What is Financial Planning?
The Financial Planning Standard Council of Canada has said that it the integration and interdependency of 6 elements (financial management, asset management, risk management, tax planning, retirement planning and estate planning) that differentiates financial planning from other forms of financial advice. The Financial Planing Standards Council license Certified Financial Planners
Who provides Financial Planning and how are they compensated?
Financial Planning may be provided by many different types of individuals and different firms.
Fee Based Planners: Charging an hourly rate and not earning any product compensation.
Salaried Employees: Working for institutions may receive some form of bonus based on product sales.
Commission and Service Fee Planners typically receiving a payment at the point of sale and ongoing service fees
Asset Fee Based Planners receiving Wrap Fees, Trailing Fees or Service Fees on investment accounts and some Commission where Asset based fees are not available
- May charge an additional fee for planning
- May provide complimentary planning to clients based on need. Time spent on planning is limited by client account size.
Who regulates Financial Planning?
The Financial Planning Standards Council of Canada is responsible for licensing Certified Financial Planning Professionals in Canada (CFP) They have a code of conduct and have set Practice Standards for members. At the date of writing, their is no system in place to review the planning activities of members, although consumer complaints to the organization will result in an investigation and members may be disciplined and have their right to use the CFP marks revoked.
In the Investment industry there are 2 major "self regulatory" bodies. The Mutual Funds Dealers Association (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC) The role of a Dealer is to supervise the sales activities of members. Most Dealer firms are members of these organizations (with the possible exception of a few very small firms). Both organizations require that Dealer members supervise the Financial Planning Activity of sales persons, but describe Financial Planning as activities that result directly or indirectly in the sale of a security.
