisors? That was the subject of KBR’s July poll, and it’s clear that to industry professionals, the answer isn’t so black and white. Our readers agree it’s a problem, but the solution falls somewhere between simply answering “yes” or “no.”

With a total of 234 votes, there was almost an even split down the middle. 52.99 percent said “no,” more regulation is not needed, while 47.01 percent said “yes.” However, comments made it clear that this is a real problem in the industry, and it’s an issue that many are passionate about resolving.

In fact, the majority of commenters agreed that the solution lies in education with verifiable credentials that let Canadians know they’ve found a well-informed, trustworthy advisor who has their best interests at heart. Secondly, they mentioned the need for better enforcement of the existing regulations.

We were also very flattered by the comments, like this one from Naveed, suggesting that Knowledge Bureau’s curriculum could be at the heart of the solution, and we agree! Programs like our Real Wealth Management designation were created with this in mind. Graduates of the program earn the right to a title that tells their clients that advisors holding this designation can successfully deliver goal-based, client-centric wealth management solutions.

Naveed said: “Create awareness to follow ethical practices and professional standards [rather] than more regulations. Knowledge Bureau can play a vital role in this.”

For this reason, we have also asked Susan Allemang, who has a handle on compliance and regulation as the Director of Policy and Regulatory Affairs for IFB, to speak on the issue at this year’s Distinguished Advisor Conference in a session entitled “The Intersection of Ethics, Compliance and Technology: The Evolving Nature of Advice.”

We featured some of our readers’ comments on the July poll last month – and here are some more great insights about this hot topic:

Ann points out that people need to do their research before selecting an advisor: “So many of these comments are spot on! We are back to the consumer needs to know who they hire as a third party. This goes for your financial advisors, tax preparer, contractor, cleaning lady. You are hiring people to handle your most valued assets. If you are looking at the cheapest out of pocket solution, well good luck with that, which a lot of clients are: the person who will pay cash to save on HST or who has a buddy that will do the [tax] filing for them. I met a chap who was involved in network marketing financial planning and was selling everything and recruiting at the same time. Not knowing a lot, I asked about this business to some top professionals and they explained that so many clients come to them to FIX their investments. Consumer awareness!! You need to know who you hire, you should ask for qualifications, shop around, read reviews. No to more regulations as they need to enforce what is already in place.”

Thomas points out that morality plays a role: “No, moral conduct is not changed by creating more regulation and paperwork. They will find a way around it. The paper process
now is already tedious enough.”

Ken suggests a method for enforcement: “Advertising by regulatory bodies of actions taken against unethical or fraudulent members. Too many professional organizations are self-regulating, do not notify the public of their bad apples. For them, better the public lose money than their organizations or their ‘presumed’ professional members. These are closed shops, people! Law suits must be the first step, funded by the regulatory bodies, whose job it is to protect the public. Won’t see that in my lifetime! If you feel you have been wronged, contact the regulatory agency in charge of your problem. If no action is taken by them within a month, hit the news media, print and TV, and name names. Most professional organizations do not want the publicity, and might act.”

Leanor agrees that the enforcement of existing regulations needs to change: “They don’t need more regulations as they have enough, but they never enforce them, especially in British Columbia. They put out these ridiculous fines and have them written up in the paper but never collect them as the money has somehow disappeared. These same people, noted in the Sun paper this year, constantly run these schemes and live in unbelievable houses still, in Vancouver, and the poor investor has none. History here in BC for development and money laundering are well known in government circles in all parties.”

Weigh in on this month’s poll question: Do you believe that consumers are expecting more specialized knowledge and advice in their relationships with tax and financial advisors?

Additional educational resources:

1. Knowledge Bureau’s Real Wealth Management Strategy can help you hone in on your clients’ needs and offer more value in your service offerings. Enroll in the designation program or start with a free trial of Elements of Real Wealth Management.
2. This year’s Distinguished Advisor Conference and the newly introduced Executive Business Builder Retreat feature 32 outstanding speakers on the agenda, all of whom will help you step up your leadership skills and expand on your client-focused service offerings. Early-bird registration ends September 15!

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