Having someone to advise you on investments can be key to achieving your financial dreams, but as Yahoo Finance Canada found, there has been strong, heated contention about the title and what it means for years.
The trouble all comes down to a single letter. The Small Investor Protection Association has argued that there is a stark difference between those who say they are an investment advisor versus those who say they are an investment adviser.
SIPA claims that the financial “industry uses the title ‘Financial Advisor’ for their sales persons to gain trust” and that “sales persons are not legally required to look after investors’ best interests.”
They also say that “Securities Acts define an ‘Adviser’ as having responsibility to look after investors’ best interests,” and that “regulators say ‘Financial Advisor’ is an unregulated business title that can be used by anyone.”
SIPA has not responded to Yahoo Finance Canada’s requests for comment for this story, but the organization has been spreading the word about what they believe is a difference between advisors and advisers for years.
It sponsored a quirky YouTube video on the topic in 2015, and in 2016, MoneySense published a guest column by SIPA’s president Stan Buell explaining the organization’s perceived difference between the two terms.
The advisor/adviser divide gained more traction in 2017 when it was featured in a CBC Go Public story.
No semantic difference, WealthBar says
Tea Nicola, cofounder and CEO of WealthBar, told Yahoo Finance Canada that she investigated further after the controversial difference came to light.
“I went in pretty deeply, and I could find no evidence that there is a semantic difference between an advisor and an adviser,” Nicola said.
She likens the difference to that of colour and color.
“What I have found is that advisor is a colloquially Oxford English accepted and U.S. version of the word,” Nicola added, saying that it’s commonly found in the media.
“The adviser, with an e, turns out is a Queen’s print standard and because our regulations are national and are subject to Queen’s print standard, the word adviser with an e appears in regulations,” she said.
“From a fiduciary material perspective, who can do what in terms of regulation and in terms of client experience, there is really no difference.”
Confusion over ‘Advisors’
The Canadian Securities Administrators (CSA), a national group which acts as an umbrella organization for provincial securities administrators, says that “‘adviser’ is defined in the securities legislation of Canadian jurisdictions.”
“Adviser’ is a legal term and is used in securities legislation as it is a category of registration for those that are in the business of advising in securities,” a representative of CSA said in an emailed statement.
“Advisor’ is a colloquial term that captures a broad range of firms and individuals that would cover both advisers and dealers registered under securities legislation, but is also often used in the context of others that provide financial advice.”
It added that some of those individuals and firms may be licenced or regulated in another area, like insurance, mortgage or banking, or they may not be formally regulated, like stand-alone financial planners.
SIPA, however, has explicitly raised concerns about the term “financial advisors,” saying in one of its reports that they can be “an outright con man or fraudster that is unregulated,” or “a regulated representative that is a commission motivated sales person.”
Distinction between adviser types does exist
Nicola says that the distinction between salespeople and those who have a fiduciary responsibility to their client exists, but often there is no cause for alarm.
The CSA’s AreTheyRegistered.ca, which aims to help investors check the status of a financial adviser or firm to prevent investment scams and fraud, doesn’t use the term “advisor,” but does include several individual registration categories, including “dealing representatives” and “advising representatives.”
The term “dealing representatives” has largely been used to refer to those who act as salespeople, while “advising representatives” is used for those who have a fiduciary responsibility to their client. The CSA says that additional duty is there because advising representatives can have discretionary authority over a client’s assets.
SIPA said in a 2016 report that dealing representatives legally act as an agent of the dealer and not firstly of the investor. “Client relationship rules currently allow this to be hidden from your view, and the investor is expected to be responsible for learning this information themselves,” it read.
However, the CSA says that both types of representatives still have to act fairly to clients.
“Under securities legislation, all dealing and advising representatives have an obligation to act fairly, honestly and in good faith toward his or her clients,” the CSA said in an email to Yahoo Finance Canada. “Most securities legislation requires that an individual who presents himself as being registered must in fact be registered and indicate the actual category of their registration.”
If you still want to know if you’re dealing with an advising representative, Nicola says you can ask about the products being sold.
“If you hear a variety of brand names that seem broad and competitive with each other … chances are you’re dealing with somebody who has your best interest at heart,” she added.
She also adds that dealing representatives still often have many products at their disposal and that they too are able to offer something that is best for their client.
“We’re not dealing with snake oil salespeople, we’re dealing with large, transnational financial incumbents that are for the most part operating above board in a heavily regulated environment,” she said. “You’re not going to be ‘royally screwed’ regardless of who you’re going with.”
CSA says that a full review of titles is a longer-term project for the organization and a report published earlier this year outlined certain changes that include the use of titles and designations that promote transparency and don’t mislead clients. It says comments for the publication are currently under review.