Since 2004, the Canadian Securities Administrators (CSA), a watchdog representing regional regulators in Canada’s 10 provinces and three territories, has been in talks to implement a country-wide legal requirement for people giving consumers financial advice to act in their client’s interests rather than their employers.
The CSA published a paper in 2012 and then released a second consultation in 2016.
However, in a circular released last week, the regulator says all regional regulators except the Ontario Securities Commission (OSC) and the Financial and Consumer Services Commission in New Brunswick will no longer introduce a mandatory best interest standard.
Instead, the provincial watchdog has proposed “target reform” proposals for the industry, such as regulating the titles used by people who provide financial advice, conflicts of interest and the suitability of investment products.
Australia and the UK already require advisers to work in their clients’ best interests while the US and the EU are set to introduce the standard in the near future.
What’s in a vowel?
Currently, just 4,000 financial advisers – spelt with an ‘e’ – out of 121,000 investment professionals have a legal duty to act as a fiduciary for their clients.
The rest, who are often referred to as financial ‘advisors’ are registered as ‘dealing representatives’ or salespeople licensed to sell financial investments.
“This is a very disheartening day. Things are definitely not working for Canadians who trust the financial advice they’re getting. Unless you live in Ontario or New Brunswick, your savings will continue to be managed by salespeople who aren’t bound by a best interest duty,” investor advocate Kevin Kivenko told CBC News.
Kivenko runs runs the financial consumer advocacy site CanadianFundWatch.com.
Canada’s five biggest banks and other financial institutions have repeatedly come under fire for putting investor’s money into mutual funds and other investments to generate sales revenue, commissions and management fees but that often aren’t the best option for the client.
