Greg Pollock: Financial advice regulations lacking

Today, more than ever, Canadians need professional financial advice to secure their futures.

Household debt has soared to record heights, less than a third of the population can count on an employer pension, and half of those without pensions between the ages of 55 to 64 only have enough savings to last them a year.

Today, more than ever, Canadians need professional financial advice to secure their futures.

Household debt has soared to record heights, less than a third of the population can count on an employer pension, and half of those without pensions between the ages of 55 to 64 only have enough savings to last them a year.

As Canadians struggle with these financial challenges, research has proven that those of us who work with a financial advisor accumulate up to three to four times more wealth than those who don’t.

Considering these facts, one might assume government policymakers would be focused on helping more working families get the financial advice they need.

Sadly, this isn’t the case. In fact, the Canadian Securities Administrators (CSA) is now pushing for regulations that would put financial advice out of reach for millions of middle-income Canadians. In a nutshell, regulators want to change the rules of how Canadians can pay for financial advice, by banning mutual fund commissions and forcing all investors to pay directly. This wrong-headed move will reduce choice and access to financial advice for those who need it most and simply can’t afford to pay direct fees of hundreds of dollars, like seniors on a fixed income and young people just beginning to save for retirement.

The CSA admits that after commissions are eliminated, independent advisors may not continue to service households with less than $100,000 to invest. But, the regulators say there is no reason for alarm because most Canadians receive advice from the big banks and insurance companies, and those options should still be there.

Today, investors can choose how they pay for financial advice, whether by commission or direct fees. What’s more, the new CRM-2 rules, which only recently came into effect, are now working to increase transparency around fees on account statements and to help investors better understand their investment performance and the associated costs.

Rather than debating about how advisors are paid, the real problem we should be tackling is that the current regulatory system is broken and failing to ensure the competence of all financial advisors across the country. Despite that most Canadians now turn to their advisors for more than just one kind of financial product or service, regulation continues to be disjointed, with different regulators overseeing the sale of different kinds of financial products, like insurance, mutual funds and other securities. As a result, there is no effective industry-wide oversight or disciplinary process to ensure the integrity and accountability of financial advisors serving their clients across the securities and insurance markets.

It’s time to oversee financial advisors as we do all other professionals, from lawyers to accountants and engineers. Every financial advisor should belong to a professional body and be subject to a common code of professional and ethical conduct, mandatory professional liability insurance, ongoing continuing education requirements, and a disciplinary process with the authority to remove an advisor who has wronged an investor.

Banning commissions will do nothing to raise the quality of financial advice. To do that, we need a new regulatory model that gives all Canadians access to the sound and trustworthy advice they need – no matter the size of their wallets.

— Greg Pollock is president and CEO of Advocis, The Financial Advisors Association of Canada 

 

Click here to read on the Toronto Sun website.