Financial advisors v’s lawyers and doctors….

Ken Kivenko the ubiquitous Canadian investor advocate has been e mailing a picture of a Canadian Securities Institute advert.   The advert shows the costs of becoming a financial advisor ($4k) versus that of a lawyer (75k) or a doctor ($72k) and their respective average salaries. 

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It is a bit misleading to both public and aspiring advisors:

Number 1, it can take as little as 3 months to become a financial advisor and years before a lawyer or a doctor is allowed to deal with live people.  Standards have to be fairly low to allow this type of entry requirement.

Number 2, both a lawyer and a doctor have a fiduciary responsibility towards their clients/patients and are required to give advice that is in their own best interests.  A Canadian financial advisor on the other hand does not and is able to operate under a financial arrangement (remuneration for transactions) that is an ever present conflict.

Number 3, the position of a financial advisor, given the lack of best interests standards and remuneration conflicts of interest, is not a profession.  In fact, the body representing financial advisors (Advocis) is fighting against the introduction of standards that would elevate the role of advisor to a professional status.

Number 4, the advert should really be comparing a financial advisor to other sales positions, although even here, the dividing line would not be clear.   You buy a washing machine, a car, a house and you realise that you are undertaking a transaction.  You go to a financial advisor and you might think that you are buying advice.  No! The return in the advert comes from sales and not advice.

Number 5, the financial advisor “salary” is not a salary, it is the average transaction generated earnings that advisors in the industry generate from selling.   A salary on the other hand is what you get whatever the number of “transactions” your clients end up with after accepting your advice.

Many financial advisors in Canada operate at professional standards,  but regulation and product distributors would rather not recognise this uncomfortable truth; the uncomfortable truth is the fact that advisors are representing themselves as advisors and being paid and regulated as salespersons.  

If you want to know more read the pro industry and the pro consumer positions on the recent OSC mutual fund and best interests standards consultations’ comment letters.

Other info:

http://www.ipcc.ca/files/IPC_Update/_2012_updates/11-8-12/FAQ_IPC_Securities_MFDA_to_IIROC_Nov12_FINAL.pdf

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