MONTREAL - As the investigation continues into a Quebec investment broker and the whereabouts of as much as $50 million entrusted to him, the alleged scam has sparked calls for more stringent regulations for financial planners.
But associations that represent planners say there are plenty of strict guidelines in place already to keep them in check.
And while the case of Montreal-area planner Earl Jones is tragic, it’s a reminder clients need to ask hard questions and avoid blind trust, especially when their life savings are involved.
"The financial advice industry is extremely regulated, financial advisers are typically licensed for insurance purposes and registered for securities and mutual fund purposes," said Peter Tzanetakis, vice-president of regulatory affairs at Advocis, the association representing financial advisers in Canada.
"But additional regulation for financial planning would not have any impact on someone who is intending to run a fraudulent scheme."
Jones has not been charged and there is no warrant out for his arrest but Quebec’s securities regulator has frozen his accounts and allege between $30 million and $50 million is missing.
His whereabouts remained unknown on Thursday as anxious investors who stand to lose hundreds of thousands of dollars waited for news.
Investors have learned through authorities that Jones, a self-proclaimed financial planner operating in an office tower in a Montreal suburb, was never licensed to handle their money.
The Financial Planners Standards Council, a not-for-profit organization that raises awareness about financial planning and enforces professional standards through certification, says it’s important for consumers to do their homework because anyone can call themselves a financial planner.
"The regulatory environment allows anyone to hold themselves out as a financial planner," said Tamara Smith, vice-president marketing.
So it becomes incumbent on the consumer to verify credentials and ask to see certification and references, she said.
"It is so important to find a planner you can engage in conversation, that you can trust," Smith said.
Tzanetakis says there are some key warning signs to look for in terms of fraud:
- A promise of consistent or very high rate of returns on investments.
- A promise of a special or exclusive investment.
-Pressure to invest outside of your means or comfort level.
"If an adviser is pushing you beyond your comfort level ... there are detailed rules and regulations about setting up appropriate risk levels," said Tzanetakis.
"So someone who is not following those (rules) is not acting in the client’s best interest."
Jocelyne Houle-LeSarge, executive director of L’Institut quebecois de planification financiere, which trains Quebec financial planners, compared the task of finding an adviser to that of locating a mechanic.
"Ask questions and, if you don’t feel comfortable, seek a second opinion," she said.
"After all, it’s your money, your savings of a lifetime and you need to be very aware."
In Quebec, rules governing who can call themselves a financial planner are more strict than in the rest of Canada but didn’t stop the charming Jones from securing clients.
Houle-LeSarge argues a single professional order to govern them instead of three separate bodies that do the job now would guarantee investors a certain quality of service.
"If you have a problem with a lawyer, a chartered accountant or an engineer, you know where to call, where to complain," Houle-LeSarge said.
"And for someone pretending to be a financial planner, (a professional order) would be detrimental."
Others have said more powers should be given to Quebec’s securities regulator - the Autorite des marches financiers - but spokesman Sylvain Theberge said more inspectors may not be a foolproof solution.
"We don’t have the ability to be at every door in Montreal, to look at every office," Theberge said, adding more inspectors wouldn’t necessarily have led them to Jones.
"It’s knowing the unknown," Theberge said.
"In Mr. Jones’ case, he worked for years and years on the basis of a confidence link from generation to generation."
