Article today You Deserve a better Financial Advisor, points out the outrageously low licensing requirements to become a sell side ‘financial advisor’. In Canada and the US candidates are required to pass a three hour exam that covers a cross-section of law and investment-related subjects–a task most can manage in just a few weeks of self-study.
The author rightly declares this woefully inadequate and dangerous to the public:
Compare this laughably low bar with the prerequisites to practice medicine, law or accounting. Each of these professions requires formal education, a famously rigorous licensing exam, and then continuing education — none of which is required of investment advisers. My guess is that very few people would trust a doctor, lawyer or accountant whose only credential is passing a three-hour exam. So why aren’t we demanding more of financial advisers?
Advisers have the power to profoundly improve lives by encouraging saving and responsible investment. But like other professionals, they also have the power to do great harm, as we are reliably reminded every few years in the media or the courts with a fresh variation on the financial scandal theme…
It’s time for financial advisers to join the family of professions in substance, and not just in name. We should require that aspiring advisers complete a minimum amount of undergraduate or graduate-level coursework in finance, accounting, or economics, and pass a multi-day comprehensive exam…
Advisers should also be bound by a code of ethics that aims higher than what current regulations mandate. Given the ever-increasing pace of financial innovation, continuing education should simply be mandatory for maintaining a license.
But these suggestions, while all fine, miss the main problem which cannot be corrected by more education alone: financial sales representatives are allowed to talk and market themselves as professionals while conducting themselves in the best interests of their profits above all else. Indeed, the industry continues to lobby tooth and nail every day to duck the legal fiduciary duty that requires professionals offering advice to place the best interests of their clients ahead of all other considerations.
Doctors, lawyers and accountants all have accepted a fiduciary duty of care to the patients/clients they are advising. The financial sales business markets itself as a profession while rejecting the mantel of liability and duty that comes with a patient/client’s vulnerability to those they rely on for advice. This is indefensible, immoral and the real reason that harmful financial advice is so systemic and damaging today.
It’s long past time, to hold everyone calling themselves a financial or investment ‘advisor’ to a fiduciary standard. A civil society simply cannot afford to have it any other way.