Tuesday, 12 November 2013

Financial Certifications Glossary from IIROC: a Useful Start though More is Needed

The Investment Industry Regulatory Organization of Canada's online glossary of about 40+ financial titles and designations is a good step forward towards lessening the confusion confronting the average person looking for expert advice. The direct weblinks to all the sponsoring / certifying organizations' websites is itself a big timesaver. The listing of education requirements for each designation gives an impression of how substantial and deep the required knowledge base is for each.

My suggestions for additional info for the glossary:
1) Standard of Care provided to Client - does the holder of a designation undertake to provide advice under a fiduciary duty best-interest standard or a suitability standard or something else? This is a hot topic these days as the Ontario Securities Commission considers whether to impose best-interest standards on people who call themselves financial advisors. The glossary indicates whether each designation has an ethics code but it doesn't, and could and should, say what each code promises on this critical point.

2) Subject Matter Expertise - the one thing I as a consumer want to know is "who do I ask about what?" Suppose I want advice on improving tax efficiency of my investments across types of accounts (RRSP, TFSA etc). The designation titles are suggestive but inadequate. Do I look for a CA, a CGA, a CIM, a CFA, a CFP or any of about a dozen or so other possible designations? Is the Distinguished Financial Advisor Tax Services Specialist going to provide me with sound advice? I'd guess not as the impression from the webpage is that they are competent in filling in T1 and T2 tax forms but that's it. A Chartered  Accountant or maybe a Chartered Investment Manager would be a much better bet, despite the absence of the word tax in the title. The head of IIROC says in a Morningstar video interview that they don't want to judge the various designations but surely they can compile and condense into some sort of searchable system what each designation claims to be able to do. Every solid designation should have and should publish its Body of Knowledge such as the CFA does.

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