What’s in a Name?

What exactly is a financial advisor? I personally have no idea, so the average consumer must be even more confused.

The financial advice industry currently has no set standards for job titles (outside of the province of Quebec) and many people holding themselves out as advisors are not really offering any advice at all. A quick online scan of local financial advisory providers will show all sorts of creative and misleading titles such as “advisor”, “wealth manager”, “vice-president”, etc and most of these titles have been randomly chosen to sound official. The “financial advisor” title is the most confusing of all since it simply has no definition yet is widely used.

Furthermore, many who are holding themselves out to be providers of advice are just salespeople selling a few specific insurance or investment products. So what is the average consumer supposed to do to find the right advice? The best first step is to become better informed.

You should first determine what level of education somebody has. In order to sell life insurance products including investments such as segregated funds, all you need to do is pass a quick 45 minute open-book exam. Similarly, to sell investments and be considered an “investment advisor” or “stock broker”, a quick securities related exam is all that’s required. Ultimately, the barrier to entry in this industry is incredibly low.

The above minimum requirements are a far cry from the multiple courses, exams and years that it takes to earn a proper advisory designation like the Certified Financial Planner (CFP) or Chartered Investment Manager (CIM) designations. People that have taken the time and shown the skills and knowledge required to attain one of these high-level designations are in the position to provide a much higher level of advice.

Herein lies one of the major issues consumers face. Many who have only done the bare minimum are still using job titles that suggest they have a much more extensive level of training and knowledge. In the province of Quebec, you can only hold yourself out to be a “Planificateur Financier” (Financial Planner) if you’ve completed the university level programs and passed the IQPF examinations. But outside of that province, there is no such job title restriction, and anyone can call themselves a financial planner or advisor.

The Canadian consumer also faces a barrage of “credentials” that follow many advice providers’ names. Some of those little letters represent significant training and hurdles to obtain while others are a few days of effort at most. Some designations require the holder to meet annual continuing education requirements and live up to certain codes of ethics while others do not. The Investment Industry Regulatory Organization has an online glossary that lists 67 different designations and what they all require.

I for one would say that 67 separate designations are far too many for the average consumer to wade through. At the core of our industry, there are only 3 designations that matter:

  • A CIM® designation shows advanced training in investment management.
  • A CLU® designation shows advanced training for life insurance.
  • A CFP® designation shows advanced training in financial planning and is generally considered the “top” designation that a financial advice provider can attain.

All three of the above designations require multiple years of previous work experience, significant courses, annual continuing education, adherence to a code of ethics and numerous examinations to complete. Aside from a Chartered Financial Analyst (CFA) designation (that’s mostly utilized in the portfolio management world), all the other designations floating around out there can pretty much be ignored. Sure, some other designations have a bit of merit to them, but they cause more confusion than anything else.

I look forward to the day when we have job title restrictions in place across Canada and a consumer can easily distinguish between an investment or insurance salesperson and someone who is truly a financial planning professional. In the meantime though, it’s up to you the consumer to figure out who is really who.