Bill 157: The Insurance Experts Weigh In (UPDATED)

Posted on March 12, 2014 and updated March 27, 2014 in Brokers, Life Insurance Canada News 8 min read
Statue Ivstitia by Jamie McCaffrey (edited)

UPDATE: Since the following article was first published, Bill 157: The Financial Advisors Act has passed its second reading in the Ontario Legislature.

Our article has also been the subject of much discussion and debate on Twitter, including a comment from the Toronto Star‘s Ellen Roseman:

And now, the original article…

A new bill meant to better regulate the behaviour of Ontario’s financial advisors passed first reading in the provincial legislature on February 18, 2014 and while our experts agree with it in principle, they say it isn’t really as effective as proposed.

If passed, the bill would install a Financial Advisors Act of 2014, which would apply to everyone who gives financial advice in Ontario for commission and renumeration regardless of the type of financial products they sell in the province.

The act would lay out clear proficiency standards that advisors will need to meet on a consistent basis, including continuing education requirements, the need to hold errors and omissions insurance and hold themselves to a code of ethics.

Unlike the current system, which is governed by a series of government ministries and is held to a number of disconnected rules from each of these bodies, the proposed legislation seeks to standardize the rules and requirements by putting their administration under what would be the newly-created Office of the Director.

This office would act as a central office for consumer complaints and have the power to levy fines against those who do not uphold these new requirements of the industry in good standing. They can even revoke licenses from the most egregious violators and non-compliers.

Advocis, The Financial Advisors Association of Canada, supports the bill, which was put forth by Liberal MPP Rick Bartolucci.

“I think it’s an excellent piece of legislation to address any concerns that consumers might have about the financial advisor that they’re dealing with across the table,” Greg Pollock, president and CEO of Advocis, told Investment Executive.

“We think this will go a long way to building consumer confidence in the work that advisors do and, in the long term, will address the financial interests of all Canadians.”

Currently, advisors are being suffocated by 50 federal and provincial statues and regulatory bodies and Bill 157 aims to streamline that process.  However, not all players in the financial industry believe the bill really offers true reforms. 

Ami Maishlish, president of CompuOffice Software Inc., which provides back office technology solutions for insurance brokers, believes that the exemptions this bill provides ensure it will never have the enforcement teeth it needs and will always provide the loopholes needed to get around it. 

“The 8-point broad list of ‘exemptions’ from the proposed Act, that would permit a large number of persons engaged in wide variety of occupations, from lawyers to real-estate brokers and mortgage brokers to hold out as ‘financial advisors’ without having to meet any qualifications and without being subject to governance by the proposed new SRO,” says Maishlish.

Those exempt from the powers of the bill and the proposed act are as follows:

1. Those authorized to practise law in Ontario.

2. Those licensed under the Public Accounting Act, 2004.

3. A member of the Certified General Accountants Association of Ontario.

4. A member of the Society of Management Accountants of Ontario.

5. A registered under the Real Estate and Business Brokers Act, 2002.

6. A mortgage broker as defined in the Mortgage Brokerages, Lenders and Administrators Act, 2006.

7. Those registered under the Registered Insurance Brokers Act.

8. A person or class of persons exempted from the application of this Act by the regulations.

Also exempt are people who deal in securities that are exempt from the prospectus requirement under section 73 of the Securities Act (Ontario) — for example, registered dealers.

Maishlish says that exempting people like registered dealers “leaves the gate open to a 10-lane highway for additional exemptions.”

In light of this, he believes that Bill 157 would not serve to raise the bar; rather it would be an effective vehicle to lower the bar in terms of knowledge and proficiency all the way down as far as it could possibly be lowered by all those being exempted.

Daniel Kahan, the Executive Director of the International Society of Life Settlement Professionals, is also confused by the bill.

“In principle, I think it’s a good idea but can’t understand why a qualified actuary should not be allowed to call themselves a financial advisor?” he says.

Kahan believes that life agents and financial planners should be allowed (and even encouraged) to do what is in the best interest of the policyholder (rather than the insurer) when it comes to allowing them to “monetize” their Term to 100 policy, including donating the proceeds to charity.

In Maishlish’s opinion, Bill 157 doesn’t even go far enough in regulating the financial industry. He had hoped that  the proposed Office of the Director would take over the regulation of mutual fund and investment paper sales from the MFDA and IIROC and that it would take over the regulation of life insurance sales from FSCO.

Unfortunately, this is not the case, which means that the proposed new SRO would be in addition to, and not instead of, the existing regulatory apparatus.

“This means more costs, more bureaucracy, and yet another alley in the regulatory maze that consumers would have to navigate to seek redress,” says Maishlish.

“Now, that alley would be like a flaky GPS: sometimes on and sometimes off depending on whether the alleged transgressor was or was not a member of one of the exempt groups.”

Given all these thoughts, Maishlish’s final impression of Bill 157 is that it will create more problems than it solves. 

“It will do nothing, absolutely nothing to enhance consumerism and consumer protection and nothing to raise the qualification and proficiency bar for all holding out as financial advisors,” he says.

“Rather, it just adds to the already confusing and bloated regulatory maze, adds costs to some advisors for those costs to be downloaded to consumers, adds another alleyway to the maze of regulations and regulatory red tape.”

If you’re an insurance broker with more questions about Bill 157, visit Advocis’s FAQ or you can read the actual Bill in its entirety here.

avatar
Ami Maishlish
Ami Maishlish

In reference to this discussion, following are relevant links:

1. Bill 157: http://www.ontla.on.ca/web/bills/bills_detail.do?locale=en&Intranet=&BillID=2934

2. The RIBO Act which, IMO, should be viewed as a benchmark for this discussion:
http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90r19_e.htm

3. Advocis’ promotional brochure for Bill 157:
http://www.advocis.ca/pdf/Advocis-Facts-Bill-157.pdf

I urge readers to read the material in each of the above links in order to understand the background to the discussion.

Advisors and consumers should read the material – and in particular the first two references – as these contain the “meat of the matter”.

Ami

LSM Insurance
LSM Insurance

Thanks Ami!

For Advisors Only
For Advisors Only

3 comments are below from http://www.foradvisorsonly.com Comment#1 I have a specific concern since “Bank employees who are not permitted to hold themselves out as “financial advisors” and are limited to offering advice on simple deposit products such as savings accounts and GICs would also be exempt as these are very common,simple transactions.” Given that there are “financial planners” who are employed by banks, why are they not covered within this Bill? They produce financial plans and invest their clients money, just as we do. Furthermore, it is my understanding that they are paid a higher commission to send their own… Read more »

Ami Maishlish
Ami Maishlish

To expand and elaborate, I would add to the foregoing that the entire regulatory system deserves a close examination, including comprehensive public consultations that would include consumers as well as “players” (aka “interested parties”). Patching an old pair of jeans with a dish-rag doesn’t make those jeans new (though perhaps fashionable in some circles). We need to closely examine and improve the current and rather woefully lacking level of open, meaningful and relevant disclosure. No, that doesn’t mean a few obscure words or figures buried in small print on a 30-page document that hardly anyone is expected to read but… Read more »

Ami Maishlish
Ami Maishlish

As noted in various postings on this subject, I am very much in favour of the spirit and advertised goals of Bill 157. My concern with it is that it so full of holes (including exemptions and exceptions) that, in practice, it would more likely create a costly bureaucracy that would add nearly nothing to consumer protection, may actually impede consumers who need to seek redress with yet another bureucratic alley-way, and may actually serve to LOWER rather than raise the bar. The Act is also deficient in its silence on active and significant consumer representation in its proposed added… Read more »

Ravi
Ravi

This is an interesting bill. I wonder how many so called advisors even know what’s in it.

There needs to be a better and more centralized mechanism to spread the word among advisors