May 2024

This month’s newsletter discusses how the approach to protecting the financial advisor and planner titles creates a confusing array of different minimum standards. We also discuss how investors should consider spring cleaning their financial goals and investment portfolios. Under What’s New, we spotlight Women and Investing, a new online resource introduced by the British Columbia Securities Commission’s InvestRight. Get into these insightful topics and more…

Title Protection – Investors Beware

Several provincial governments passed, or are considering passing, laws to regulate the use of two titles: financial advisor and financial planner. These titles, which are now protected, have been widely used in the financial services industry for years. Canadians often rely on them to find professionals to help them manage their financial affairs. The new laws are supposed to ensure that every financial advisor or planner meets a minimum standard required in the province where they practice.

Ensuring everyone meets a minimum standard is generally a good thing. We all agree that people without a minimum level of knowledge or training should not be allowed to call themselves financial planners or advisors. 

However, the fundamental problem is that these title protection frameworks are based on various different minimum standards, not a common standard. As a result, individuals with very different education, training, experience, and legal obligations can all use the same title. This is not only very confusing, but it is also potentially misleading to the average person.

To understand what kind of financial advice they are getting, the average Canadian would need to spend considerable time and energy understanding the key differences between the array of minimum standards.

They might also want to take a crash course in securities and insurance regulation to better understand their legal protections, if their financial advisor misbehaves.

In Ontario, for example, rather than developing a common standard for all financial advisors, the government decided it was more important to allow those working in financial services to choose their own pathway for obtaining that title. The result is that, in Ontario, financial advisors can:

• Obtain their credentials from vastly different organizations. These organizations have different objectives, roles and abilities to protect the public when a financial advisor’s conduct falls short and causes harm. 

• Receive different licenses to sell and advise on different types of financial products.

• Complete different courses on various subjects and pass different exams.

• Meet different educational requirements and have various ongoing learning requirements.



For example:

Q: What kind of advice are you trained and licensed to give me?

Q: Do you get paid a commission for the products you sell, or do you charge me a flat fee for the advice you provide?

Q: What education and qualifications do you have?

Q: Who regulates you, and what compels you to put my interests first when giving me advice?

Q: How will you tailor your advice to my specific needs?

Q: If things go wrong and your advice is inappropriate, who will protect me?

The last question is vital because your provincial government may leave it up to the advisor’s credentialing organization to protect you when things go wrong.

Don’t confuse minimum standards with a common standard. Remember, the best way to protect yourself is to ask questions to understand exactly what type of financial advisor or planner you are dealing with.



Spring Cleaning: Time to Tidy Up Your Investment Portfolio

Spring is the ideal season to clean and tidy up not just your home, it’s also the perfect time to organize your investment portfolio. Regularly reviewing your investments can empower you to make informed decisions, reduce stress, and improve your financial health. Below are some tips and resources for reviewing your investments to help support your financial well-being.

Revisit Your Financial Goals

Before you dive into assessing your investment portfolio, revisit your financial goals. These goals help to guide your financial and investment decisions. It’s essential to review your goals when there’s a significant life event, for instance, becoming a parent or inheriting assets. Performing a review lets you determine whether you should make a change, such as investing in different products.

Are you a conservative investor who prefers stable, reliable returns, or are you open to taking greater risks for higher potential returns? Knowing your risk tolerance will help you decide the best mix of assets for your portfolio.

Consider what matters to you and prioritize your goals accordingly—they should be specific, realistic, and measurable. You’re more likely to achieve a particular goal, such as saving $5,000 for an emergency fund within two years, rather than a vague goal, like simply increasing savings.

Creating a checklist for your financial goals can help you pinpoint what you want to achieve financially. Consider working with a qualified financial planner to develop a strategy and create a plan. This will assist you in setting clear goals and increase your chances of attaining them.

Review Your Investment Portfolio

Risk Tolerance

A key aspect of your portfolio review is re-assessing your comfort level with risk. Important life changes, such as losing a job or going through a divorce, can affect your risk tolerance. Think about how comfortable you are with market fluctuations and potential losses.

Are you a conservative investor who prefers stable, reliable returns, or are you open to taking greater risks for higher potential returns? Knowing your risk tolerance will help you decide the best mix of assets for your portfolio.

Using a questionnaire can be a helpful tool in gauging your risk tolerance. Take the quiz here!

Time Horizon

Your investment time frame is closely tied to how much risk you may be comfortable with. If you’re investing for the short term, you may prefer less risky investments that ensure your money is available when needed. As you age, your investments also have less time to recover from market downturns. Therefore, you may want to invest in less volatile products, such as bonds, rather than stocks as you approach retirement. If you are just starting your career, you may be willing to take on more risks to earn more returns.

Fees

When reviewing your portfolio, consider how much you pay in fees. The more you pay, the less money you’ll have to invest, or have from your investments. Keep in mind that some fees reduce the returns on your investments.

Our FAIR Canada Investor Survey showed most investors don’t understand the fees they pay. Only 28% of investors felt confident they understood their fees, and 63% reported not understanding them. A staggering 77% were concerned they were paying too much in fees.

Take the time to review your annual report on costs and pay attention to the different fees. Research and compare similar investment products to find suitable options with lower fees. If you work with an advisor, ask how they are compensated and how you can reduce your fees. Remember, many fees are negotiable! To help you become more familiar with investment fees, read FAIR Canada’s resource on Understanding Fees and Statements.

By reviewing your investment portfolio, you’ll be better prepared to reach your financial goals. For more tips, check out the Ontario Securities Commission (OSC) resource. Happy spring cleaning!

What’s New

Investor Alert! You Are Not Required to Use Claims Management Companies

The Canadian Investment Regulatory Organization (CIRO) is warning Canadian investors that they do not require a claims management company to communicate with regulators.

Local securities regulators, CIRO, and the Ombudsman for Banking Services and Investments never charge investors fees for using their services. The Canadian Securities Administrators or CIRO do not regulate claims management companies, so investors should be cautious when using their services. 

Women and Investing: A New Resource From InvestRight

The British Columbia Securities Commission’s InvestRight has unveiled an online space dedicated to women and investing. This comprehensive guide to investing, called Women and Investing, features quizzes and resources explicitly designed to engage more women in investing. To assist you in empowering your investing journey, check it out here!

Digital Engagement Practices Investing Report

The OSC recently released its Digital Engagement Practices: Dark Patterns in Retail Investing Report. The report examines how investing platforms use digital marketing and design techniques to influence retail investors’ behaviour.

These practices raise regulatory concerns due to their potential impact on investors’ decisions and privacy. The dark patterns aim to manipulate users’ decisions while using apps and investing platforms. You can read more about these practices and what regulators do to counter them. Gain further insights in the full report. 



Throughout the year, FAIR Canada submits many comment letters on various important policy and regulatory matters that have an impact on investors. Read more about our investor advocacy work.

We’d Love to Hear From You!

Do you have feedback on our newsletter or suggestions for topics you’d like us to write about? Your input is valuable and will help us improve our newsletter content for loyal subscribers like you. Please email us at info@faircanada.ca with your comments and/or suggestions.

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To learn more about our advocacy for investors, visit FAIRCanada.ca