What’s the Difference Between a Financial Planner and Advisor?
Hi, !
Life used to be simpler, wasn’t it? Maybe that’s not entirely accurate, especially if you want to look up an information (anyone missing encyclopedias?) or not have to plan your night around watching your favourite show. It does seem more complicated now, though. With a deluge of real-time data at our fingertips, sorting through it all becomes a challenge. That’s where we step in. In this newsletter, we aim to sift through the noise, distilling complex financial topics into plain English for your benefit.
The financial landscape in Canada is undergoing significant transformations, some of which might be slipping under your radar. The recent fusion of mutual fund-only and fully licensed advisors is adding a layer of complexity to understanding what your “advisor” can offer you. Additionally, new regulations are reshaping what titles financial professionals can use. In my view, it’s crucial to grasp the qualifications, expertise, and services available from the individual managing your finances.
In essence, recent regulatory changes in Ontario have reduced the titles within the investment industry to two: Financial Planner and Financial Advisor. In the initial proposal there were diverse options, however, as competing associations and companies prioritized their interests over consumer understanding the clarity for the consumer became murkier.
These guidelines came into effect at the end of March, prompting the need for clarity on what they signify and what they don’t.
To carry the title of Financial Advisor, one essentially needs only to be part of the industry. This title encompasses individuals such as Mutual Fund Dealing Representatives (who’ve passed the mutual fund course), Registered Representatives (licensed to sell various financial products), or those with additional expertise like the Registered Retirement Analyst (RRA) designation. Initially, there were discussions about aligning titles with the products these individuals could sell. For instance, someone exclusively selling proprietary products might have been labeled as a “Proprietary Mutual Fund Salesperson.” Though not elegant, it offered customers transparency about their advisor’s capabilities.
However, with the introduction of the Client Focused Reforms aimed at protecting investors, major investment firms, including banks and large mutual fund companies, removed third-party funds from their offerings. Having a title for their advisors that represneted their lack of diversity in investment options could have painted a poor picture for these companies, hence the adoption of the generic titles that do little to differentiate advisor capabilities.
At Cherry Hill, we now use the Financial Planner title. Our team comprises advisors who all hold the Certified Financial Planning (CFP) designation. According to Investopedia, a CFP signifies “formal recognition of expertise in financial planning, taxes, insurance, estate planning, and retirement savings,” making it a globally esteemed credential in the financial planning sphere. While a CFP is the pinnacle designation, under the new rules, there are four other designations that can also be labeled as “Financial Planner,” including the Registered Retirement Consultant (RRC), which I also hold — albeit with much less rigorous requirements than the CFP.
This isn’t to diminish the value of other designations or credentials. Instead, it underscores the importance of understanding what you’re getting when seeking financial assistance. There was an opportunity to create a transparent landscape where consumers could match their needs with advisors boasting complementary education and competence. Unfortunately, this opportunity was not fully realized, leaving consumers to navigate a less transparent terrain.
Until next week, Happy Investing!
Trevor
In Lighter News:
Today is International No Diet Day, so order guilt-free fries with your burger today!
Markets:
- Our team has provided us with the April Market Commentary, please have a look at it here.
- We have also made some trade in our Watermark Private Portfolios, whcih you can find here.
