Part I – Some History and an Outline
Some of you may have seen that I’m scheduled to speak at Advocis’ Banff School in August of 2024.
This is a bit of a fraught decision for me. I’ve found a lot of what comes out of Advocis frustrating and not in the best interests of consumers.
I’m going to unpack some of that here and explore some of my own journey to a better understanding of advocating in the best interests of consumers.
I have had dealings with Advocis right since my early days in this industry. I started volunteering with the Edmonton Advocis Chapter in about 2009. I enjoyed my time on that Board. We ran a lot of good events. I sat on that Board for more than a decade. I’ve trained a few hundred people, maybe as many as a thousand, en route to obtaining various Advocis designations and certifications.
My plan here is to outline my concerns with Advocis. Following that, I will indicate what I would do if I were the CEO today. (A role I would not want, to be clear.)
Part II – Advocating Against the Consumer
Since my time in the industry, Advocis has lobbied (effectively, I might add) against a fiduciary duty for financial advisors. The party line is that advisors already have a common-law fiduciary duty (e.g. it will be imposed by the courts when necessary) but this is a BS argument, and one that I have previously promoted, to my chagrin. The biggest problem here is that this sets a very low initial bar for advisors.
There is no requirement, absent a legislated or regulatory fiduciary duty, for an advisor to examine their own bias, conflicts of interest, or to consider approaches other than those available via that advisor’s licensing. Further, the onus is on the aggrieved client to demonstrate a fiduciary duty. Instead of fiduciary being the default, this requires the client to demonstrate this. The client ends up having to foot the bill to arrive at the fiduciary standard. This alone acts as a deterrent.
Advocis has advocated for advisors to have freedom to generate fees in ways that are harmful to clients. Whether this is arguing against the DSC ban, or arguing in favour of the ridiculous advisor charge-back structures that have effectively replaced DSCs, Advocis has taken anti-consumer positions in many very public ways.
Part III – Education
I formerly held the CLU designation, but chose to drop it this year. When I took the CLU, it was a great course. I learned the ins and outs of annuity taxation. I learned about insurance company reserves, product design and construction, and employment law and remuneration concepts. I still refer to the textbook that was then in use for the Laws of Life Insurance section of that course.
Today, the CLU is watered down significantly from what it was, while the CFP® certification has ramped up. The open-book nature of the CLU exam, and the fact that it’s primarily a tax and estate planning designation, takes a lot of the cache away from this program.
I see a lot of advisors today promote CLU as somehow more advanced than CFP, but I don’t think this is true in any material way. The breadth of the CFP, in my opinion, makes it a far better planning designation than the CLU. Advocis has been promising a re-write and update of the course for a long time, but I’ve seen no materially beneficial improvements to the program in the past decade or so.
Advocis rolled out its PFA designation a few years ago, and that has been a failed experiment. I’m still not sure what the purpose of this designation is. If I were still a dues-paying member, I would have questions about the cost of this program vs. the number of people who have completed it and carry the PFA.
Part IV – The Chapters and Regional Schools
The US Financial Planning Association had some similar challenges to what Advocis is facing back in 2017-19, or thereabouts. Michael Kitces wrote quite a bit about it (https://www.kitces.com/blog/fpa-national-audited-financials-mismatch-overview-national-finances-membership-transparency/), and I think there is a lot to learn here.
I have long maintained that the good stuff happening at Advocis is almost all at the Chapter and Regional School level. The chapters provide a gathering place for sharing best practices and the kind of in-person meetings where everybody has the opportunity to get better. Industry pros like Jamie Golombek and Dave Patriarche are regulars at these events.
I know several Chapter Presidents and Board Members across Canada. I am on the slate to speak at Banff School this August. I have queried many of the local leaders within Advocis about what they are hearing and the communication they get from Advocis National. A common refrain is that they show me some nebulous communication and ask me what it means.
Part V – Recent Legal Troubles
Advocis’ troubles have been long known among industry insiders. Members and chapter leaders were generally kept in the dark. Michelle Schriver from Advisor.ca published an article in August 2023 that brought a bunch of issues to light. (https://www.advisor.ca/industry-news/industry/advocis-addresses-liquidity-after-poor-2022-results/) Since that article was published:
· Advocis terminated its CEO
· That CEO sued for wrongful dismissal
· Advocis terminated its COO
· That COO sued for wrongful dismissal
· Advocis stopped paying an educational services provider (SeeWhy Learning)
· SeeWhy sued for non-payment
· That lawsuit was publicly settled
· Information has come to light about Advocis’ nearly inexplicable ownership of a cash value insurance policy with enough room for a $600,000 loan against that policy. If I were still a member, I would be asking many questions about this:
o What was the justification?
o On whose life was the policy sold?
o Who took the commission?
· Acting CEO Harris Jones (to his credit) publicly admitted that the public representation of membership numbers was about twice the actual paying number of members.
· Some questionable accounting practices between the entities for which Advocis produces financial statements (Institute for Advanced Financial Education and The Financial Advisors Association of Canada) have come to light.
· One board member resigned from the board mid-term
· Advocis has accessed numerous reserve funds and credit facilities.
It’s not impossible to fix these issues, but it puts a lot of pressure on the organization.
Part VI – More Distant Legal Troubles
It may seem like a distant memory by now, but I will use this as an example of how Advocis has not played well in the industry sandbox.
In 2010, the Institute of Advanced Financial Planners (IAFP) was already an established industry player, since 2002. Advocis was certainly aware of their existence. Despite that, Advocis sought to incorporate the Institute for Advanced Financial Education (IAFE).
The IAFP took an action to the Federal Trademarks Opposition Board, who agreed that Advocis should not use the IAFE name or acronym. Despite a legal finding against Advocis (https://www.canlii.org/en/ca/tmob/doc/2017/2017tmob164/2017tmob164.html) they continue to use the IAFE marks. I’m not clear how an organization that acts in clear contravention of a legal order can hold itself out as promoting an ethical standard for its members.
Part VII – Current State
A June 27, 2024 article in Advisor.ca (https://www.advisor.ca/industry-news/industry/stable-financial-state-has-been-achieved-advocis-says/ again by Michelle Schriver, who has done a great job staying on top of this story) includes many quotes from interim CEO Harris Jones.
This article presents a 3-part plan to restore Advocis to health. Or maybe a 6-part plan:
· Restate their 2022 financial statements.
· Provide increased transparency when their 2023 financial statements are released at the end of July.
· Hire a permanent CEO.
· What Harris identifies as their path forward indicates a focus on 3 areas:
o Code of Conduct
o Continuing Education
o Community
It’s nice that the areas for future focus are alliterative. But I’m not sure what they mean or how they help.
Is the goal to revise the existing Code of Conduct? To more aggressively apply it to member activities? What’s the plan here?
Does “Continuing Education” refer to only true CE efforts? Or does this capture the CLU, CHS, CEA, and PFA designations? There is a rumour that Advocis is also pursuing a financial planning designation to compete with the CFP. This is an expensive undertaking, and I wonder about the wisdom of competing directly with an established player like FP Canada. Were I a member, I would be asking what the expected expenditure is here, as compared to the expected results.
Does “Community” refer to the local chapters and regional schools? Or something else? I know, for example, that Advocis previously implemented a policy that local chapters weren’t permitted to communicate directly with their members. All communication was to be sent to National which would then communicate to members. This type of policy is not helpful for creating that sense of community.
My immediate questions concern transparency. The article in Advisor.ca suggests that the 2023 financials, which will be released at the end of July, will have a lot more transparency. But if the goal is truly transparency, why not start now? The 2023 financials showing up in the middle of 2024 also means there are 7 months of 2024 that are still in question for members. If transparency is really the goal, I hope members will get to see interim financial statements. I would also hope the membership gets updates on the hunt for a permanent CEO, and, to the extent it’s possible, an update on the outstanding lawsuits.
Part VIII – The Prescription
It’s not my goal here to simply attack Advocis. I believe Advocis can recover from this and provide a meaningful home for financial advisors. I believe community is useful in this industry for learning, sharing best practices, and encouraging positive behaviours.
In that light, I believe Advocis can recover by taking some very specific steps:
1. Immediate transparency. Don’t wait for the AGM to produce financial statements. Start a weekly newsletter to 100% of the paying membership. In that newsletter, discuss:
a. Current financial position
b. Any available updates on borrowing / use of credit
c. Any update around legal challenges
d. Short message from the CEO and/or Board Chair, specifically detailing how the priorities identified by the CEO are being applied to decision-making within the organization.
2. Support Local and Regional Activities. There is still lots of local and regional activity happening, and this is the heart of Advocis. To the greatest extent possible, support these activities. Include upcoming local activities in the newsletter described above. Make sure the program chairs or their delegates at the chapter level are supported in putting on activities. Give the chapters the tools to communicate with their members.
3. Forum Magazine. I am not sure of the benefit of printing and mailing Forum. I believe that, at the least, Forum should be moved to a primarily online delivery. Save printing costs. For those who still want print editions, let them pay for that on a cost-recovery basis. The Financial Planning Association (US) produces a well-respected journal that is only available digitally, and has been for years.
4. Reduce membership dues. A $1,000 annual membership is very expensive compared to other comparable organizations. Maybe existing members are comfortable with this, but if I am a new member, I will be comparing this to other organizations where a $500 annual membership is closer to the norm.
5. Get back to an insurance focus. There is no other national member organization in the life and health insurance space. Financial planners will gravitate to FPAC. Investment-only folks may find a home with the CFA Societies. Estate planners can go to the Estate Planning Council. Show your strength.
6. Be clear about whose interests you represent. Is Advocis about consumer protection? Or for the advisors who pay membership dues? Or something else? Be clear who benefits when a member pays their dues.
7. Carve out unnecessary functions. Advocis, as an organization with 100+ years of history that has long been able to count on the generosity of its members, should eliminate all unnecessary functions. This should include:
a. Drop all designation programs. There are other entities (FP Canada being my favourite, but even CSI) that are specialists here. Sell the CLU and CHS packages to somebody who is in this business and committed to this business. This allows a lot of expense to be cut. Something that is often not accounted for in developing these programs is the cost and complexity involved with course updates and re-writes. As an example, a substantial amount of content around the capital gains inclusion rate will have to be updated in the CLU material.
b. Drop the CE requirement for members. Other than a life insurance-only licensed person resident in Atlantic Canada, every Advocis member has some CE requirement. There is no reason for Advocis to require CE credits of its members each year. The securities CE regime, insurance CE regime, and financial planning CE regimes all fill this bill.
c. Stop running training programs on a hybrid basis. I know it has become the norm since COVID to run training sessions on a hybrid basis (live and webcast concurrently), but this is a very expensive way to run things. In my experience, the cost and complexity of running programs where you’re trying to accommodate two different audiences outweighs any benefits.
d. Get out of the advocacy space. Advocacy is expensive to do well. To the extent that advocacy is useful, individual members can choose whether or not to participate in consultations and committees.
There is a solution available that gets Advocis out of its current troubles. Continuing past behaviours won’t cut it. I believe the path set by FPA in the US when they were in trouble is a good model for Advocis to look at.
Edit/Correction
The original published version of this article made reference to CALU having their financial statements prepared alongside Advocis'. This is not correct. CALU's financial statements are prepared, audited, and presented separately. I apologize for dragging CALU into this. - JW
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