Training for Advisers Just isn't Good Enough

Preet Banerjee

Special to Globe and Mail Update

After high school, it might take another 10 years (or more) of schooling and training before someone can become a practising physician. It can take as little as two months to become a practising financial adviser. Pushing initial adviser training requirements even slightly along this continuum is long overdue.

I firmly believe that the vast majority of investors need qualified financial advice, so don't mistake this column for adviser-bashing.

Many advisers go well above and beyond the bare minimum requirements to gain entry to their industry and spend the rest of their careers continuously upgrading their skills and knowledge ... but some do not. They don't need to.

There is no requirement for a specific undergraduate university or college degree in financial advice in order to become a financial adviser. While I have seen some financial services specializations offered by some MBA programs, they are few and far between and don't necessarily focus on the financial adviser role. There are many different types of jobs available in financial services.

Should commission-based financial advisors be regulated?

All licensing routes to becoming a financial adviser in Canada entail self-study courses only. For mutual fund salespeople, one can easily complete the online course in one month. Total tuition and exam fees are as little as $350 plus tax. For advisers licensed to sell individual stocks and bonds (in addition to mutual funds), perhaps two months of slightly less than full-time studying is required to pass the two multiple choice exams. There is also an additional requirement of passing an ethics exam (the Conduct and Practices Handbook course), and completion of a 90-day supervisory period. Call it five months in total. Total costs can be as little as $1,525 plus taxes.

Many financial advisers got their start in the business as a second career. Older recruits are seen as less of a risk from their hiring firms since they have more established personal networks of people with higher asset levels. The truth is that for the vast majority of financial advisers, survival is based on asset gathering, not investment and planning prowess. The first five years in the business sees more recruits that have left than have survived. For some, it's due to a lack of sales skills, although they may be very well versed in actual planning and investment advice. For others, it's the opposite.

For the few who excel at both, they are on their path to rewarding and successful careers and their clients are both happy and lucky. We need more of these advisers.

It would take a long time to implement and we would need to grandfather existing licensed advisers, but perhaps we should be asking the soon-to-be-formed national securities regulator to consider creating stiffer educational and preparatory requirements for future financial advisers. Perhaps the new regulator could collaborate with the financial services and post-secondary educational institutions to create a curriculum of study. Even a simple apprenticeship requirement would be a step in the right direction. A prospective financial adviser could learn under the tutelage of an experienced adviser, much like an intern, clerk or resident.

Ten years of preparation would be overkill for an adviser, but two months is, quite frankly, unacceptable.

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